1. Have just returned to New York after long talks this morning at
State Department, Washington, with Butterworth (Head of Far
Eastern Division), Lacy (South East Asia), Nolting (Netherlands
Desk) and Bancroft (United Nations Affairs). Hickerson (Head of
European Division) was present for part of the time. Forsyth
accompanied me.

2. It was made clear to us that the State Department is anxious (I
might almost say resolved) to secure an early settlement on the
basis of the Renville Agreement and is prepared to put pressure on
the Dutch to this end particularly by financial means. Butterworth
said that Holland is only 'ke[pt] floating' by U.S.A. assistance,
and throughout the talk the mood of the American officials was
that no nonsense would be tolerated and that the Dutch are in no
position to reject suggestions from U.S.A. if they specially want
an early start with economic reconstruction which America is even
now in the course of planning. They were confident that the Dutch
will accept continuance of the Committee of Good Offices until
final settlement and handing over of sovereignty. The State
Department think it would be a natural evolution for the Committee
in the phase of implementation to exert positive influence e.g. by
making suggestions instead of leaving initiative to the parties.

However they prefer this should be achieved tacitly, i.e. by the
Committee itself and not by explicit directions from the Security
Council. They are most anxious to avoid the raising of contentious
issues in Security Council and we gathered they do not want Soviet
to have openings to make trouble. (Western European plans and
economic importance of Indies were touched on in this connection.)
Their view is that Republic's best policy would be to co-operate
actively and quickly in practical implementation of Renville
Agreement and make up its mind unequivocally that it can secure
its objectives by so doing. As an earnest of this and as a means
of beginning at once on economic and administrative reconstruction
they want the Republic to join the present provisional Government.

3. We expressed strong doubts whether the Indonesians would do
anything that might tend by implication to confirm the present
Republican areas as the future territory of the Republic as a
state in the U.S.I. and contended that for them the criterion at
all stages would be their ultimate position in the Federation.

They would therefore probably be determined to hold on to their
status as a party to a dispute. With this in view their
representatives might well raise in Security Council all main
issues of interpretation and implementation which could become
obstacles to final settlement in order to get assurances.

(Butterworth's answers on these points were that the Republic
could not have it both ways and must perform an 'act of faith' and
that the emphasis now should be on 'settlement' not on 'disputes'.

Moreover it would be unnecessary to raise these issues in the
Council if the danger of further disputes and breakdown could be
removed by other means).

4. As far as the exceedingly fluid position allowed, I had,
previous to today's conversation, decided that the difficulties
that still might prevent an early and just settlement should be
emphasised and described fully in the Council. The American
attitude which was strongly expressed has made me doubt the wisdom
of my previous decision both
(a) Because they made it clear that they would be hostile in the
Council to this course mainly because of fear of Russian attitude.

(b) Because they might even try to prevent Australia being heard
although they would not be likely to succeed in this, and
(c) Because I felt from their replies when I mentioned the
following specific matters that the Americans might be prepared to
agree specifically with Australia before the debate in the Council
to use pressure on the Dutch for the following objects:

(1) To have Dutch accept stronger powers by Committee in that it
could make and publish suggestions to parties without awaiting
invitation as in past. These suggestions to cover not only what
questions should be discussed but also basis of agreement.

(2) To have Committee continue to function right up to
transference of sovereignty not only to assist the Dutch and the
Republic but also all other Indonesian States concerned.

(3) To have the Dutch agree to refrain from formation of new
states. [1]

5. At the end of the interview I was tempted to ask them
specifically if they were seeking a settlement 'out of court' in
this way but refrained owing to my position on the Committee and
because I thought the Minister should decide whether Australia
would like to trade with America on this and obviously, if so, the
ministerial level would seem the most appropriate and effective.

Forsyth told me afterwards he had made a similar decision at the
same stage.

6. Naturally my attitude in the Council could not be used
expressly as a bargaining point but the Australian attitude could
be and by implication my attitude would be the same.

7. Since writing the above I have had the benefit of telephone
conversation with you [2] and will explore guardedly with Graham
the possibility of the Committee as such getting an assurance from
America to the effect of paragraph 4 but I personally feel this
should not delay ministerial approach.

8. Graham told me Secretary Marshall had telegraphed blunt protest
to Dutch on Australian Observers and I will immediately acquaint
him with your fears as expressed to me. [3]

9. I will not commit myself to any course of action until I know
Canberra views which I would greatly appreciate. Present
indications are that matter will come before Council on Friday.