Your UN 106 and 109. [1]

Whilst we fully appreciate the importance of gaining the maximum
possible support from the United States, we are not happy at your
suggested bargain with the Americans.

2. The State Department's attitude as set forth in your 106,
paragraph 2, is broadly what we would have expected and up to a
point it can be regarded as satisfactory. Evidence of their
willingness to bring pressure to bear on the Dutch to agree to a
settlement along the lines of the Renville principles is welcomed.

At the same time some of the fundamental questions at issue were
not apparently discussed in your talks with the State Department.

3. We have been assuming that whilst the unconditional acceptance
of the Committee's principles by both sides provides an agreed
basis for an ultimate settlement in Indonesia, the position of the
Republic in the interim period would remain precarious unless it
could be properly safeguarded; and that it is on the question of
these safeguards that the negotiations for settlement may break
down. The Republicans are still insisting, for example, on
controlling their own trade and maintaining their own
representatives abroad. The first of these conditions seems to us
to be the fundamental issue in dispute. The Dutch are unlikely to
agree to it, and the State Department is at present unsympathetic
according to reports from Washington.

4. It does not seem to us that the Committee's visit [to] New York
will have accomplished its real purpose i[f] controversial issues
such as trade are not fully discussed. We agree that an open
wrangle in the Security Council should be avoided if possible. At
the same time we do not think it would be fair to leave the
Security Council in ignorance of the real obstacles that still
remain in the way of a settlement. The assurances which you
believe can be obtained from the Americans in return for the
suppression of controversial issues in the Council, while they
could be useful in the forthcoming talks at Batavia, do not appear
to us to bear any direct relationship to the fundamental points
under dispute. You will be better able to judge their real value,
but they seem scarcely worth the cost of avoiding difficult
questions at this stage. We think these latter might be discussed
frankly with the Americans.

5. A further important consideration is that we think on
reflection that an agreement of the sort suggested resembles too
closely in some respects the kind of procedure we have been
objecting to in negotiations elsewhere and is, in a sense, a by-
passing of United Nations organs. If the Americans are anxious as
they appear to assist in reaching a satisfactory settlement they
should be prepared to act on the lines of their suggested
assurances without any thought of a quid pro quo. If there is to
be any arrangement it should be between the Dutch and the
Committee of Good Offices, and not between the Australian and
United States Governments. It should be made clear to the United
States Government that we cannot accept a procedure involving
private understandings between our two Governments involving other
Governments. We would nevertheless hope that the Americans could
immediately exercise their influence in the direction of agreement
between the Dutch and the Committee Good Offices on points listed
in your paragraph 4(c) [2] before the Committee reports to the
Security Council. Failing such agreement, the Australian
representative who will be attending the Security Council, in
addition to yourself as a member of the Committee, must be free to
raise fundamental questions in the Security Council.