Dubois has reported Neher called on him for a long discussion in
which he expressed the hope that Dubois might inform the Republic
that the Dutch would welcome Hatta, Sjahrir and Leimena in an
interim Federal Government. Neher thought this might constitute a
political settlement which would eliminate the need for wrangling
difficult details which would keep the committee for months in
Indonesia. Neher also stated that the Dutch were most anxious to
set up as United States of Indonesia and anything which the
committee could do to help towards this end would be greatly
appreciated. In answer to a query, Neher expressed the opinion
that if the Republic demanded a fourth position the Netherlands
would not wish to see a breakdown of their plan merely on this
account. There is still no indication of Dutch conception of
powers and functions of the interim Government. Although Neher is
reported by Dubois to have said that it was the intention to give
members wide responsibilities it is my guess that the proposed set
up would leave Van Mook all the important decisions and the
members would in effect be glorified administrators under him.

Dubois intends to go alone to Djokjakarta on Sunday morning to
consult Soekarno.

2. This development which explains the absence of the expected
announcement by Van Mook on the formation of an interim Government
(see my telegram K.74 [1] paragraph 4) may be viewed from a number
of angles;

(a) As Dubois would suggest Neher and Van Mook may be sincere and
may be seeking to take advantage of Van Vredenburch's absence. As
Kirby will have reported, Van Vredenburch has been the main
obstructionist in negotiations here.

(b) The offer may be the result of pressure by the State
Department following the disappointment at Van Meek's cold reply
to Hatta's offer of co-operation in an interim Government (see my
telegram K74). [2] A quick settlement pleasing to the United
States would pay the Dutch dividends in United States dollars.

(c) The Netherlands after taking into consideration the
committee's press interviews in New York and the trend of the
discussion in the Security Council, may be seeking to avoid a
settlement on the basis of Renville principles. They are adopting
their favourite, procedure of discussions in private and off the
record. It may be their objective to pose the formation of a
composite interim Federal Government as a political settlement,
sufficiently far reaching to justify the withdrawal of the Good
Offices Committee. If this is the case, use of the United States
representative to convey the message is a clever stratagem for
imposing additional pressure on the Republican Government.

3. I believe something along the lines of this last possibility is
most likely. However, the Republicans will clearly have to respond
to this latest overture to the extent of agreeing that Hatta and
perhaps some other Republicans discuss the matter in detail with
Neher and Van Mook at Batavia. Participation in an interim Federal
Government would enable the Republicans to overcome difficulties
they are at present facing on the vexed question of sovereignty.

On this issue the Dutch seem determined that the Republicans
should eat humble pie and particularly following the Renville
Agreement the Republican position is weak. Unilateral concessions
on sovereignty would be a critical matter in the internal politics
of the Republic whereas the participation in an interim Federal
Government would enable them to hand over without loss of face
such matters as foreign relations to that Government as they have
in fact already agreed to do.

4. In all, the Republic's interests would seem best served by
Hatta agreeing to participation in an interim Government,
providing:

(a) the Republic obtain four portfolios and this is a reasonable
proportion of the total number (say four ninths);

(b) that the Government is not subject to control by a parliament
in which the Republic is not fairly represented;

(c) that the Government is a real Government in the sense that it
can make political decisions and that any veto powers of Van Mook
would only be used in exceptional circumstances;

(d) that such participation is without prejudice of political
principles agreed upon on Renville and that both Governments will
continue negotiations in conjunction with the Good Offices
Committee with a view to the complete formation of a United States
of Indonesia as early as possible;

(e) that the Republic is solely responsible for internal security
in their own state.

5. If, as I believe most likely, the Dutch refuse these
conditions, the Republicans could take advantage of the situation
by referring the whole issue to the Committee of Good Offices.

Their position would be the stronger because [of] Van Mook's
letter which clearly considers a political settlement as somewhat
additional to the formation of an interim Government. By that time
there would probably be press leaks which would help to counter
the Dutch policy of working in the dark.

6. Any comments would be appreciated. I am endeavouring to see
Hatta before he has any discussions with the Dutch and failing
instructions to the contrary will make suggestions along the lines
of paragraph 4 above.