The Netherlands Delegation has replied to the Committee's letter
of January 3rd (see paragraphs 3 and 4, K.235 [1]) making the
following points:

(a) A Representative of the Chief of the General Staff will confer
with the Committee's military observers at 1700 hours today
January 4th, to discuss preliminary plans for redeployment of
military observers.

(b) Since no reply has been received from the Consular Commission
as to its plan the discussions between the military
representatives can only bear a provisional character and cannot
prejudice the performance of the tasks entrusted to the Consular
Commission.

(c) The remaining information requested in the Committee's letter
of December 28th [2] will be furnished as soon as consultations
with the Netherlands Government are concluded.

(d) 'In accordance with the first paragraph of Dr. Van Royen's
statement [3] delivered to the Security Council on December 29th,
hostilities in Java were terminated on December 31st at 2400
hours. This fact was confirmed in an order of the Commander-in-
Chief which was cabled to the territorial Commanders in Java on
January 2nd at 1845 hours.'
2. This reply is clearly unsatisfactory and it is evident that the
Committee can make no progress against the flagrant disregard of
the Security Council by the Netherlands. I therefore believe our
report to the Council should throw the whole issue back; that we
should show clearly that the Netherlands' intransigence, borne out
by correspondence already forwarded by the Committee to the
Council, makes any observation of the cease hostilities
meaningless; and that in view of the restrictions which will
obviously be placed on the military observers by the Dutch there
will be no prospect of useful and unbiased reporting from the
field.

3. Cochran will undoubtedly support a strong report in the absence
of directions to the contrary from his Government. As set out in
my telegram No. K.234 [4] we are concerned that the Committee and
our countries may be associated with a dishonourable settlement in
Indonesia obtained by force. For this reason the Americans may
wish to go further and suggest the withdrawal of the Committee.

4. The United Kingdom is anxious that the temperature in Indonesia
be reduced and that efforts were not made to bring about a
satisfactory settlement including a guaranteed date for transfer
of sovereignty to U.S.I. This supports the Dutch line which has
always been that law and order must be restored before the
transfer of sovereignty can be considered. In the absence of Dutch
goodwill and because of the impossibility of placing any reliance
on the Netherlands' expressed desire to the transfer in question
in the near future, this policy far from facilitating a settlement
will be seen by the Republic and Asiatic countries as direct
support for colonialism. On the contrary the main hope of a
permanent settlement appears to be in making use of all possible
pressures to induce the Dutch to make real concessions now.

5. The conference called by Nehru could make a positive
contribution by suggesting the outline of a reasonable settlement.

Our participation in the Asian Conference, which the Republic
already regards as more important than the Security Council, would
be most useful for Australian prestige here. I shall endeavour to
see that instructions from the few remaining Republicans free in
Indonesia to their representative in India include reasonable and
practical suggestions for an immediate settlement. I shall also
seek to influence the reports of the Indian Consul-General [5] in
these directions towards suggesting co-operation with us and the
United States.