We have been considering in the light of the recent debate and
resolutions in the Security Council and having regard to your
latest telegrams and despatches what should now be our main
objectives in Indonesia.

2. It is clear that the Dutch are doing everything they can to
weaken the position of the Republic and to exclude it from their
plans until these are so far advanced that the Republic can carry
little weight in any future United States of Indonesia. To this
end Dutch policy is apparently to delay a settlement with the
Republic and meanwhile to regard the 'Renville' principles as
having no binding effect until a settlement is reached.

3. We get the impression that the Dutch still have the initiative
and that the Committee is placed in a position where it can do
little but complain and protest about Dutch actions which, however
much at variance with the spirit of the Renville principles are
not easy to challenge as outright breaches of any agreement. It
seems to us that the Committee should now be making every effort
to seize the initiative. Even though the Australian amendment to
strengthen the Committee's power [1] was not incorporated in the
Security Council resolution, the Council has given the Committee a
sufficiently clear lead to adopt a more active role, in particular
by making proposals to both parties and by making them public if
there is any tendency to stall. Above all the Committee has an
open invitation to report back to the Security Council if there is
no progress towards a settlement.

4. In our view the Committee should concentrate on the following:

(a) Political Agreement. The importance of an early agreement
incorporating all the 'Renville' principles over-rides everything
else. It must be the task of the Committee to bring both the
parties together and to use every available means to persuade
them, particularly the Dutch, to reach a settlement. Now that the
Security Council debate is over the Dutch can have no excuse for
delaying negotiations any longer. The main objective should be to
tie the Dutch to a firm agreement which will limit their
opportunities for weakening the Republic and from which any
departure by the Dutch will stand as a manifest breach of faith.

(b) Trade. Important as it is that negotiations for a political
settlement should be got under way at once and agreement reached
as soon as possible, it is even more urgent that a firm
arrangement be made in respect of trade. The value of Indonesian
products in relieving world shortages and in particular their
bearing on the current dollar shortage problem, make it of the
utmost importance that trade should again begin to flow to and
from Indonesia. At the same time any arrangements made for the
resumption of normal trade with Indonesia must take full account
of the position of the Republic. Whether or not the Dutch can be
compelled to allow the Republicans to trade direct with countries
abroad with their own goods and their own ports, there must at
least be an early restoration of conditions under which the
products of Republican territory can be disposed of and the
Republic fully paid for them in money or in needed goods. We are
ourselves considering approaching the Netherlands Government and
proposing a resumption of trade between Indonesia and Australia on
the basis of an agreement between the Republic, the Dutch and
ourselves. [2]

We hope to let you have further information on this proposal and
meanwhile it is confidential to yourself. Meanwhile the Committee
should lose no opportunity of pressing for a resumption of
internal trade and intercourse as contemplated under Article 6 of
the truce agreement. [3]

(c) New States. While the action of the Dutch in sponsoring the
creation of separate States in Republic territories under their
control is clearly at variance with the 'Renville' principles
merely to vilify the Dutch for breach of principle can serve only
a limited purpose. The object should be to bind the Dutch to
agreement to refrain from sponsoring new States until free
plebiscites can be held under the supervision of the Committee.

This again brings out the importance of an early political
agreement which should incidentally ensure that the Republicans
are not hampered in any reasonable activity designed to persuade
population in areas at present under Dutch control that their
future is bound up in a single State covering Java, Sumatra and
Madura.

(d) Provisional Government. We see no advantage to the Republicans
in their hastening to join the new provisional Government. Whether
the new Government is to be called 'provisional' or 'interim'
seems to us to be of relatively minor importance; the fact remains
that it will continue to be subject to Dutch veto until it is
replaced by a sovereign federal Government. It may ultimately be
to the advantage of the Republicans to join it, but not until they
have ensured in their political agreement with the Dutch, that it
will exercise greater powers than are at present contemplated for
it. 5. We are far from pessimistic that the Republic is beyond
help. Signs of independent action in East Indonesia, and the
election of Wiranatakoesoema in West Java [4] (whether planned by
the Dutch or not) suggest that Republican influences are still
strong throughout Indonesia and will increase provided the
immediate danger period can be overcome by satisfactory political
and economic settlement. It is clear that the immediate need is
for vigorous and energetic action by the Committee to bring these
settlements about.