Thank you for your No 309 [1] re Indonesia.

2. We have been following closely developments in Indonesia and
share your very great concern at the breakdown of negotiations
between the Dutch and the Republicans.

3. We cannot altogether agree with the point of view you express.

The position now reached is in many ways similar that which
existed before 'police action' commenced. The Republicans did not
and do not now feel disposed to give up what
forces they until their position is assured in a suitable Federal
system. If their army is disposed of or placed under the command
of the Dutch they are in a position exactly similar to that which
would have existed if the Security Council had not prevented the
advance of the Dutch forces and the ultimate destruction of the
Republican Army.

4. We do not feel disposed at this stage to persuade the
Republican Government to accept the demands of the Dutch unless
these demands are accompanied or even preceded by some convincing
demonstration of earnestness on the part of the Dutch to include
the Republic in a Federal system in which the Republican authority
would be effectively represented and would take an effective part
in administration. At the present time in spite of denials a
virtual blockade remains and there has been no sign of which we
are aware of any real intention or willingness on the part of the
Dutch to push ahead with a permanent Federal system giving
adequate and effective representation to the Indonesians even
though an interim provisional Federal Government were established.

5. You refer to the repercussions throughout South-East Asia of
any further deterioration in relations between the Dutch and the
Republic. In our view repercussions would be no less serious if at
this stage Australia were to press the Indonesians to accept what
we must regard as unreasonable demands and thereby throw the
Indonesians into the arms of Asian countries only too willing to
champion the Indonesian cause and to widen the gulf between
Eastern and Western countries in this area which throughout these
negotiations we have persistently endeavoured to bridge.

6. The Committee of Good Offices has made its report to the
Security Council where the matter will have to be discussed if the
Dutch persist in refusing to make any concessions. If there is
further fighting or if negotiations which the Security Council
ordered cease then in our view the Security Council would have no
option but to uphold its previous decision taken under Chapter 7
of the Charter and act accordingly invoking the articles of the
Charter which give it power to ensure that its decisions are
carried into effect.

7. We feel that you may have overlooked one most important factor
in the situation-the question to what lengths Hatta can go in
making further concessions to the Dutch while retaining the
confidence of the separate groups within the Republic particularly
the Masjumi party from which he draws his main support. We should
have thought that the Dutch would have recognised that Hatta as a
moderate who has shown capable of holding together the majority of
genuine nationalists and of suppressing a serious Communist
uprising without outside aid would represent their best hope of
reaching a satisfactory and stable settlement and that they would
have been prepared to go a considerable way to help him in his
undoubted difficulties with his own people. It seems obvious that
the removal of Hatta at the present stage would destroy any chance
of an agreement. Yet it is impossible to discern much effort by
the Dutch to meet Hatta half way, they have continued to stick
rigidly to their main demands and the fact that the parties have
come so far towards agreement is largely a measure of the lengths
to which Hatta has been prepared to go.

8. We are convinced therefore that this is no time for bringing
persuasion to bear on the Republican Government to accept as they
stand the Dutch conditions regarding the future of the Republican
Army and the command of all the armed forces. Hatta has made it
clear that he has gone as far as he dares, and many of his
supporters consider he has already gone too far.

9. We accordingly consider that the Dutch should still be urged to
resume negotiations at the point where they broke off and to make
a patient and sincere effort to settle the outstanding questions
without forcing Hatta into an untenable position. In particular we
think they should be persuaded to lift immediately the blockade
and to drop their repeated complaints about violations of the
truce agreement. Even if these allegations have any substance
which is dubious they will surely cease to have any relevance if
an agreement can be reached and status quo lines, demilitarised
zones, etc., abolished.

10. You will be aware that Hatta has reiterated to Cochran
unconditional acceptance of the Renville principles and
recognition of Netherlands sovereignty during the interim period.

[2] It cannot be expected however that the Republic can give up
its control of its own forces prior to firm and genuine
arrangements governing that interim period and contemplating the
early establishment of a permanently democratically based Federal
system.