My telegram 898 of December 25th. 
1. His Majesty's Ambassador at Lisbon  points out that the proposal  would:-
(a) Get the Portuguese out of the impasse in which they have put themselves by their virtual ultimatum to the Dutch.
(b) Get the Netherlands Government out of the difficulty in which the receipt of the ultimatum has put them.
(c) Give Doctor Salazar  a diplomatic victory over one of the two parties with whom he is in dispute.
(d) Go a long way to sooth Portuguese pride and restore Anglo- Portuguese relations, since it is we who are considered the principals in the affair.
(e) Involve Portugal standing firm in refusing to withdraw.
2. Sir R. Campbell suggests that (a) and (c) both militate in favour of Salazar's acceptance, but that (e) militates against it.
On the balance he doubts whether in his present mood Salazar would accept the proposal unless it were accompanied by an offer that the troops remaining should be placed under Portuguese command, though even so Sir R. Campbell does not feel sure of the result.
3. He suggests, however, that the proposal should be made in its present general form, but that if possible, any further exchange of notes should be avoided. He would therefore propose to explore it in the first instance with the Portuguese Secretary General  reserving our right to make it public at a later stage if necessary. As regards the text of the suggested communication which would thus be oral in the first place, Sir R. Campbell considers that it would be best to substitute for reference in the third paragraph to the ancient alliance the words 'the defence of Portuguese Timor would be undertaken by British Troops'. He feels that a formal invocation of the alliance in the circumstances would make Salazar's position more difficult in that it would call down a more violent re-action by our enemies with a declaration of war on Portugal by the Axis as the logical result.
4. We should be very grateful if His Majesty's Government in the Commonwealth of Australia would seriously consider the suggestions made by Sir R. Campbell. This is that if the Commonwealth Government agree, the solution is that indicated in my telegram under reference, but if this is not acceptable to the Portuguese Government, Sir R. Campbell should suggest to the Portuguese Government that one of their own officers should be put in command of the remaining, i.e., wholly Australian, force in Portuguese Timor. We should of course hope that the Portuguese would themselves regard such an arrangement as purely nominal, and that in the event of a Japanese attack the Portuguese commander proved recalcitrant or incompetent, there would then be no difficulty in setting him aside.
5. The proposal obviously has little to recommend it from the logical point of view, but as Sir R. Campbell has pointed out, we are dealing with an emotional problem. We therefore think important that Sir R. Campbell should have the discretion for which he asks. The proposal might perhaps take the form that the command should be vested in the Portuguese Governor  as the Local Commander in Chief, and that no special appointment of an officer from elsewhere need be made.