Portuguese Timor. Commonwealth Government in recent years has taken increasing interest and some practical measures in Portuguese Timor with the object of checking and preventing an extension of Japanese influence there.
In this respect we have previously assisted in keeping oil concessions in Australian or British hands. Last January the United Kingdom and Commonwealth Government, in concert, secured the eastern oil concessions for the major oil companies. A link between Australia and this colony was established when Dilli was included as a regular stopping place on the Darwin-Singapore service. An official representative of the Commonwealth Government  has since been stationed at Dilli, to make contact with the local Portuguese Administration, report on Japanese activities and generally assist in promoting commercial relations with Australia.
The above policy has so far achieved the object of preventing undue Japanese penetration into Portuguese Timor by ordinary means. There is nothing in the measures taken however which would be effective in preventing an actual Japanese occupation of the territory, either with or without prior agreement with the Portuguese, should Japan at any time decide the circumstances were propitious for such a move. In view of the obvious strategical threat which a Japanese occupation of Timor would imply both to the Netherlands East Indies and ourselves and of the difficulty of driving the Japanese from a foothold in the territory once it was secured, we think it advisable that consideration should be given now to means of forestalling a move of this kind should it seem likely to occur.
The contingency might arise in one of three ways (a) German occupation of Portugal, encouraging Japan to take Portuguese Timor under 'protective custody'; (b) the possibility at any time in existing circumstances of a Japanese landing in Timor with little or no warning (cf. Batavia telegram 172 of August 23 to Foreign Office ); (c) in the event of war with Japan.
In all these cases it would seem essential for the three Governments concerned, ie., the United Kingdom, Netherlands and Commonwealth Governments, to agree beforehand on what preventive action is feasible.
We accordingly suggest as a preliminary, if you concur, that these questions should be discussed with the Netherlands Government at the earliest opportunity with view to reaching agreement in principle on action to be taken.
Whether a preventive occupation of Portuguese Timor should be undertaken by a joint or a separate force would naturally depend, especially as regards contingency (c), on the degree of political commitment in the Western Pacific existing at the time with the Netherlands Government. In this latter respect we have your telegram M.295 of 6th September  in mind.