107 Officer to Department of External Affairs

Cablegram Hague 102 THE HAGUE, 2 July 1947, 12.16 p.m.

Indonesia.

My telegram 97. [1]

Sjahrir's resignation was followed by a flood of rumours and counter rumours here but the hot-heads have been kept in check and the Government seems decided to continue the discussions on the basis of Soekarno's latest reply. [2]

2. But the situation will continue to be dangerous until an agreement is reached. Financial reasons make an early agreement essential to the Netherlands. They feel they cannot continue the present Military expenditure so either must use their forces quickly or be able to reduce them.

3. It is, above all, important that Soekarno should stand by his last statement and anything to help or persuade him would be valuable.

1 Dispatched on 23 June against the background of the Dutch- Indonesian exchanges summarised in Document 95, it conveyed Officer's assessment that the situation at The Hague was 'more reassuring' than it had been previously.

2 See Documents 101 and 106.

[AA:A1838/283, 403/2/3/2, ii]