Your 256. 
I saw Bevin and Addison morning of 23rd July. Bevin opened by saying that he regarded the Indonesian situation as not being isolated. If no solution were found promptly it might lead to similar troubles in Malaya, Burma and may even upset the good work that has been accomplished in India this year. Its complications are world wide.
2. Bevin went on to say that India did not want to see the Indonesian question before the Security Council because discussion there would have an unsettling influence on India itself if the proceedings followed the precedent of those on Greece and like questions and went on in an inconclusive way with the use of the veto. The only hope was some form of mediation and India was anxious that this should be achieved. 
3. Later today Bevin is to see the United States Ambassador to enquire what part the United States Government is prepared to play in concrete action at The Hague. He has in mind some form of arbitration in which both the Dutch and Indonesians will agree to accept any award. He expects to make a full statement of the present United Kingdom position in the House of Commons this afternoon.  Commonwealth Relations Office is telegraphing the text. Bevin is also to go to Cabinet this afternoon for a direction as to future action.
4. Dealing with action taken recently Bevin stressed that he had been at great pains to avoid what has occurred. He talked to the Netherlands Foreign Minister at Paris recently and he believes with success. The United Kingdom is of the opinion that the Netherlands Foreign Minister was overruled by the Dutch Cabinet.
5. At this point I asked whether in view of the fact that the United Kingdom's attempts had been brought to nought it might not be possible for some country outside the Great Powers to undertake mediation. Bevin asked immediately what Australia could do. He then enlarged again on the action already taken and said that he was tired of attacks and suggestions that United Kingdom policy had failed merely because its many efforts had failed to prevent the Dutch resorting to force. The United Kingdom had put troops in with great losses and had avoided major catastrophes earlier. The United Kingdom had assisted to bring about an agreement between the Dutch and Indonesians and now the range of disagreement between them had been reduced to the question of the Gendarmerie and the allegations of failure to observe terms of truce.
6. I said that his question as to what Australia could do was not immediately answerable. It depended on what mediation might be acceptable and it depended on developments in the position generally. But Australia was strongly of the opinion that in view of our proximity to the N.E.I. and our experience over the past two years in the issues at stake Australia could make a contribution. If the Government at The Hague refuses this course deliberately and refuses to countenance its being settled by action from The Hague then the only hope might be negotiations and mediation on the spot in the N.E.I. which would convince the Government at The Hague. Australia would be able to make a substantial contribution in such negotiations.
7. I mentioned Australia's admiration for the work of Killearn and our conviction that his services could be well used in the present emergency. Bevin elaborated at great length on Killearn's virtues but said that the form of action to be taken now that The Hague had declined to accept the United Kingdom's offer of its good offices must depend on his conversations with his colleagues and with the Indian and United States Representatives and on Cabinet's decisions. Bevin said that the United Kingdom Government would not wish to interfere with any action the Australian Government decided to take towards stopping hostilities and settling outstanding problems in the N.E.I. and indeed would welcome it.
But the actual form of our collaboration with the United Kingdom in a joint effort must necessarily wait the Cabinet's decision after review of all factors including the attitude of the United States.
8. Cabinet decision will be reported as soon as available.