136 Department of External Affairs to Officer

Cablegram 38 CANRERRA, 20 May 1948, 3.45 p.m.

IMMEDIATE SECRET

It is now becoming clear that the Prime Minister's approach referred to in our 29 [1] has been rejected by the Dutch.

Meanwhile negotiations at Batavia are dragging on with little prospect of Settlement, and we are concerned at progressive weakening of Republic under Dutch pressure in absence of such settlement.

2. It is still apparent that the Dutch are doing all in their power to fragment Republic and to prevent coalescence of Republican areas into a single State when the United States of Indonesia is created.

3. In pursuance of this aim the Dutch are conducting systematic campaign to destroy Republic economically. They have not yet shown any willingness to free channels of internal trade. It is clear that Republican requests for medical supplies, clothing and much needed equipment are being refused by the Dutch, who furthermore will not allow Republican areas to import from abroad through regular channels. To prevent Republicans making their own arrangements to import direct to their areas, the Dutch are maintaining a tight naval blockade which extends even to inter- island trade. They are thus making unjustified and ruthless use of their trade regulations as a weapon to starve Republic into surrender to their demands.

4. The time has come when, injustice to the Republic, we must consider taking direct steps on our own account to help the Republic economically. We propose to send post-war relief supplies to the Republic as well as to several other countries in South East Asia, and if the Dutch continue their present tactics we are contemplating making arrangements to carry on direct trade with the Republic, even at risk of conflict with Dutch blockade measures. Before proceeding any further, we wish you to make the position known to the Netherlands Government, and to emphasize our dissatisfaction with progress of Batavia negotiations.

1 Document 122.

[AA:A1838, 403/3/1/1, xvi]