34 Department of External Affairs to Embassy in Washington

Cablegram 80 CANBERRA, 27 January 1948, 4.15 [p.m.]

IMPORTANT SECRET

INDONESIA

Judge Kirby is proceeding shortly by air to New York, where together with his two colleagues on the Committee of Good Offices, he will report to the Security Council on events leading up to conclusion of truce agreement between Netherlands authorities and Indonesian Republic last week.

2. We fully agree with Judge Kirby's view (which is shared by his colleagues) that Committee must remain in Indonesia to supervise the implementation of the truce settlement and the establishment of neutral zones, to assist the parties to reach a settlement on immediate political and economic questions, and to ensure that the Indonesian peoples are given absolute freedom from coercion in determining by plebiscite their future relationship with the Indonesian Republic and the Netherlands Crown. It is our fear that unless the Committee is allowed to continue in being, the Republican position may be made so untenable that the negotiations will again break down.

3. In this connection, it may be necessary for the Republic to be assured that it will be in a position to control its own external trade and to strengthen its economic position by the acquisition of foreign exchange. The Dutch may oppose any such idea and may try to insist that all exportable products from Indonesian owned properties within the Republican area shall be handled by themselves for their own purposes. We consider that this would be most unwise from the point of view of a final settlement satisfactory to the Dutch and there is nothing in the terms accepted last week by the Republic which would preclude its exercising direct control over the proceeds of its own exportable goods. The Dutch have attained almost all their political desiderata thus far and we believe they could well afford to adopt a liberal attitude in this matter. if they do not do so we greatly fear that the forthcoming discussions will break down and the effect of the present truce agreement will be nullified in circumstances in which world public opinion would be in full support of the Republican position.

4. You should put these considerations before the United States Government and point out to them that any influence they may be able to exercise within or outside the Security Council towards ensuring a satisfactory settlement of immediate economic issues would be helpful.

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