The breakdown of the negotiations between the Dutch and the Republicans in Indonesia is causing us very serious concern, as no doubt it is to you; and the more so because developments in China are likely before very long to have their repercussions throughout South East Asia. We shall hope to consult you very shortly about the China situation, but in the meantime the Indonesian question has become very urgent and I feel you would wish to know our views.
2. It appears that the negotiations have broken down over two related questions:-
(a) Disposal of the Republican Army, and (b) The question of unified command.
3. As to the first of these, we feel that it is not unreasonable of the Dutch to insist that the Republican Army should not remain in being in the shape of identifiable units in a federal force.
Experience in Burma showed that the existence of a private army at the time of the grant of independence eventually proved an embarrassment to the Government, and there seems to be no doubt that the creation of a Federal Indonesian Army into which the Republicans would be absorbed as individuals but not as units is the course most likely to lead to ultimate stability.
4. On the second point it appears that while the Republicans accept the position that the Crown Representative will constitutionally have overall command of both the Dutch and the Federal Indonesian forces, they want the Dutch to agree to limit the sovereignty of the Crown Representative by an undertaking in some form or another not to exercise his authority over the Indonesian Army against the wishes of the provisional Federal Government. The Dutch are unable to agree to this.
5. I must say frankly that we should find it very difficult to urge the Dutch to give way on this latter point, the more so as the overriding powers of our own representatives in India and Burma during the interim period were limited by an unwritten convention and not any formal undertaking. The Republicans agreed to the first of the six additional principles of the Renville Agreement , which states clearly that sovereignty rests with the Netherlands during the interim period, and it seems to us that they are therefore committed to acceptance of the Dutch proposals.
At present they do not accept them and it is difficult for us to see how the Dutch can be expected to meet them. Apart from anything else, to limit the sovereignty of the Crown Representatives would involve further legislation in Holland, which would, according to our information, not gain sufficient support in the legislature to go through. The Dutch Foreign Minister has been doing his best in the face of considerable opposition and even he feels that the limit of concession has now been reached.
6. The Dutch have now announced their intention to set up the Provisional Federal Government without the Republic, leaving provision for them to enter subsequently if they are willing. It would have been much better in our view if the Dutch had refrained from making an announcement at this stage, but internal political pressure seems to have compelled them to take this step and we have to consider the position as it is. If the Federal Provisional Government is set up without the Republic, it seems likely that disorders will break out in Indonesia and that the Dutch may then be compelled to resort to force to restore order. Such a development could only be to the disadvantage of all concerned and would lead to a long period of instability in South East Asia which would adversely affect all our interests.
7. We consider that in reality the Republic position will not be seriously jeopardized by conceding the two points mentioned above.
Much will of course depend upon the good sense and judgment of the Crown Representative but were he to order the Federal Indonesian Army to take action during a state of emergency against the advice and in defiance of the wishes of the Provisional Federal Government (which is to control that army except in a state of emergency), then it is very probable that the Federal Forces would not obey. The Republicans appear to appreciate this point but their distrust of the Dutch, nevertheless makes them press for some limitation of the sovereignty of the Crown Representative.
8. In our view the essential thing is to get the Provisional Federal Government set up and to include the Republic in it. All Indonesians, whether Federal or Republican, want Indonesian independence and the best way to get it is to work together in the Provisional Federal Government and in the Federal Indonesian Forces. If the Dutch thereafter abuse their position it will only result in their ultimately losing all influence in Indonesia and it is difficult to believe that they will not recognise this and suit their actions accordingly. We feel sure that the setting up of the Federal Government including the Republic will do a great deal to relieve the present tension and it is that which seems to us of paramount importance. The question is whether the Republican Government can be persuaded to see the position in this light, now that the Dutch have made it clear that they feel unable to make any concession on the point at issue.