Your 1033. 
Ambassador saw Director U.N. Office State Department today and urged effort to make effective U.N. call for cease-fire and release of leaders. He stressed points in your 1033 and pointed out effect on opinion in South East Asia if U.S., which had sought withdrawal of Dutch forces, now allowed the Dutch to defy Security Council.
2. Rusk said while Dutch action played into Communists' hands the U.S. could not use E.C.A. aid as a means of pressure in such situation. U.S. had to work with United Kingdom and France and could not carry the whole burden of supporting U.N. decisions alone. Approaches were being made to London and Paris but there did not seem much prospect that any further steps could be taken in the Security Council tomorrow.
3. Rusk then said U.S. had been considering possibility that the Dutch might agree to withdraw their forces to December 18th positions on condition that question of Security Council jurisdiction be referred to the International Court.
4. We said we had no instructions on this proposal, but pointed out the following difficulties which immediately came to mind.
(a) it might be taken to imply that the Council had some doubt as to the validity of its previous decisions. (Rusk said the United States had no such doubt and would make this clear. They would probably file a brief with the International Court supporting its jurisdiction.) (b) The Soviet Union had in the past opposed reference of questions of jurisdiction of U.N. organs to the International Court and might veto such a proposal now.
(c) Attempts would undoubtedly be made to water the proposal down.
If the Netherlands withdrew to December 18 positions and Republican Government reinstated there might be an opportunity for negotiations while the Court was considering the case. This would not be so if, while the case was being heard, the Netherlands remained in occupation of Republican territory or refused to negotiate. The Dutch had asked for reference to the Court as a delaying tactic. (Rusk made it clear that Dutch agreement to withdraw would be a condition precedent.) (d) it was difficult to foresee all the implications if the Court embarked on a general discussion of the scope of Article 2(7).
(Rusk said that the opinion should be sought strictly on the question of Security Council action on the Indonesian question.) (e) There was no certainty that the Dutch would agree to the proposal. To suggest it and to have it rejected might only encourage them further in their defiance of the Council.
5. So far as we could judge the United States had not thought out this idea in detail and may not have discussed it even with the U.K. and France. We would appreciate your comments.
6. The Ambassador pointed out that the most obvious and direct step which could be taken was suspension of economic and financial assistance. Failure of the U.S. to play this card would not be understood by the people of South East Asia. Rusk asked whether the Australian Government had 'played similar cards'. We said that our situations were not parallel, but that if the United States wished to support action we would be glad to advise the Australian Government. Rusk hastened to disclaim any suggestion that the United States was even considering suspension of E.C.A. aid. We would appreciate advice a[s] to any action taken or contemplated in Australia e.g., termination of post-U.N.R.R.A. relief.