1. Have just returned to New York after long talks this morning at State Department, Washington, with Butterworth (Head of Far Eastern Division), Lacy (South East Asia), Nolting (Netherlands Desk) and Bancroft (United Nations Affairs). Hickerson (Head of European Division) was present for part of the time. Forsyth accompanied me.
2. It was made clear to us that the State Department is anxious (I might almost say resolved) to secure an early settlement on the basis of the Renville Agreement and is prepared to put pressure on the Dutch to this end particularly by financial means. Butterworth said that Holland is only 'ke[pt] floating' by U.S.A. assistance, and throughout the talk the mood of the American officials was that no nonsense would be tolerated and that the Dutch are in no position to reject suggestions from U.S.A. if they specially want an early start with economic reconstruction which America is even now in the course of planning. They were confident that the Dutch will accept continuance of the Committee of Good Offices until final settlement and handing over of sovereignty. The State Department think it would be a natural evolution for the Committee in the phase of implementation to exert positive influence e.g. by making suggestions instead of leaving initiative to the parties.
However they prefer this should be achieved tacitly, i.e. by the Committee itself and not by explicit directions from the Security Council. They are most anxious to avoid the raising of contentious issues in Security Council and we gathered they do not want Soviet to have openings to make trouble. (Western European plans and economic importance of Indies were touched on in this connection.) Their view is that Republic's best policy would be to co-operate actively and quickly in practical implementation of Renville Agreement and make up its mind unequivocally that it can secure its objectives by so doing. As an earnest of this and as a means of beginning at once on economic and administrative reconstruction they want the Republic to join the present provisional Government.
3. We expressed strong doubts whether the Indonesians would do anything that might tend by implication to confirm the present Republican areas as the future territory of the Republic as a state in the U.S.I. and contended that for them the criterion at all stages would be their ultimate position in the Federation.
They would therefore probably be determined to hold on to their status as a party to a dispute. With this in view their representatives might well raise in Security Council all main issues of interpretation and implementation which could become obstacles to final settlement in order to get assurances.
(Butterworth's answers on these points were that the Republic could not have it both ways and must perform an 'act of faith' and that the emphasis now should be on 'settlement' not on 'disputes'.
Moreover it would be unnecessary to raise these issues in the Council if the danger of further disputes and breakdown could be removed by other means).
4. As far as the exceedingly fluid position allowed, I had, previous to today's conversation, decided that the difficulties that still might prevent an early and just settlement should be emphasised and described fully in the Council. The American attitude which was strongly expressed has made me doubt the wisdom of my previous decision both (a) Because they made it clear that they would be hostile in the Council to this course mainly because of fear of Russian attitude.
(b) Because they might even try to prevent Australia being heard although they would not be likely to succeed in this, and (c) Because I felt from their replies when I mentioned the following specific matters that the Americans might be prepared to agree specifically with Australia before the debate in the Council to use pressure on the Dutch for the following objects:
(1) To have Dutch accept stronger powers by Committee in that it could make and publish suggestions to parties without awaiting invitation as in past. These suggestions to cover not only what questions should be discussed but also basis of agreement.
(2) To have Committee continue to function right up to transference of sovereignty not only to assist the Dutch and the Republic but also all other Indonesian States concerned.
(3) To have the Dutch agree to refrain from formation of new states. 
5. At the end of the interview I was tempted to ask them specifically if they were seeking a settlement 'out of court' in this way but refrained owing to my position on the Committee and because I thought the Minister should decide whether Australia would like to trade with America on this and obviously, if so, the ministerial level would seem the most appropriate and effective.
Forsyth told me afterwards he had made a similar decision at the same stage.
6. Naturally my attitude in the Council could not be used expressly as a bargaining point but the Australian attitude could be and by implication my attitude would be the same.
7. Since writing the above I have had the benefit of telephone conversation with you  and will explore guardedly with Graham the possibility of the Committee as such getting an assurance from America to the effect of paragraph 4 but I personally feel this should not delay ministerial approach.
8. Graham told me Secretary Marshall had telegraphed blunt protest to Dutch on Australian Observers and I will immediately acquaint him with your fears as expressed to me. 
9. I will not commit myself to any course of action until I know Canberra views which I would greatly appreciate. Present indications are that matter will come before Council on Friday.