Dubois has reported Neher called on him for a long discussion in which he expressed the hope that Dubois might inform the Republic that the Dutch would welcome Hatta, Sjahrir and Leimena in an interim Federal Government. Neher thought this might constitute a political settlement which would eliminate the need for wrangling difficult details which would keep the committee for months in Indonesia. Neher also stated that the Dutch were most anxious to set up as United States of Indonesia and anything which the committee could do to help towards this end would be greatly appreciated. In answer to a query, Neher expressed the opinion that if the Republic demanded a fourth position the Netherlands would not wish to see a breakdown of their plan merely on this account. There is still no indication of Dutch conception of powers and functions of the interim Government. Although Neher is reported by Dubois to have said that it was the intention to give members wide responsibilities it is my guess that the proposed set up would leave Van Mook all the important decisions and the members would in effect be glorified administrators under him.
Dubois intends to go alone to Djokjakarta on Sunday morning to consult Soekarno.
2. This development which explains the absence of the expected announcement by Van Mook on the formation of an interim Government (see my telegram K.74  paragraph 4) may be viewed from a number of angles;
(a) As Dubois would suggest Neher and Van Mook may be sincere and may be seeking to take advantage of Van Vredenburch's absence. As Kirby will have reported, Van Vredenburch has been the main obstructionist in negotiations here.
(b) The offer may be the result of pressure by the State Department following the disappointment at Van Meek's cold reply to Hatta's offer of co-operation in an interim Government (see my telegram K74).  A quick settlement pleasing to the United States would pay the Dutch dividends in United States dollars.
(c) The Netherlands after taking into consideration the committee's press interviews in New York and the trend of the discussion in the Security Council, may be seeking to avoid a settlement on the basis of Renville principles. They are adopting their favourite, procedure of discussions in private and off the record. It may be their objective to pose the formation of a composite interim Federal Government as a political settlement, sufficiently far reaching to justify the withdrawal of the Good Offices Committee. If this is the case, use of the United States representative to convey the message is a clever stratagem for imposing additional pressure on the Republican Government.
3. I believe something along the lines of this last possibility is most likely. However, the Republicans will clearly have to respond to this latest overture to the extent of agreeing that Hatta and perhaps some other Republicans discuss the matter in detail with Neher and Van Mook at Batavia. Participation in an interim Federal Government would enable the Republicans to overcome difficulties they are at present facing on the vexed question of sovereignty.
On this issue the Dutch seem determined that the Republicans should eat humble pie and particularly following the Renville Agreement the Republican position is weak. Unilateral concessions on sovereignty would be a critical matter in the internal politics of the Republic whereas the participation in an interim Federal Government would enable them to hand over without loss of face such matters as foreign relations to that Government as they have in fact already agreed to do.
4. In all, the Republic's interests would seem best served by Hatta agreeing to participation in an interim Government, providing:
(a) the Republic obtain four portfolios and this is a reasonable proportion of the total number (say four ninths);
(b) that the Government is not subject to control by a parliament in which the Republic is not fairly represented;
(c) that the Government is a real Government in the sense that it can make political decisions and that any veto powers of Van Mook would only be used in exceptional circumstances;
(d) that such participation is without prejudice of political principles agreed upon on Renville and that both Governments will continue negotiations in conjunction with the Good Offices Committee with a view to the complete formation of a United States of Indonesia as early as possible;
(e) that the Republic is solely responsible for internal security in their own state.
5. If, as I believe most likely, the Dutch refuse these conditions, the Republicans could take advantage of the situation by referring the whole issue to the Committee of Good Offices.
Their position would be the stronger because [of] Van Mook's letter which clearly considers a political settlement as somewhat additional to the formation of an interim Government. By that time there would probably be press leaks which would help to counter the Dutch policy of working in the dark.
6. Any comments would be appreciated. I am endeavouring to see Hatta before he has any discussions with the Dutch and failing instructions to the contrary will make suggestions along the lines of paragraph 4 above.