Reliable Republican sources say that the Federalists at yesterday's B.F.O. meeting agreed to the three conditions, irrespective of Soekarno and Hatta, for talks between the Republican leaders and the Federalists (see my telegram K256 ).
(A) The release of the Republican leaders.
(B) Meeting the Republican leaders as a Government.
(C) The Republicans to participate in the talks as representatives of the Republican Government.
The same source believes that Beel telephoned Sassen last night and that the decision is acceptable to The Hague.
2. Such a decision by the Dutch would be in line with their efforts to seek rapprochement with the Republicans through the Federalists and may be foreseen as an attempt to by-pass the Security Council's resolution , or at least the Commission for Indonesia.
3. Hatta and Soekarno will be obliged to meet with the Federalists now that their conditions have been accepted, but may insist on the talks proceeding on the basis of the Security Council's resolution. The Dutch may make new offers. Rumours are current that they may make suggestions for an early transfer of Sovereignty to a United States of Indonesia and for the re- establishment of the Republican state on the basis of plebiscite or elections.
4. In the continued absence of information from The Hague regarding the resolution, I shall endeavour to have the Commission send a strong letter to the Netherlands delegation tomorrow morning and to follow this up with a further report to the Security Council which will conclude with a recommendation.
5. The Dutch are taking steps to form another State in the Area of Middle Java occupied by them prior to 19th December. Preliminary discussions have been held for the establishment of Representative Council at Semarang.