485 Critchley to Department of External Affairs

Cablegram C11 THE HAGUE, 8 September 1949, 6.45 p.m.

SECRET

Progress at the conference continues to be slow and it would appear that it will take another three weeks to crystallize the issues. Hatta is not satisfied and at the suggestion of the Republicans the midweek excursions which have occupied the delegations on most Wednesdays have in principle been abandoned.

2. There is every indication that the conference will succeed in the sense that there will be an agreement. The Government and the majority of the people of the Netherlands are facing up to the inevitability of the transfer of sovereignty to Indonesia. The important issue now is whether the agreement can be obtained quickly and in an atmosphere that will facilitate economic and political stability in Indonesia or whether the settlement will be delayed and limited in such a way as to create continuing problems after the settlement.

3. There is no doubt that the Netherlands interests could best be served by a quick gracious settlement in which they would depend upon Indonesian goodwill and the establishment of a strong moderate Indonesian Government preferably under Hatta.

4. It is equally clear, however, that politically and psychologically the Dutch are incapable of making this approach.

There is no adequate guidance through a Government Public Relations policy or by the Press and the public is woefully ignorant of the real issues of the Indonesian question. There is still a tendency in official circles to disregard the dangers of political instability and to seek to play off Indonesian factions and politicians against one another. The 'oral note' [1] of the 14 principles for an economic and financial settlement is also a clear indication that the Dutch will seek excessive guarantees in the economic agreement.

5. To sum up- (A) A settlement at The Hague is most likely.

(B) That issue, however, is primarily whether this settlement will be good enough to get by in Indonesia and South East Asia.

(C) The Commission cannot take a strong line yet but it will probably be necessary to exert pressure eventually in order to achieve a reasonable settlement.

1 Document 484.

[AA : A1838, 854/10/4/3, vi]