The Portuguese Timor situation could be approaching a point of denouement. On the ground Fretilin is near to a complete take-over. This position has been achieved by force of arms: before the recent troubles, UDT, we believe, had much the greater support. At one point it appeared as if the Portuguese were intending to negotiate with Fretilin alone for a hand-over of sovereignty in Portuguese Timor. Santos, however, now has in mind a new conference in Macao involving all three Timorese parties, with Indonesia in the wings in Hong Kong. He intends to speak in these terms to the Indonesians in Jakarta.
Clearly, the talks in Jakarta will be crucial. Your own recent reports indicate that the Indonesians have lost all patience with Santos and his mission. However, they also seem prepared for one last-ditch attempt to negotiate a solution with Santos (and they have thus, for example, sought Australian co-operation in persuading Santos to return to Jakarta as soon as possible). But if the talks break down, it seems that Indonesia is likely to wash its hands of the Portuguese and instead opt for the alternative course of a stepped up [but] still protracted campaign, in the hope that the territory will eventually fall into Indonesia's lap.
From the point of view of our own interests, and of disturbance to the region, this protracted operation could be the worst outcome. Indeed it is questionable whether in the event of palpable and extended Indonesian interference in Timor, the Australian Government could sustain the sympathetic position towards Indonesia which it has managed to follow over Portuguese Timor thus far. The strong possibility that Portugal would take the issue to the United Nations would add to the domestic problems of containing the Portuguese Timor issue.1
It is this consideration which has led the Department to think in terms of the regionalisation arrangements referred to in our telegram O.CH265548.2 We recognise, of course, that the prospects of another Macao-type agreement may not meet Indonesia's optimum requirements. Indeed, we detect in the Indonesian position, as conveyed to you in recent days by Professor Mochtar, a strong reluctance to concede that the approach they were discussing with Santos in Jakarta two weeks ago has been overtaken by events. But the Indonesians themselves must surely accept that it is difficult now to think in terms of a peace-keeping force when peace (of a sort) is breaking out all over in Timor as a result of Fretilin's military victory. In our view, the moment when Indonesia could have acted is now well past. It seems that the best the Indonesians may hope for is to retrieve something for themselves from the new round of Macao talks.
It is in this context that the idea of some regional diplomatic initiative might be attractive to the Indonesians. Such action could be a means of achieving some international recognition of Indonesia's interest and status in relation to Portuguese Timor. It could indeed establish a framework for future Indonesian action including an Indonesian peace-keeping initiative should there be a future breakdown in the political processes within Portuguese Timor and a further lapse into political disorder. We expect in this regard that the Indonesians would share our own assessment of the fragility of the political situation in the territory. This situation is likely to continue whatever temporary political accommodation Dr Santos is able to stitch together at Macao. There is of course the additional factor of Indonesia's own covert activities which can be expected to continue to fan to lines of dissidence at least in the border areas.
In conclusion, I am attaching a copy of a paper we had been toying with last week on possible alternative regionalisation arrangements.3 As you will see, we were drawing on the precedent of the Viet-Nam Paris Agreement as offering a possible pointer to the way ahead in Portuguese Timor. These proposals have clearly been overtaken. But they are the kind of ideas which might again find favour next time Timor lapses into political turmoil.
All this is rather overtaken by your O.JA17584 (which is very helpful) but you might like to see how our minds have been working.
[NAA: A10463, 801/13/ll/1, xiii]