The Australian Interest
- There is no established Defence view on the defence importance to Australia of Portuguese Timor. It has been argued in some departmental Branch working papers that our interest would be served by the territory becoming independent, when we could look for military access to it in the event of pressure or threat by Indonesia and/or by some other power sometime in the future. Against this must be argued that a weak and unstable Portuguese Timor could be exploited by an external power for strategic ends. (This is also Indonesia's anxiety.) There could be friction between Indonesia and an independent Timorese state, which could become a source of regional tension and instability. Australia would come under pressure in this respect from both Indonesia and the Timorese state, and it would be difficult to please one without antagonising the other. Essentially, the difficulty about a defence policy in support of independence for Portuguese Timor, designed to improve our military scope should Indonesia become unfriendly in the future, risks Indonesian unfriendliness now.
An immediate target for attack, in any circumstance of Indonesian pressure against Portuguese Timor, will be the Defence aid and co-operation programme with Indonesia; and indeed, a substantive policy question in this respect will arise should Indonesia be likely to use its military forces for threat or attack against that territory. This would go to the heart of our defence relationship with Indonesia. Conceptually this is based in both countries upon a desire to enjoy peaceful dealings and handle amicably any differences arising and upon an appreciation of certain common strategic interests. However, Australia is, and can afford to be, less concerned in this latter respect than the Indonesians, and in any case the present strategic situation is not such as to stimulate lively policy in either country for substantial defence co-operation.
- The Indonesians have shown themselves sensitive to Australia's interest in the future of Portuguese Timor. (There is even some indication that they are taking our Embassy into their confidence to an extent that could suggest collusion.) While they are aware of our concern that Indonesian incorporation of the territory 'should appear to be a natural process arising from the wishes of the people', they are, or were, assured that incorporation is supported by Australia. If domestic agitation against this, particularly were Indonesia to use force, were to move the Australian Government to modify its declared position, there would be unfavourable reactions from at least some influential elements in the Indonesian Government. We would be seen as resiling from earlier assurances, as opposing a major Indonesian policy objective and as yielding to pressure from political groups hostile to the present Indonesian regime, and linked with its major political opponents (the communists).
- The prospects canvassed above raise questions about the tenability of a policy of open support for Indonesian objectives in Portuguese Timor. There are also questions about defence interests and policy in a situation that bears so directly on the stability of defence attitudes and relations between Indonesia and Australia. If Indonesia acquires Portuguese Timor by politically unacceptable processes, our defence relationship with Indonesia will suffer. If Indonesia is inhibited from acquiring the territory by adverse political attitudes in Australia (and elsewhere), likewise our defence relationship will suffer; and in either case the territory could be a continuing source of regional instability, taxing both political and defence policy in relations with Indonesia.
- As the situation develops, we could well face a difficult decision whether the defence interest lies in supporting the territory's independence or its incorporation, even by force, into Indonesia. We cannot sensibly access this yet, and shall have to see how the situation shapes. At this stage, leaving aside questions of political principle involved in the consideration of free choice for the Timorese (to which defence policy cannot be insensitive), we would go no further than to say that there is no independent Australian strategic interest in the independence of Portuguese Timor that would warrant our now opposing its transfer to Indonesia and jeopardising the stability of defence relations with Indonesia; but this situation could change.
- Whether, as the situation develops, Australian political policy will be able to contribute to the management of this difficult problem is yet uncertain. At this stage, however, we are agreed with the Department of Foreign Affairs, in recommending that in your own forthcoming discussions in Jakarta formal discussion of the subject should be avoided; but opportunity should be taken to remind the Indonesians of the unfavourable reactions to be expected to any immoderate action, and the importance Australia attaches to the free choice of the Portuguese Timorese being seen to be exercised. It will be desirable to impress upon the Indonesians, that, while we share their view that the incorporation of the territory into Indonesia would be the most satisfactory outcome if it could be arranged in a politically acceptable way, the Australian Government would experience substantial political difficulties, domestically and in its relations with Indonesia, if Indonesian activity in respect of Portuguese Timor could be represented as improper pressure or coercion.
- It would be desirable to indicate a sympathetic understanding of Indonesia's concerns about the likely weakness and instability of an independent Timorese state, and the possibility of foreign intervention there prejudicial to both our interests (although our apprehension on this score is less acute than the Indonesians'). But it would be prudent to avoid any discussion of how the problem of the territory's future is to be handled, pointing out that this is a matter for political policy and the Minister for Foreign Affairs.
- It will be desirable to seek the Ambassador's advice as to with whom the points above should best be made. Generally, while these points should be firmly lodged with the appropriate Indonesians, we recommend that your approach be in a low key and that you not be drawn into detailed discussion.
- A particular problem will be how to handle discussion of a follow-on defence aid program against the background of the possible difficulties in this respect mentioned in paragraph  above. It would be impolitic to refer to Portuguese Timor in the formal discussions on defence aid. We recommend that these discussions proceed in a normal way, subject to it being clearly understood that they are exploratory and without commitment at this stage and will require confirmation by the Government after further consideration in Australia. We would want to avoid the Indonesians feeling, on the one hand that we were fully committed to further defence aid, and on the other, that we were now using defence aid as a leve[r] on their actions in respect of Portuguese Timor.
[NAA: A1838, 696/5, iii]