Kuala Lumpur, 9 December 1965

2640. Secret Priority

Barter Trading

For 'Toh' in our cable No. 2634¹ please read 'Bogaars'.

2. Wade, Bottomley and I met again this afternoon following Wade's farewell meeting with Razak (Wade leaves tomorrow for six weeks' leave in New Zealand.) Razak told Wade that he had written to Goh proposing that Singapore use boats over 200 tons for barter trading, but reiterating that the Malaysian Government could not agree to the Pulau Senang proposal.

3. Wade told Razak that he had reason to believe that Lee would still wish to go ahead with Pulau Senang. In which case, said Razak, Malaysia would impose economic sanctions. Razak said that he would not be present at the C.D.C. meeting on 14th December because of the SEAP games² and that it would only be a briefing meeting in any event. He did not intend to have a proper meeting until 28th December unless Goh insisted.

4. Wade asked Razak point blank for an assurance that Malaysia would not use force against Singapore. Razak would not give this. He implied that economic sanctions was the limit of Malaysia's initial action but said that as there was no telling what could arise subsequently, it was impossible for him to give the assurance sought. Wade commented that Razak was in a grave mood and that in view of reports from the New Zealand office in Singapore, he himself now believes a clash is likely.

5. As against this last assessment Bottomley and I both feel that the Malaysians and Singaporeans are indulging in brinkmanship and that although a miscalculation could lead to trouble, there are face-saving plans available, for example, either 200 ton boat trading or complete reappraisal of the Senang scheme in the light of simultaneous barter trading from five or six Malaysian ports (see our cable 2639).³ Whatever the rights and wrongs of Singapore's position, the fact is that Malaysia is in a position to do very serious damage to Singapore, although at some cost to itself. It is difficult to imagine that Lee will continue to push a point of principle to the point which might lead to economic dislocation and thus to political danger within Singapore for himself.⁴

[NAA: A1838, 3006/4/9 part 30]

1 9 December. It reported advice that Singapore was 'agreeing to the suggestion that they should try barter trading from ships of over 200 tons' and that four ships would commence operating within the next two days. It also reported that 'Toh' had made it clear that this was additional to, not instead of, Singapore's Pulau Senang proposal.

2 Razak was President of the 3rd South East Asian Peninsula Games due to be held in Kuala Lumpur. The games were a biannual event inaugurated in 1959 to promote cooperation, understanding and relations among countries in the region. The founding members were Thailand, Burma, Malaysia, Laos, Vietnam and Cambodia, with Singapore included following the separation. The games would become the Southeast Asian Games with the inclusion of Indonesia and the Philippines in 1977–Brunei becoming the 10th member in 1997.

3 9 December, advising that Razak was instructing the Combined Internal Security Committee (CISC) and the Combined Planning Committee (CPC) 'to examine parallel proposals to the Pulau Senang scheme that barter trade be resumed on a similar basis at Penang, Port Swettenham, Malacca, Batu Pahat and Kukup on the west coast and Pengerang in south east Johore and that these together with Pulau Senang be considered as a single aspect'. On 6 December, Dollard had advised Parkinson that an alternative plan for a modified form of barter trading between Singapore and Indonesia had been developed with Special Branch and that this was to be discussed with Singapore at 'top political level'. No details of the plan had been provided.

4 Cablegram 2634 had also contained the advice that Lee had confirmed that the barter trading issue was now 'a question of principle' between Singapore and Malaysia which, if not settled, could place him 'on weaker ground in a future dispute'.