My 1603. [1] Indonesian Policy.

1. Since despatching telegram under reference the situation in
Java has seriously deteriorated along lines we had anticipated.

The refusal of the Hague to sanction negotiations with Soekarno
has led to delays during which Soekarno has lost influence and as
matters stand he is not an effective medium for negotiations.

2. The responsibility for this deterioration is clearly that of
the Hague. Mountbatten and both Van Mook and British
representatives in the area have persistently recommended
negotiations but the Hague authorities have undermined all
attempts by stating publicly that if Van Mook is negotiating or
intends to negotiate it is without authority and against
instructions. The time may come if it has not already arrived when
it will be essential for United Kingdom and/or United States
America to make public this Dutch responsibility.

3. In the existing circumstances there are three alternatives-
(A) The British to attempt to maintain administration and to allow
the Dutch to take over gradually. This seems to be what is
happening now. British forces are being reinforced and efforts are
being made to keep control by a show of aerial strength. At the
same time radio reports state that United Kingdom following upon
further talks in London with the Dutch has agreed to permit the
landing of 75,000 Dutch troops in the next three months in Java.

The Dutch do not appear to have sufficient available forces to
take over immediately. In any case whether they take over
gradually or immediately representatives of the Indonesian groups
will be in no mood to negotiate if they see that undertakings have
been given prior to the opening of discussions to the Dutch
ensuring that their control is to be restored whatever happens
during the talks. This alternative will involve long term strife
and unrest and in any event cannot lead to a permanent settlement.

(B) The British to enforce order without permitting arrival of
Dutch forces and ultimately to lay down terms of settlement. As in
the case of alternative (a) this would involve grave political
difficulties in India, Burma, Malaya and other places in this area
resulting in serious decline in Britain's (including Australian)
prestige in South East Asia. (It is to be noted that Indian troops
are being employed on large scale against Indonesian groups.) The
long term effects of this might be the creation of strong anti-
British sentiment throughout South East Asia ultimately
threatening Australia itself.

(C) The third alternative is for the responsibility for carrying
through a settlement to be transferred immediately to an Allied
Commission representing at least, repeat at least, United Kingdom,
United States of America, Australia and New Zealand. It is already
too late to expect the Dutch to negotiate bilaterally with the
Indonesians. Similarly the stage has passed when the British could
arrange for negotiations likely to be successful as they already
have become committed in the eyes of the Indonesians to re-assert
the Dutch Administration.

4. We cannot wait for formal inter-governmental consultations
which are always prolonged before setting up an inter-allied
commission and the following is the way in which we suggest that
the third alternative can be put into effect.

5. It is desired that you immediately discuss the matter with the
Secretary of State and if possible the President pointing out to
him the dangers of the present situation and the dangers of the
various alternatives which might be adopted. It should be
suggested to him that he make an offer of mediation and propose
the setting up of an Allied Commission. President Truman may be
willing to point publicly to his discussions with you and
associate Australia with the initial mediation offer. As part of
the offer the Indonesian leaders should be informed that the
Commission would arrange for negotiations and would recommend
that, pending those, no Dutch forces be landed in Java or Sumatra
and that the implementation of such proposals would depend upon
the Indonesians co-operating in preventing further violence.

6. Every day's delay is resulting in further commitments by the
British which ultimately will lead to British having to take
complete responsibility and having very large forces involved.

Every day's delay is making civil war more imminent because Dutch
forces are already on the way. We suggest you urge the quickest
possible action by United States Government and an immediate
announcement by the President even prior to formal consultation
with any interested power.

7. We do not underestimate the extreme difficulties implied in
these proposals. They may have to be a-mended in the light of your
own estimate of what the American and British reactions are likely
to be. Our assessment is that the situation is landsliding and
what we have suggested above is a last minute attempt to achieve a
solution of this problem which is vital to Australia by
arbitration.

8. While Australia must take an active part in diplomatic
negotiations such as this and do everything possible to prevent
developments which ultimately may threaten her security, every
precaution must be taken not to imply that Australia is willing to
undertake military commitments other than those arising out of
membership of the United Nations.

9. You will note from telegram to External Affairs Officer [2]
that United Kingdom Government has not been informed. It is left
to your discretion as to how and when the United Kingdom
Government is informed.