I have the honour to report that another month is drawing to a
close without the Dutch-Indonesian agreement having been signed.

To judge from the public statements made by each side, a deadlock
has been reached, but there is a little evidence that an attempt
is being made to close the gap. In a statement issued on the last
day of January, the Republican Minister of Information, Dr.

Natsir, had urged the immediate signature of the agreement, taking
the line that the cease-fire was not the key to the situation, but
that signature would constitute a political application of the
truce and provide a basis for the solution of all remaining
issues, political as well as military. The Dutch reply asserted
that the Commission-General was anxious to sign, but that military
activities had confused the situation and had a delaying effect;

the Commission-General was naturally bound by the Romme - van der
Goes van Naters motion [1], and had [itself] [2] imposed the issue
of a cease-fire as a preliminary condition.

2. It was against this background, and more important still, under
the shadow of the Krian incident reported in my Despatch No.5/1947
[3], that the two Delegations met early in the month. There is no
doubt that the Commission-General had been perturbed by Krian into
a sense of urgency, and Professor Schermerhorn, I believe, hoped
that the signature would take place early in February. At the
delegation meetings, it was agreed that Krian should be treated as
an abnormality, that the demarcation line should officially hold
good, and that the occupied areas should be returned 'when
conditions returned to normal'.

3. The Republican Delegation then left for a Cabinet meeting at
Djokjakarta, at which the Government decided to adhere to its
previous readiness to accept all that took place at Linggardjati,
and nothing else. The communique announcing this, and the Dutch
reply in which their former position is maintained, are contained
in my telegram No.19 of 12th February. Any public statements since
made by either side have merely consisted of dialectical
justifications of earlier statements, and contributed nothing new.

Since the return of the Indonesian ministers to Batavia, there
have been no further meetings with the Commission-General,-only
the secretaries of the two delegations are in contact. The
Commission-General appears not to be a happy family, and Dr.

Schermerhorn declined an invitation to meet Sutan Sjahrir alone,
fearing to compromise himself.

4. Dr. Romme, parliamentary leader of the Roman Catholic Party and
co-author of the disputed motion has now left for Holland. He
seems to have spent most of his time in military circles, and did
not make contact with any Indonesian leaders. The tone of his
reported speeches has been quite uncompromising, as can be judged
from a typical pronouncement made at Medan on February 12th. He
there said 'If the Indonesian Delegation and the Dutch Commission-
General interpreted some important points differently at the time
when the agreement was initialled, the whole agreement has no
feasibility and is really a horrible misunderstanding. I am not
prepared, and parliament with me, to follow a different line.'
5. What difficulties the Commission-General is having with the
Netherlands Government can only be guessed at, but a press report
appeared here on 22nd February of a memorandum on the budget of
the Ministry of Overseas Territories saying that the Government
did not intend to make any change in its policy towards Indonesia,
'even if the Government were compelled to resort to the use of
arms'. The report proceeded: 'The Government rejects the use of
force in order to restore the old constitutional structure in the
country in preparation for the new. On the other hand, the
Commission-General has also been instructed not to sign the
Linggardjati agreement as long as violations of the truce
agreement still occur.' My earlier statement that attempts to find
a way out were being made by the Commission-General is based on
hints that it is submitting various compromise formulae to The
Hague.

6. The Republican military authorities issued a cease-fire order
which came into operation at midnight on 15th February, and
withdrawal two kilometres behind the demarcation lines has been
provided for. This was officially welcomed by the Dutch, though
their military spokesman, having no military actions to report on
17th February, could not refrain from announcing the death of one
soldier from wounds previously received. Since the cease-fire,
there has been a lull generally, but some clashes have occurred,
the blame for which cannot be placed with certainty.

7. General Spoor has returned from Holland-with what directives,
one does not know. It is the opinion of the British Military
Liaison Officer, who has been here since the first British
landing, that Indonesian activity has recently been less than
former activity against A.F.N.E.I., but seems more because of the
scale on which the Dutch hit back. It is undoubtedly their policy
to hit hard whenever there is an excuse, and their use of aircraft
is more extensive than in British times. It does seem to be true
that the Krian operation was conducted relatively easily, but more
significant is the way the Service people were able to complete
the operation and force the civilian side into tortuous
justifications of it; this, allied to the aggressive service
temper, is potentially dangerous. It is interesting, in this
connexion, to learn that General Spoor, some days after the cease-
fire, sent Sutan Sjahrir a letter in uncompromising terms
demanding revolutionary changes in demarcation lines, and that
Professor Schermerhorn, disclaiming knowledge of it, but faced
with a copy, had to pass it off as a 'misunderstanding'.

8. The Netherlands navy, too, is active. It has been busy stopping
and detaining small ships, mostly Singapore-British, in connexion
with the economic blockade; a large American vessel, the Martin
Behrman is now loading rubber and other prohibited exports at
Cheribon, and subsequent happenings are being awaited with some
interest. [4] There has been a naval reconnaissance of the south
Java coast, and a landing party went ashore at a point which has a
strategic relation to the Bandoeng sector. Action has also been
taken against what is described as a fleet of prahus to be used
for Republican landings and infiltrations on Bali, and with the
same object, a coastal battery at Banjoewangi was destroyed.

9. Republican Government circles after the last Cabinet meeting
were very pleased at what they felt to be the increasing political
unity of the Republic, and the cease-fire order was issued with
more confidence that it would be obeyed, than would have been
possible earlier. The T.R.I. [5] has been reformed by a reduction
in rank to a more realistic level of many senior officers; the
civil police is considered now to be ready to take sole charge of
police activities in the interior, and arrangements are being made
to withdraw the army from these duties. A Republican Purchasing
Agency has been established to conduct all commercial transactions
in Batavia on behalf of all the Republican ministries. Under the
impulse of Dr. Gani, consideration is being given to the
rationalisation of government industries, with special attention
to control of costs and elimination of surplus personnel. The
Komite Nasional (K.N.I.P.) began its session on 25th February.

Pre-session expectations were that it would discuss the activities
of the working committee of the K.N.I.P., as well as the
Presidential Decree No.6 of 29th December last, increasing the
number of members of the Komite, and, if the decree is approved,
that the new augmented Komite would meet.