Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

179. Telegram From the Embassy in Indonesia to the Department of State¹

Djakarta, September 30, 1956—10 a.m.

812. Deptel 496.² Embassy staff engaged in study most advantageous timing announcement ICA line credit to Indonesia (mytel 3 from Medan³). Minister Planning Djuanda has indicated to USOM chief he hopes US will announce decision on line credit soonest so he can prepare present PL–480 loan agreement⁴ and agreement on line credit to Parliament as one package for prompt ratification. I believe it would be advantageous for US and help preserve hard-won momentum and increase efficiency in US technical and economic assistance to Indonesia if this were done. Problem is to choose time of announcement that will avoid context US reacting to Soviet or other Communist bloc offers yet preserve our advantage in field economic cooperation. This may require postponing announcement Department’s decision (Deptel 392) until shortly after Sukarno’s return even though considerations securing prompt action Indonesian Parliament and launching road building and other projects in areas outside Java which will be financed by line of credit argue for prior announcement if possible.

In my opinion US decisions on aid programs Indonesia generally should be guided principally by their effect on substantial US strategic and investment stake Indonesia, not by individual Soviet moves here, by Asian-African reaction Suez or by over concern sensitivities Dutch.

Vital this line credit will not be our [because of?] undue delay or withholding announcement, become in Indonesian minds political threat which they will inevitably compare to Aswan Dam and which may arouse in their minds new doubts and launch debates reminiscent MSA imbroglio 1952.⁵ We have, after long and assiduous effort, convinced Indonesian leaders our aid does not “have strings attached” and if our aid programs are to be effective here we believe we must avoid any connotation their use as political goal or punishment. I have never meant minimize in any way Indonesian determination reduce Dutch domination economic sector and Indonesianize rapidly as possible in commercial field. I have tried to make clear that more reasonable elements Indonesia, who would favor “go-slow” process in Indonesia’s own best interest, were losing ability hold back vociferously radical elements determined move against Dutch regardless of consequences, so long as West Irian question remains involved. Mytel 1873 repeated information Hague 111⁶ reported, when Dutch-Indonesian relations were breaking down Geneva, “danger that public opinion all stripes will demand strong unilateral action against Dutch should no agreement be reached”.

Dutch position Indonesia has deteriorated at accelerated rate since failure Geneva negotiations last February as was predicted in conversation reported Embdesp 767 of June 16.⁷ In rapid succession have come abrogation RTC and, what Indonesians call logical consequence, repudiation Dutch debts. It is clear that Indonesian public opinion will push this or future governments, of whatever political orientation, to further pressures on Dutch in [garble] so long as West Irian denied Indonesia.

I see no chance establishment gain for US in case Suez, or for Dutch in their numerous problems with Indonesia, by US trying to make this line credit persuasive instrument for changed attitudes by Indonesians toward these 2 problems complexes [complex problems?]. With respect moral issues involved between Dutch and Indonesians, Indonesian sense righteousness is no less strong than that of Dutch. Indonesians claim Dutch have broken RTC by refusing recognize West Irian as area in dispute (as provided in RTC agreements) and by incorporating West Irian in Netherlands Constitution as part of Netherlands territories⁸ before settlement reached between two countries. Any US decision as to which country is morally right would be strongly resented by other and would be out of keeping with US policy toward West Irian dispute.

Withholding US aid to Indonesia would not improve Dutch position Indonesia, might well worsen it indirectly by widening resentment against West to include those influential leaders now friendly to and cooperative with US and would also risk Indonesian attitude toward US interest Indonesia.

Indonesians know US line of credit to Indonesia under consideration. This inevitable in Washington atmosphere full discussion our aid programs and policies. If announcement is not forthcoming near future they will inevitably regard delay as political punishment which will tend to increase receptiveness to Soviet blandishments.

Recently concluded Soviet loan agreement (mytel 690)⁹ must be presented Indonesian Parliament before projects can be started. Indonesians have indicated projects under this agreement will be located in areas outside Java, areas in which US programs have hitherto been weak or non-existent but in which I hope US can bring increased emphasis as encouragement non-communist elements, many of whom feel neglected by Central Government Indonesia, frustrated and in unhealthy state public mind.

There is evidence present non-communist coalition, including Prime Minister, anxious continue emphasize programs technical and economic cooperation with US in preference those with Soviet (mytel 751¹⁰) and I hope we can maintain and encourage this point of view.

I do not see any likelihood reversal Dutch misfortunes Indonesia barring Dutch reversal on West Irian either at Dutch initiative or our intervention (and I do not recommend latter at this time).

I believe US in planning this extension economic aid to Indonesia should be guided principally by objective a) maintaining and strengthening non-communist Indonesian Government; b) protection American interests particularly oil with its enhanced importance since Middle East crisis; c) maintaining advantage our 6 year head start in field technical and economic cooperation with Indonesians; d) timing announcement that will avoid connotation competition with Soviet in either propaganda or economic aid fields. It will be of crucial importance to retain advantage improved atmosphere US has gained from successful Sukarno visit US in face Soviet plans (implementation of some of which already in evidence) make major effort in propaganda, aid, trade and conceivable military fields to win Indonesia to support Soviet bloc on international issues and bolster PKI and speed internal subversion. For US to waste this advantage in vain attempt soften blows on Dutch (however much we all would like show sympathy for Dutch) would be disastrous in my opinion.

Desirability expediting Parliamentary ratification and facilitating best coordination this line credit with PL 480 loan and other US programs Indonesia argue for announcement now. On other hand furor here over Moscow joint communiqué¹¹ (mytel 765¹²) must in my opinion be operating as brake on Sukarno which might be weakened by his knowledge US credit already “in bag” and thus lead to some ill-advised behavior in Red China as in Moscow (Moscow telegram 573 to Department¹³).

I recommend therefore we delay announcement until soon after Sukarno’s return from Peking (scheduled October 12). Immaterial whether announcement made here or Washington but I would like provide Prime Minister Ali or perhaps Sukarno with advance knowledge timing announcement. Baird concurs in foregoing.

Cumming

1. Source: Department of State, Central Files, 70756D.5–MSP/9–3056. Secret. Repeated to The Hague.
2. Telegram 496 to Djakarta, September 27, requested Cumming’s comments on telegram 392 to Djakarta, September 11, which informed him of the State–ICA decision to provide a $25 million line of credit to Indonesia over a period of more than 1 year, and stated that the Department was studying the timing of the substantive approach to the Indonesian Government. (Both ibid., 756D.5–MSP/9–1156)
3. Telegram 3 from Medan, September 18, Cumming’s preliminary reply to telegram 392 (see footnote 2 above), recommended delaying the approach to the Indonesian Government until the Embassy could ascertain Indonesian reactions to a Soviet-Indonesian economic and technical aid agreement signed on September 15 and determine the moment at which the approach would most strengthen the anti-Communist coalition government. (Ibid., 756D.5–MSP/9–1856)
4. Negotiations were in progress for an agreement to permit the loan to Indonesia of rupiahs accumulated by the United States from the sale of agricultural commodities under the agreement of March 2, 1956 (see footnote 4, Document 143). Negotiations continued intermittently for over 2 years, primarily because of U.S. insistence on, and Indonesian refusal to accept, a maintenance of value clause; documentation concerning the negotiations is in Department of State, Central File 411.56D41. An agreement signed on March 18, 1959, was replaced by an exchange of notes of May 29, 1959; for text, see 10 UST 1079.
5. Reference is to the controversy aroused by the signature of the U.S.-Indonesian agreement of January 5, 1952, which led to the fall of the Sukiman Cabinet; see footnote 7, Document 116.
6. Dated February 10, not printed. (Department of State, Central Files, 656.56D13/2–1056)
7. Despatch 767 transmitted a memorandum of a conversation between Kwee Djie Ho, the chief Indonesian diplomatic representative in The Hague, and an Embassy officer. (Ibid., 656.56D/6–1656)
8. The amendment to the Netherlands Constitution received final approval on August 21, 1956.
9. Telegram 690 from Djakarta, September 16, reported the signature of the Soviet-Indonesian aid agreement of September 15, which provided for $100 million credit to Indonesia for unspecified aid projects. (Department of State, Central Files, 456D.6141/9–1656)
10. Telegram 751 from Djakarta, September 24, reported that the Embassy had learned that the Indonesian delegation, which had negotiated the Soviet aid agreement, had been instructed by Ali not to agree to anything that would hinder U.S. aid. (Ibid., 456D.6141/9–2456)
11. Reference is to a joint statement of September 11, signed by Abdulgani and Soviet First Deputy Foreign Minister Andrei Gromyko, and issued at the conclusion of Sukarno’s visit to Moscow. For text, see Documents (R.I.I.A.) for 1956, pp. 738–740. The statement had aroused controversy in Indonesia, particularly because of a sentence reading, “Moreover, the Soviet Union and the Republic of Indonesia have declared that the existence of military pacts does not further the efforts to ease international tension, which are sorely needed for attaining world peace”; and because it did not mention West Irian.
12. Telegram 765 from Djakarta, September 26, reported that Ali had told Cumming that the United States should regard the furor over the communiqué as a good sign and that he had assured Cumming that the communiqué did not mean that Indonesia was moving toward the Soviet Union. (Department of State, Central Files, 656D.61/9–2656)
13. Telegram 573 from Moscow, September 13, reported that Sukarno had accepted the Order of Lenin during his visit to Moscow. (Ibid., 090.6156D/9–1356)