305. Memorandum From Michael V. Forrestal of the National Security Council Staff to President Kennedy0
Indonesia
I attach two cables which give you the current status of our negotiations with Indonesia on the question of possible U.S. economic assistance (Djakarta’s 1732 and Aidto 1345).1
The Aid Agency is presently operating on the theory that both from the point of view of the situation in the U.S. Congress and from the point of view of a rational approach to Indonesia’s economic difficulties, our efforts should be guided by two fundamental principles. First, we should try to spread the burden of outside assistance to Indonesia among as many Free World countries as possible; and second, we should break up the assistance package into a series of inter-related economic programs in order to avoid a large U.S. stabilization loan. The programs we have in mind are listed on page 6 of Aidto 1345.
There has been some difficulty in getting the Indonesians, and even our Embassy in Djakarta, fully to understand that we cannot provide substantial assistance without having a more precise idea of Indonesian requirements in the light of the specific steps they intend to take on their own to stabilize their economy. Part of the difficulty is that Sukarno himself tends to regard his economic difficulties as problems which can be solved by dramatic political gestures, including a substantial gesture in form of a loan from the United States. Because of this feeling, it has been extremely difficult to get the Indonesian Government to develop with the IMF a detailed program for stabilization and economic development.
Nevertheless, some progress has been made; and we understand that the Indonesians are about to invite the IMF team to return to Djakarta to complete their work on the Indonesian program. Also, on the [Page 667] 15th of this month Sukarno is scheduled to make a major economic address in which he may announce the first in a series of steps which his Government will take at home toward stabilization.
The danger is that from time to time Sukarno will demand excessively large and unrealistic commitments from the United States before the Indonesians have even defined the belt-tightening measures which they will take and which have to be defined before we can talk dollars and cents. Aid is resisting these demands, but one can expect the political pressures to become quite intense.
Finally, the Indonesians have been making unrealistic demands on U.S. oil companies. Unfortunately the oil companies have been too rigid in their negotiations and have not shown much imagination in devising ways of meeting their own financial requirements with Indonesian political requirements. Bob Barnett in State is doing a good job in getting the oil companies to reexamine their positions.
- Source: Kennedy Library, National Security Files, Countries Series, Indonesia, Vol. III, 5/63. A note on the source text indicates that the memorandum was part of the President’s weekend reading for May 11.↩
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In telegram 1732, May 8, Jones reported that during a trip with Sukarno to West Irian Sukarno talked extensively about economic problems. Jones made three points: the United States was not dragging its feet on assistance for political reasons, but as soon as Indonesia reached an agreement with the IMF, U.S. assistance would be accelerated; U.S. aid to Indonesia was far greater than to any other nation; and it was difficult to accept Indonesia “condoning PKI efforts to point finger at US as neo-imperialistic.” (Department of State, Central “Files; E 1–1 INDON)
Aidto 1345, a joint State-AID message, April 26, authorized Jones to review with Sukarno, Subandrio, and Djuanda the U.S. position on stabilization. The message provided guidelines for that review. (Ibid.)
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