756D.94/54
Memorandum by the Assistant Chief of the Division of Far Eastern Affairs (Ballantine) of a Conversation With the Netherland Minister (Loudon)3
Dr. Loudon said that after having arranged to see Mr. Ballantine to acquaint him with the contents of a letter from the Governor General of the Netherlands Indies he had received an urgent instruction from his Government asking the Minister either to see Mr. Welles in person or to have the counselor of the Legation see Mr. Welles. In pursuance of that instruction the counselor had already seen Mr. Welles.4 Dr. Loudon said that he had instructed his office to let Mr. Ballantine know of this, but, while the office apparently had not done so, he was very glad that Mr. Ballantine had come so that he might emphasize certain observations which he wished to make in connection with the letter.
With this introduction Dr. Loudon proceeded to describe the contents of the letter to him from the Governor General, which he said was dated July 11. The Governor General described the situation in the Far East as serious. International developments had served to give Japan a free hand. British naval forces in the Far East were small and Japan was without any opponent of importance in the Far East. The Japanese group favoring a strong foreign policy were gaining the upper hand (Dr. Loudon noted that this letter was written before the advent of the Konoye cabinet).5 Japanese aggression was therefore a certainty. Although strong action by the United States might serve to hamstring Japan, such attitude on the part of the United States was unhoped for. Nevertheless the Indies Government was determined to resist Japan as effectively as it could.
The Minister then proceeded to offer his own comments in regard to the situation. He said that he would speak quite frankly; he did not wish to be understood to be critical of the United States yet what he wished to say was so delicate that he hoped that it would not be made the subject of any written memorandum. The Minister offered two specific suggestions: (1) that it seemed to him that it would be of great moral effect in the present situation if further delay could be avoided in concluding the pending arrangements for the air service between Java and the Philippine Islands; and (2) he hoped that something could be done to avoid the delays which are now being [Page 59] experienced in obtaining permits to ship various war materials and equipment which the Netherlands East Indies Government had ordered in the United States.
The Minister then alluded to the taking of measures by this country against Japan. Although he was vague and indirect in his language on this point I gathered that he was trying to convey his apprehension lest the imposition by us of restrictions on certain exports to Japan might precipitate Japanese action against the Netherlands East Indies.
Dr. Loudon then went on to say that he felt that the situation of the Netherlands East Indies was critical in that the future now lay between two alternatives. The Islands must either become absorbed in the East Asiatic economic bloc or be retained as a source of wealth for the white race. He suggested that the Dutch Government could do much to increase its value for American trade. Although Americans knew of the Indies as a source of rubber and tin he felt that they did not realize its potential importance as a market for American manufactured products. He said that Java was already partially industrialized but if the Indies continued to remain in Dutch hands they could be further developed in the interests of the white race.
The Minister then went on to say that he realized that there was no answer that Mr. Ballantine or anyone in the United States could give him to these various observations which he made. What he was saying was more in the nature of a prognostication of the possibilities which he regarded as of concern to the United States. He then asked Mr. Ballantine in the light of Mr. Ballantine’s long residence in the Far East what his estimate of the situation was. Mr. Ballantine referred briefly to reports in the press regarding the nature of the recent cabinet crisis in Japan, which indicated that those elements in favor of a stronger foreign policy were in the ascendency, to the repeated Japanese statements that they considered that the settlement of the China affair was a paramount need, and to the fact that notwithstanding this desire liquidation of the China affair still seemed far from sight. Mr. Ballantine said that while he could not venture to make predictions in view of the many factors involved and the possibility of unforeseen developments, he did not in view of all the circumstances look for any sudden or dramatic action at this time on the part of Japan in directions other than in China. Mr. Ballantine thanked the Minister for the Minister’s exposition of the situation in the Netherlands East Indies and said that he would not fail to bring the Minister’s observations to Mr. Welles’ attention.6