501.BC Indonesia/10–849: Telegram
The Chargé in the Netherlands (Steere) to the Secretary of State 1
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908. Hicus 53. Ten a. m. October 7. Read to Stikker, Van Royen, Hatta, Djuanda, Hamid and Indrakusuma in top secret meeting my quarters informal and personal suggestion quoted Hicus 52.2 Upon request Van Royen, gave him copy well as others. In discussion that followed I corrected orally point three memo to explain suspension applicability in pledge only concerned 1.3 billion outlined point two and that pledge would be operative with respect present and future indebtedness to Netherlands in excess 1.3.
When group assembled I said that since Baarn talks3 two or three of their group had asked me what should be done. I considered it urgent we get results shortly on debt settlement and financial agreement. I regretted publicity which was making negotiations more difficult. I said that if we could not soon report success on union statute and financial problems world would look pessimistically on RTC. I said I had not discussed with my government, my UNCI colleagues or anyone else idea I was going “try out” on them in accordance request from both parties I take helpful initiative. I said purely personal and probably would not please either delegation.
I said was convinced Netherlands would not wipe out debt for extraordinary military expenses as such or reduce total debt to figures stipulated by Republicans. I said I could understand political difficulties Netherlands Government but convinced they must reduce by greater figure than offered. I said place to reduce was on state-to-state [Page 506] debt and place to give service respite was on bonds and Netherlands guaranteed foreign credits. I said Indonesians themselves should have responsibility for internal debt. I said my whole thesis was that no matter how carefully we draft and how long we talk over amounts and plans nothing would be of avail if USI does not succeed. I said we had to go limit in making sacrifices all sides to get plan that will work.
I said concerned over burden Indonesia will have initial period. I was against their trying do whole thing through foreign borrowing, particularly if they have their exchange from exports pledged to considerable extent. I said if they assume too heavy borrowing load they could never emerge from morass of indebtedness. I said they would have to conduct Spartan economy at best. I knew Hatta, Hamid and others realized they could not make go of it unless they looked to Netherlands for technical assistance and aid. I thought they might also desire consult International Bank or Fund. I said be most difficult get new government started under conditions which have been inherited. Said would like see termination discussions on finance and debts soonest with generous attitude and sacrifice both sides. I thought this would do much to show world union partners are going to shoulder and share burden as business partners. I then read text memo. I added that at Baarn I had suggested there might be group of experts selected to look into settlement as long-term proposition with only general lines agreement to be reached RTC. I reminded Stikker he had told me definitely his government could not accept such suggestion but wanted whole problem settled now. I said Hatta had spoken with me of this same expert group idea but I realized it futile.
In discussion that ensued I said I did not have knowledge of contracts under which US credits outstanding in total under reference but would try get this reduced if possible.
When Djuanda asked re tin pledge, I gave explanation in first paragraph this message. I said Netherlands had sought “agreement” on Indonesian financial aid related matters well as tin pledge and setting aside percentage foreign exchange from exports. I said they were willing waive “agreement” if obtaining “consultation.” Furthermore my recommendation did not include export percentage arrangement. I was therefore favoring tin pledge as above indicated although from standpoint Indonesia procuring needed new loans from abroad realized this would be handicap. I said had received tin pledge descriptive document which I had requested at Baarn only last night and had not yet studied it carefully. Van Royen spoke of heavy load plan would oblige Netherlands carry coming four years. Stikker said if they cannot come to compromise with Indonesians no hope of solving problem but difficult Netherlands accept whole my plan and go on giving credits.
[Page 507]I thought unwise attempt monetary purge now. Said if we could get out announcement of broad-minded settlement with mutual sacrifices more favorable atmosphere would be created for any debt consolidation or monetary operation. There would be more confidence in monetary future and currency unit that Indonesia is to utilize. I said happy agreement and good press would improve chances for domestic and foreign support.
Hatta and Djuanda spoke of deficit budgetary situation inherited and said actual debt between 10 and 12 billion rather than between 6 and 7 as Netherlands figures utilized by me indicate. We pledged secrecy and early study my paper since Stikker and other ministers leaving next Wednesday for Luxembourg. Was agreed suggestion would be discussed with limited top colleagues and group would inform me whether they found paper basis for any further discussion. If so, we would meet again secretly my quarters. Meeting was entirely cordial.
At end Steering Committee meeting 4:30 p. m., Stikker asked if I would be available in evening. I said 5 o’clock meeting on union statute but would be in quarters thereafter. Made real progress in meeting with one from each delegation on union statute and all of us confident we could get this satisfactorily completed first of next week. On call from Stikker I went directly from meeting to residence Prime Minister 8 p. m. where talked with Drees and Stikker alone for hour and half.
Drees said Finance Minister Lieftinck insisted my suggestion impractical and he unwilling assume responsibility therefor. Said few members government had talked over situation and thought inevitable government tender resignation. Said intended telegraph Netherlands Embassy Washington to report situation to Department. I said had already informed Department, had made suggestion to group, and had let Department know of impasse and of request from Stikker that I push matters and his receptiveness to idea of my getting group together and giving my suggestions. I said I had not cabled text, preferring wait see whether group willing accept it as basis for discussion.
Drees and Stikker took turns telling how difficult their situation was politically and financially and how my suggestion now made their going on in government and RTC impossible. I reviewed figures with Stikker in endeavor convince him margin of charge to Netherlands thereunder as compared with their plan advanced Baarn should certainly not be considered as constituting item to make government resign. I said they must realize SC and world would not consider this satisfactory reason for government falling and RTC failing.
Drees then referred to unfavorable reports from Indonesia. I said aware of them just as I had been familiar with other fears which Netherlands had held over Indonesian problems. I said casualties [Page 508] had ceased and was confident situation could be worked out once RTC ended and Indonesian leaders return from Hague to Indonesia.
Stikker said my suggestion not only unacceptable as basis negotiation but would make impossible get Indonesians accept anything less since they have seen it. I said I never sounded out either party in advance when requested offer compromise formula. I reminded him he had been one to urge me most strongly get Hatta into negotiations some way, had made no suggestion himself for basis thereof and Netherlands oral note following Baarn gives no lead. Only answer he had was that his people could show costs military operations much less than Indonesian figure mentioned 700 or 800 million as correct. Department knows this ridiculously low.
When both Drees and Stikker reiterated necessity cabinet resigning, I said this absolutely foolish. I said I had worked with their government through lot of difficulties and was willing go ahead and help get fair settlement now but did not desire participate in agreement which would leave such burden on Indonesia that I, with some little technical experience, was absolutely sure would not give Indonesia ghost of chance of either succeeding or surviving. I said I would gladly discuss my suggestion with Lieftinck or any their experts. I repeated I had not submitted my suggestion to Department and had not acted under any instructions. I said I was acting on own responsibility but entirely happy have my government review my suggestion.
I said naturally regretted if any well-intentioned moves my part upset them. I insisted suggestion had been purely informal and that I would not even have circulated copies if Van Royen had not requested this or if any one of group had opposed suggestion going beyond oral stages. I reminded them that suggestion had only been advanced as possible basis for discussion and group members were to let me know before Sunday whether they accepted it as such basis. I would, however, seek withdraw memo with explanation I had been given understand it was not acceptable as basis for Sunday’s discussion.
When Stikker spoke rather strongly of alleged harm I had done, I recalled to him many services I had performed for him and his government. I said he and Drees had volunteered to me last February that Netherlands did not have manpower and money to carry through second police action. I said they realized well as I that course we have taken under SC directive only possible way out. I said I had taken whole responsibility on USDel side in spite warnings from friends that Netherlands Government might walk out when situation got tight and blame SC and US particularly therefor. I said I had never believed this and could not believe for one minute now that government would quit and invite chaos and Communism in Indonesia.
[Page 509]I said optimistic over chances new state if only can be given breathing spell. Said intended proceed Department immediately after termination RTC and help obtain financial assistance needed to give Indonesia fair start. Said I would likewise be interested and active in seeing Netherlands supported during difficult period. Thought better that both partners to union seek outside aid rather than Netherlands look to Indonesia for payment of debts and interest during critical stage and oblige foreign lenders largely finance Indonesia including debt service to Netherlands.
When I spoke of willingness intercede for both partners, Drees and Stikker became interested. I said I had not favored any understanding between Netherlands and US Government before or during RTC on what settlement should be or what assistance could be expected from US later. They then said would proceed with cable to Ambassador Washington and needed my memo as basis thereof. Said might ask me talk with Lieftinck and others. Said we should not, however, have Sunday meeting or endeavor negotiate on financial problem in RTC next few days.
I spoke with Hatta by phone when he became available 11:30 p. m. Told him suggestion had been found unacceptable as basis further discussion and I would see him 10 a. m. Saturday for return of memo. Asked he inform Djuanda and keep strictly secret. Endeavored contact Hamid. Unsuccessful but will try later.
Suggest Department review OIR report No. 4947 of Aug. 17 on Indonesian public debt which I have used importantly as basis my reasoning in suggestion under reference. Am convinced my suggestion technically sound and fair. Felt it absolutely imperative I take this informal initiative or risk seeing conference break down. At same time feel withdrawal memo only way remove from government technical excuse to resign on Indonesian issue. Signed Cochran.