856d.00/10–949: Telegram
The Chargé in the Netherlands (Steere) to the Secretary of State 1
913. Hicus 55. Rusk eyes only. Sorry bad connection but hope you understood (1) Cabinet situation settling down, (2) this reported in Hicus 542 early Saturday afternoon which had not reached you when you phoned and (3) I had been to Schipol Airfield seeing Beam off on 8 p. m. KLM for Batavia and having last talk.
Considering potential danger present stage RTC, believe should give you calm Sunday analysis. Since coming Hague I have been personally active mainly on (1) getting rules of procedure that guarantee for UNCI appropriate participation in RTC (which are working satisfactorily), (2) pressuring Indonesians to agree to hearing significant interests (which is to begin this coming week), (3) serving as intermediary in union statute group with purpose (which hope will be accomplished next two or three days) of achieving middle course draft that can be accepted politically all sides, (4) making Indonesians realize they cannot get complete wiping out of debt arising from police actions and other causes considered by them “not to benefit of people of Indonesia” and making Netherlands realize it is to their own interest give Indonesian financial settlement that will not impair sovereignty, but will be politically acceptable and so fair as to afford USI reasonable chance to succeed.
Positions assumed by parties in Baarn talks and adhered to succeeding days revealed divergency that could never be eliminated by normal inter-party negotiation. Conscious of this and urged by leaders in three delegations and most of all by Stikker to take initiative, I personally ventured suggestion which I knew did not take care joint [Page 513] Indonesian determination not to pay extraordinary military debts and which I fully realized would be considered drastic by Netherlands. I thought time had come to let Stikker know it is out of question for me support Netherlands cause to extent he would like and is imperative Netherlands demonstrate more generosity in financial field if they are to have successful RTC and viable union.
I did not expect either side accept my hurriedly put together plan as such but did hope it might—and still hope it may—get them started on realistic talks toward debt solution, etc. Stikker now has arranged for me to meet with Lieftinck and Goetzen Tuesday morning and Van Royen has intimated Netherlands still look to me to help them get out of impasse. With two Netherlands Ministers I will not of course insist on my own plan, especially since Drees said it not acceptable as basis. I will put burden on them of suggesting something better and at least find out whether they are ready move in any helpful degree toward middle ground agreement. I may even ask them give me plan whereunder they think Hatta government could handle finances of USI during first four years and seek their assurance they would be willing undertake its implementation if chosen as responsible officials for this purpose. If Lieftinck cannot see light, he might make way for more constructive realist.
At this point should recall that Stikker and Hirschfeld were most insistent to me on early monetary purge Indonesia while Jacob has let Dow know he would resign if such adventure attempted. Hirschfeld admitted to me that Hoogstraten and other economic and financial officials NEI Government are not “one hundred percent” and would have to come out. My point is that Netherlands officials here are not sound in their ideas as to what should be done to take care of internal debt situation Indonesia and that Netherlands officials there aside from Jacob are not likely be great help.
Unless Netherlands may move fairly far in giving relief on lines comparable to these I have suggested, believe Hatta will adhere demand international group study problem and only general lines of financial settlement be included in RTC agreement. If Netherlands then does not accept this, result will be deadlock. If UNCI or member thereof makes compromise proposal to Netherlands, danger would be risked of Drees Ministry falling rather than take responsibility for asking Parliament make more “sacrifices,” to use Prime Minister’s words.
In negotiations Indonesia and here Netherlands always allege Hatta unable take responsible decisions and unsure of support. Evident here Netherlands negotiators themselves in difficult position self-made by Netherlands. For instance, Stikker and Van Royen told me [Page 514] Baarn Netherlands offer reduction debt could be raised from 500 to 700 million but not more since decision had already been taken by government in liaison with Parliament that this would be maximum. Stikker told me Cabinet had just completed plans for next budget to be in balance which counted on interest from Indonesians on state to state debt, consequently this could not be reduced as I suggested. In my conversation with Drees and Stikker, Prime Minister found my suggestion unacceptable since he said he had given pledge to Parliament further sacrifices in favor Indonesia would not be sought from them. Difficult believe reduction by another billion or two would mean sacrifices by Netherlands anything like comparable those Indonesians have suffered already and would bear in monetary purge wiping out at least two-thirds remaining value of currency after 30 percent devaluation few weeks ago.
With Stikker and few other Netherlands ministers absenting themselves most this week, little prospect early progress on financial problem. Stikker and Van Royen told me hoped we could talk on other matters and leave financial problem dormant few days. With Indonesians realizing Baarn talks meant deadlock, I consider unlikely much advance can be made in related or most other committees until settlement debt and financial problems in prospect. Some Indonesians already pressing for return home and Hatta himself may find it imperative go unless outlook entirely favorable by end two month period RTC, that is October 24, for early successful conclusion. With Hatta gone, hopes for achieving results would diminish.
Situation is therefore that unless Netherlands willing soon accept realistic arrangement on debts, conference hopelessly deadlocked. If Drees Cabinet resigns on financial or other RTC issue, then RTC ends. If government falls on financial issue, feel Netherlands would have very poor case before SC. While Republicans would of course report SC, I am sure they would not remain Hague after conference breaks down but return Indonesia. Believe Indonesians will insist on sovereignty January 1, 1950 whether transferred by agreement with Netherlands for union or whether Indonesians take their own decision and declare themselves entirely independent. RTC following inter-Indonesian conferences Jogja and Batavia has provided really pre-sovereignty convention for Republicans and BFO where they have smoothed out their divergent views and coordinated their policies and plans. Draft constitution should be finished this week. Much other drafting requisite to setting up independent government already accomplished or well underway.
Sukarno and Sultan in meantime have widened authority Indonesia. With return Indonesia leaders from RTC, really strong organization [Page 515] throughout greater part Indonesia could be realized. Stikker took pains assure me in conversation with Drees that Netherlands planning no third police action. My feeling is that next police action more likely come from Indonesians if conference fails. Prior cease hostilities agreement, Netherlands spread troops widest possible Indonesia and in agreement insisted on maintenance such outposts and patrols. Instead proving element of strength, this has made Netherlands forces more vulnerable. Through cold infiltrations TNI and Republic sympathizers evidently now have created situation where Netherlands forces would be dangerously threatened and might conceivably be annihilated if new action should come.
I do not seek Department approve plan which I suggested. I do recommend however that if and when Van Kleffens approaches Department he be made clearly understand danger to conference that is resulting from Netherlands inability see problems as they are and to pay price of extra one or two billion guilders required get workable solution. Stikker returned from US with belief American opinion towards Netherlands has been greatly improved by ill-fated journalists and by convening RTC. I have never been able reconcile Netherlands alleged determination transfer sovereignty soonest and unconditionally with attempt convince US through publicity agents and otherwise that Indonesians incapable self-government. Sovereignty likely pass to Indonesians Jannary 1 whatever Netherlands does. Circularizing friendly nations by Netherlands re their fears and troubles will not stop it. If they desire have sovereignty transfer within union, should treat Indonesians as partners and not seek tie them up like bad debtors and deprive them support essential to live.
Ushic 243 and 254 and Lacy’s 8675 received as present message being filed. Signed Cochran.