501.BC Indonesia/10–1149: Telegram

The Chargé in the Netherlands (Steere) to the Secretary of State 1

top secret

927. Hicus 57. Met 9 p. m. last night with usual three on draft union statute. Agreement reached on all remaining points of draft for recommendation to larger group meeting Thursday. It was hoped, however, each delegation could be consulted today on amendments we have proposed and that we could perhaps have provisional approval which would permit us at another meeting 6 p. m. today put document in shape. Still have annex to complete of points to be included under declaration human rights but anticipate no trouble.

Received by Minister Finance Lieftinck and Minister without portfolio Goetzen 9:30 this morning and talked two hours. I took lead thanking them for accepting offer I had made Drees and Stikker to confer with them. Said did not insist on personal plan I had put forward when pressed by three delegations to help get out of deadlock financial-economic negotiations which impeding progress and threatening RTC breakdown. Lieftinck said understood thoroughly spirit and motive well as technical approach. Said he realized necessity compromise and desired I consider personal plan which he had just drawn up.

This would involve:

Indonesians assume immediate interest and amortization obligations on consolidated and foreign debt totaling 1.3 billion guilders;
Indonesians assume 33 year debt to Netherlands with first tranche 700 million guilders obligations bearing interest immediately 3% and amortization starting after three years;
And second tranche 36 years of 600 million, interest 3% starting after three years and amortization starting after six years;
Cancellation of 700 million;
Netherlands credit line to Indonesia beginning 195[0] at minimum 300 million.

I did not oppose idea Indonesians being responsible for pre-war consolidated debt of 900 million and foreign credit of 400. I considered, however, no chance Indonesians accepting proposal if no more than 700 million to be cancelled. Netherlands argued this was really total of extraordinary million [military] expenditures involved. I said irrespective basis of calculations, this amount would not give adequate relief from debt burden to permit Hatta succeed with USIP [ USI ?].

Netherlands finally suggested arbitration committee with Indonesians having one vote, Netherlands one and neutral to be selected [Page 523] by both one vote, be set up to determine amount extraordinary military expenditures. Lieftinck would undertake recommend to his Govt and to part [apparent garble] reduction of total debt by amount of such expenditures as established by arbitration committee. Negotiations would then take place directly between parties on debt service to be worked out on remainder debt to Netherlands. Again I argued all planning would be no avail if Indonesians should be burdened with unbearable load of obligations. Netherlands conceded provide escape clause in settlement which would permit Indonesians raise question through conference of union ministers in event Indonesians find debt burden unbearable. Netherlands unwilling, however, leave overall settlement figure open, feeling definite agreement must be reached RTC.

In agreement with Netherlands, I called immediately on Hatta. I told him Lieftinck willing sound out his cabinet and liaison members Parliament on personal plan of debt settlement if Hatta and top Indonesians thought it could be accepted as basis negotiation. In understanding with Netherlands, I did not give Hatta details debt service scheme or mention amount of credit line. I simply put up idea Indonesians assume entirely responsibility consolidated debt and foreign credit; arbitration committee determine on basis extraordinary war expenditures amount floating debt should be cancelled; negotiations determine service scheme on remaining floating debt to Netherlands; Netherlands indicate amount credit line to be kept open; and escape clause as above mentioned be included.

Hatta told me Hirschfeld called on him yesterday trying work out some plan. Hatta had proposed only general financial agreement be made at conference with total for settlement left open to be determined subsequently by international study group. Hirschfeld had offered consider this but was sure his people preferred definite settlement RTC and would look upon Hatta’s scheme only as last resort. Hatta said personally willing accept Lieftinck plan as basis discussion and was sure Djuanda would agree with him. Said he would consult Hamid and Indrakusuma and let me know at three o’clock steering committee whether they would go along with idea. He said I could tell Netherlands at once that he personally favored his basis for negotiations. I proceeded Minister Finance. Lieftinck absent but I reported results to Goetzen. He said he and Lieftinck lunching with Maarseveen and he would inform his colleagues.

In my conversation with Hatta and as I reported to Netherlands, I insisted that Indonesians should not consider plan which I had suggested informally to them (Hicus 522) as indicating any position which I thought inflexible or which I would endeavor insist upon [Page 524] any [inter-]party negotiations. Hatta said he had understood this thoroughly. Since returning from above meetings, I find aide-mémoire reissued by Indonesian delegation under date October 10 which sets forth in detail their basis for discussion economic-financial relations, including cancellation 900 million consolidated and 2 billion floating, etc.

In my talks with Netherlands, I gave no commitment that I considered interest and amortization schedule. I said much would depend upon size to which debt reduced and on which schedule would apply. At steering committee Hatta told me Djuanda approved Lieftinck idea as basis. Had not had opportunity talk with Hamid and Indrakusuma. I phoned Lieftinck this information 5 p. m. He said he had discussed matter with PriMin and Stikker and had their approval. Suggested I carry on from this point with Stikker. Phoned latter who confirmed Drees and he approved idea as basis discussion. Asked I endeavor get answer as to BFO attitude tonight. I phoned Hatta who said he would try have answer for me when I attend union statute meeting his hotel this evening.

My shock proposal has thus evoked results in form detailed oral note from Indonesians and constructive suggestion from Netherlands. Atmosphere fine.

Talking with Hatta and Roem this forenoon, I urged their approval of last night’s drafting on statute, emphasizing how much it would help on vital financial-economic issue if union statute and charter out of way. They said they would approve our draft. I talked at steering committee meeting with Anakagung thereon. He still had one question which I hope we can solve at tonight’s meeting of four of us. Signed Cochran.

  1. Repeated in telegram 538, October 13, 1 p. m., to New York (USUN).
  2. Telegram 907, October 8, p. 503.