411.56D/1–1950: Telegram

The Ambassador-Designate in Indonesia (Cochran) to the Secretary of State

top secret

105. Eyes only Butterworth1 and Lacy. Please see mytel 1032 reporting conversations with Fox and Sukarno.

I have done utmost grapple with Fox problem passed to me. Have been given informal government undertaking RUSI will not renew contract Fox had with Repub and will not consummate new arrangement pending Djuanda’s return from United States.3 Fox has, however, succeeded in enlisting strong support on part old associates such as Laoh and Gani4 and has appealed to Sukarno, Hatta and others basis his help rendered them during their hour of need.

I have gone limit in emphasizing situation now much different; that leaders no longer head state with back to wall but have responsibility [Page 968]for federation encompassing archipelago with excellent prospects for future if firm foundation established. I have argued that it would be wrong through sentiment or loyalty to old friend of one constituent part of RUSI to restrict or prejudice business contacts of new federation or incur possible criticism for favoritism or graft. Have suggested change in character Indo officials in United States with result sending Djuanda and Sastroamidjojo.5 I have argued emissaries to United States should establish connections with business concerns of highest type.

Gossip attributed to Sjahrir6 circles already alleges, according to controlled American source, that if Fox signs agreement with RUSI it will be for importing capital goods that are unessential, that only Cabinet members and officials of RUSI will profit, and that American exporters will get kick-back in return commission fees. From my conversations with American businessmen here well as New York and from my own impression Fox and his original agreement, convinced best interests RUSI and of relations between our two countries will not be served by his getting any special type of contract. If you agree, I hope you can help Djuanda and Sastroamidjojo on right path.

Messages received from Department recently have worried me somewhat lest Ex-Im Bank may become overly meticulous in requiring supporting data of character and completeness impossible of achievement by new government in near future. Sukarno told me this morning he plans send Colonel Hidayat, one of top army officers, to United States consult on military aid once it is seen Djuanda is succeeding.

My point is that Djuanda mission has taken on special significance. If it is successful and he returns with definitive agreement, am confident this will be found great support RUSI Government and will pave way for happiest possible relations our two countries. If on other hand Djuanda is told he has not made adequate case and is obliged return with only promises of further consideration upon production of more details then effect and reaction will be extremely bad. Unhappy outcome would be made even worse if it appeared that his word had been doubted and Ex-Im investigators sent to verify his statements concurrently with extensive ECA mission now proposed for checking utilization ECA funds and counterpart.

Please be assured I appreciate need for protecting Department and lending agencies against credit risks and mal-administration. At same time, must stress that we have talked so long and so strongly, especially of recent date, re help which we intend extend RUSI that unless we produce quickly and generously there will be not only disappointment but most likely such need for immediate financial relief that [Page 969]Indos will be tempted or pressured to look elsewhere either to concession-seekers such as Fox or to other sources. I urge therefore that this situation be given top attention, by Secretary if necessary, to see that Djuanda is realistically taken care of and comes back with definite Ex-Im credit and if possible arrangements of helpful character with private business concerns. If some other government or international lending agency can help out on stabilization loan, this would be spendid. I mention these three possibilities rather than accept idea which had been proposed in some circles and with which I appreciated you were unsympathetic, namely that of approaching Congress for special aid. I still agree it should be possible to get RUSI on feet through foregoing measures if results can now be accomplished in United States and that this much preferable to seeking Congressional action before RUSI sufficiently well established to create good opinion Congressionally and before actual needs can be wisely envisaged.

  1. W. Walton Butterworth, Assistant Secretary of State for Far Eastern Affairs.
  2. Not printed; in it Cochran reported that Sukarno had told him that the exclusive contract which Matthew Fox, head of the American-Indonesian Corporation, had held since January 3, 1948, as the sole trade agent of the Republic of Indonesia in the United States would not be renewed. (411.56D/1–1950)
  3. Djuanda, Minister for Economic Affairs of the Republic of the United States of Indonesia, was in the United States seeking economic assistance in the reconstruction of the Indonesian economy.
  4. H. Laoh and Dr. A. K. Gani had been Vice Minister of Public Works and Minister for Economic Affairs, respectively, in various cabinets of the Republic of Indonesia.
  5. Dr. Ali Sastroamidjojo, Indonesian Ambassador-Designate to the United States.
  6. Sutan Sjahrir, leader of the Indonesian Socialist Party (Partai Socialis).