493.56D9/5–1451
Memorandum by the Assistant Secretary of State for Far Eastern Affairs (Rusk) to the Secretary of State
Problem:
Possible Sale of Rubber from Indonesia to Communist China
Background:
The Indonesian Ambassador to the U.S., Dr. Ali Sastroamidjojo, has been urgently recalled to Djakarta for consultation and is flying from New York May 16. He has expressed a desire to see you before his departure.
The new Indonesian Cabinet, a coalition which includes as its major elements the Masjumi (Muslim) Party and the PNI, is confronted with a series of major decisions. This new Cabinet replaces the Government headed by Natsir which was built around the Masjumi (Muslim) Party. However, the new Cabinet omits many of the old Cabinet including many Masjumi members, such as Foreign Minister Roem who called on you in Washington last November, and Finance Minister Sjafruddin, who has also come to the United States.
We believe that the new Cabinet is at present at a crossroad as regards its relations with the United States. It faces a decision with regard to an offer by China to exchange tungsten and rice for Indonesian rubber. We believe this decision will color the future for some time to come, and we are desirous that the Indonesians make the right decision; namely, to refuse to alter the historical pattern of Indonesian trade.
For the past several months, Indonesia has been concerned to obtain goods, rather than money, even hard currency, for its products. The Indonesian Delegation at the London and Rome meetings of the recent abortive International Rubber Conference, set forth this demand incessantly. For a multiplicity of reasons, neither the U.S. nor any other consuming nation was in a position to fulfill the exaggerated Indonesian demands in this connection.
About two months ago, Communist China offered to buy 50,000 tons (out of 700,000 tons yearly production) of Indonesian rubber for currency (what type is not known although it is believed to have been either U.S. dollars or gold). The Natsir Government rejected this offer, stating it desired goods, not currency for its products. The Communist Chinese have now come forward with an offer of tungsten and rice for Indonesian rubber. The quantities involved are unknown. We [Page 651] have received, however, an indication that this offer may be only one of several made by Communist China to Indonesia possibly looking toward the establishment of a trade agreement between the two countries.
On May 7, Dr. Subardjo, the present Foreign Minister who seems to be an opportunist having been associated in the past with the Japanese during their occupation of Indonesia, the Communists, and the Trotskyites, informed the press that Indonesia would sell “to the devil” if it would benefit the Indonesian people. When Dr. Ali raised this statement with me during his call on May 10, I told him that we did not wish the historic pattern of Indonesia’s trade to change (see Attachment 1 for a report of this interview).1
On May 11, Dr. Zain, top economist in the Foreign Ministry, reiterated that Indonesia would sell goods to any country including Communist China from which she can get the goods she needs. The Department instructed Ambassador Cochran to make representations (see Attachment 2)2 which he did (see Attachment 3).3
Should Indonesia sell rubber to China, the effectiveness of the British embargo on rubber from British colonies to China will be destroyed.
Recommendations:
1. That you inform him that, while we are not particularly concerned with the exact wording of statements made under pressure of domestic considerations, we hope that the historic pattern of Indonesia’s trade (under which nothing goes to Russia or China, and only [Page 652] a few items to the satellites) will not change at this time when the UN faces a serious problem of aggression in a delicate world situation; that we hope Indonesia will not jeopardize its independent policy by changing the pattern of distribution of its products as such action would in effect do violence to Indonesia’s independent policy; that if Indonesia takes action of this sort, it can expect a strong U.S. reaction. You way wish to make allusion in this connection to the fact that U.S. public opinion is increasingly aroused by casualties resulting from operations in Korea. You may wish to state that we hope Indonesia will not risk a strong reaction of U.S. public by opening new trade channels.
(Should Dr. Ali suggest that Indonesia would sell to the U.S. any tungsten which it might obtain from China, it is suggested you restate that we do not wish any change in the historic pattern of Indonesian trade. For your information only, we have reason to believe that we are going to get the Chinese tungsten by other and more devious means.)
(Should Dr. Ali raise the question of Japanese trade with China, you may wish to state that under export controls now in effect Japanese exports and re-exports to Communist China, North Korea, Hong Kong and Macao not requiring licenses are limited to textiles, sundry goods, agricultural products (except staple foodstuffs), fishery products and bicycles. Of the items requiring licenses, no license applications are being approved for Communist China or North Korea and applications for export to Hong Kong and Macao are being carefully screened by SCAP4 and validated only when SCAP has received Hong Kong Government assurance that goods will be consumed in Hong Kong or Macao or re-exported to non-Communist areas where transshipment can also be controlled.)
2. That you remind Dr. Ali that in submitting to the U.S. his import requirements, his Government did not list any requirements for rice. You may wish to point out that we have given his Government a note of expressing our willingness to use our good offices to assist Indonesia in procuring goods it needs.
3. That you remind Dr. Ali of the several respects in which the United States has extended assistance to Indonesia, namely $100 million Export-Import general line of credit; $40 million ECA assistance during the course of the first six months of Indonesian independence; a quantity of military equipment for the constabulary; and finally, present ECA assistance through the Special Technical and Economic Mission in Djakarta.
- None of the attachments are affixed to the file copy. Presumably, Assistant Secretary Rusk was referring to an “Informal Memorandum” which was given to Mr. Maramis on May 15, and which covered the salient points of Mr. Rusk’s conversation with Dr. Sastroamidjojo on May 10 (493.56D9/5–1551). The contents of this memorandum presented, in abbreviated form, the major topics of conversation as relayed to Ambassador Cochran in telegram 1226 to Djakarta, May 11, supra.↩
- Presumably, the reference is to telegram 1228 to Djakarta, May 11, in which Ambassador Cochran was informed that the Department of State knew of Dr. Zain’s statement, and the Ambassador was instructed to advise the Indonesian Government that statements of this sort were calculated to defeat the Indonesian goal of an independent and neutral foreign policy. Ambassador Cochran was also instructed to inform the Indonesians of the possible “actions US may take in premises shld attitude expressed in statement become official policy approved by Cabinet decision. You may wish to remind Indo Govt of oral undertaking exchanged at time of MDAP agreement. You may wish refer to exchange of notes at time Wilson’s visit pointing out that US is willing assist Indo Govt in obtaining goods but that its willingness to do so will of course be modified by statements such as noted above.” (856D.2395/5–1151)↩
- Presumably, the reference is to telegram 1580 from Djakarta, May 12, in which Ambassador Cochran reported that he had conveyed the contents of telegram 1228 from the Department of State to Dr. Darmasetiawan, the Secretary General of the Indonesian Foreign Office (856D.2395/5–1251).↩
- General Matthew B. Ridgway, U.S.A.↩