Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

154. Telegram From the Embassy in Indonesia to the Department of State¹

Djakarata, May 4, 1956—8 p.m.

2757. Reference: Deptel 1955 repeated The Hague 1788.² Consensus here is that in suspending loan payments Indonesia not originally motivated by desire test world opinion although some subsequent press comment assuring public that world will approve has probably given some officials the idea. Immediate motivation believed frustration and pique resulting from outcome Geneva negotiations as well as desire Government to produce something domestically popular.

In recent conversation with Roem, First Deputy PM, he told me that there is disagreement within Government on issue with Masjumifavoring resumption of payments while others had varying approaches to problem. He said that the usually moderate Sumitro’s support of cancellation debts was being used by more radical elements in cabinet in support their position. Final decision still requires some time (Embtel 2747³). Dutch here say their latest information is that matter will be solved in “weeks not months”. In light my conversation Roem and statement made to me by President Sukarno (Embtel 1946⁴) and by other officials I believe moderates will win out and that resumption of payments will take place.

I have taken every opportunity in conversations with Government officials and others since suspension of payments known tactfully to express my personal opinion that Indonesian action might have unforeseen repercussions and might adversely affect Indonesia credit abroad. I realize of course that my personal observations are somewhat contradicted by the strengthening of the rupiah on the curb market and recent lowering of the price of gold in terms of the rupiah. I have definite impression, however, that my comments behind the scenes have had some effect. I believe any other approach by us at this time would be unproductive and since there are no American bondholders affected any formal approach to Indonesian Government might be misunderstood. There are influential Indonesians in and outside Government circles whose efforts to correct this ill advised action and counteract radicalism would be seriously compromised if we took any formal action.

I must warn Department that Dutch knowledge of what I have done would undoubtedly leak and nullify even my limited effectiveness in this as in other behind the scenes activities of mine.

Cumming

1. Source: Department of State, Central Files, 856.10/5–456. Confidential. Repeated to The Hague.
2. Telegram 1955 to Djakarta, April 24, reported that on April 20 Ambassador van Roijen had requested U.S. support for a Dutch appeal to the U.N. Commission for Indonesia, which the Netherlands Government was considering making if Indonesia remained in default on an April 1 interest payment on a 1937 loan to the Netherlands-Indies (one of the debts assumed by Indonesia under the Round Table Conference Agreement in 1949). The telegram requested the Embassy’s estimate of the likelihood of Indonesian renunciation of its loan obligations to the Netherlands and its views of van Roijen’s thesis that the current suspension of payments was designed to test world opinion. (Ibid., 856.10/4–2456)
3. Telegram 2747 from Djakarta, May 4, reported a conversation with the Director of the Bank of Indonesia, who stated, inter alia, that the question of the debts assumed under the Round Table Conference Agreement was under study by a commission. (Ibid., 398.14/5–456)
4. Document 138.