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

268. Memorandum of Discussion at the 337th Meeting of the National Security Council, Washington, September 23, 1957¹

Washington, September 23, 1957

[Here follows a paragraph listing the participants at the meeting.]

1. Special Report on Indonesia² (NSC 5429/5; NSC 5518; NSC Action No. 1758; NIE 65–57; Memos for NSC from Executive Secretary, same subject, dated September 6 and 13, 1957³)

Mr. Cutler briefed the Council in great detail on the report of the Interdepartmental Committee on Indonesia. (A copy of Mr. Cutler’s brief is filed in the minutes of the meeting.⁴) At a pre-arranged point in his briefing, Mr. Cutler paused and asked the Director of Central Intelligence to provide the Council with the latest available intelligence material bearing on this subject.

Mr. Dulles spoke first of the recently-concluded Round Table Conference at Djakarta. Despite widely divergent views among the conferees, the Conference was actually held at Djakarta and an agreed communiqué issued. Nevertheless, no real or substantial progress toward a settlement of the outstanding issues was recorded. In short, the Conference was like a sedative—it reduced the pain, but it effected no cure. The recommendations with respect to economic and political problems were fuzzy in character. While Sukarno and Hatta managed to agree on an innocuous joint statement, there was no real meeting of minds between these two leaders. While some Indonesian officials in Djakarta feel that the Conference was at least a psychological success in laying the basis for a future settlement, leaders from the outlying islands continue pessimistic.

The attempt to solve military problems confronting the Round Table Conference was a complete failure, and these problems were turned over to a seven-man subcommittee for settlement at some future time, after Hatta’s return from his forthcoming trip to Communist China. In sum, continued Mr. Dulles, the intelligence community estimates that the stalemate remains, and that Djakarta will be unwilling or unable to meet the economic demands of the outlying provinces of Indonesia.

As to the oil situation, Mr. Dulles pointed out that there were three major oil companies now operating in Sumatra—two of them American and one British. They are still paying their revenues to the Central Government at Djakarta with the permission of the local authorities on Sumatra, who have been sympathetic to the dilemma in which the oil companies are finding themselves. Incidentally, Mr. Dulles reported that the estimate of oil resources on Sumatra has been upped a great deal recently. A 20-billion-barrel reserve is currently estimated, and this is only the beginning.

The President inquired of Mr. Dulles why Hatta was making a journey to Communist China. Mr. Dulles replied that he could think of no particular reason, but that most Asiatic leaders visit Communist China at one time or another. He added that he was not particularly worried about Hatta’s trip, because Hatta was a strong anti-Communist.

. . . . . . .

Pointing to the map, the President inquired how it happened that the Central Government still held on to a position in the northern part of Sumatra. Mr. Dulles explained that the loyalty of the local commander at Medan was still to the Central Government.

Having finished his briefing, Mr. Cutler called on the Secretary of State for his comments on the recommendations of the Interdepartmental Committee as revised by the Planning Board.

Secretary Dulles replied in general he agreed with the Committee’s recommendations, and added that indeed these recommendations constituted no radical departure from our present policies and actions vis-à-vis Indonesia. However, Secretary Dulles pointed out that the Committee’s program must be carefully handled and be flexible in its execution. Secretary Dulles said he had one additional comment—that was with respect to the position of the United States in any vote in the UN on resolutions which might be submitted with regard to West New Guinea (Irian). We cannot, continued Secretary Dulles, permit ourselves to be placed in a frozen position on these resolutions, because we are never sure of the precise form and content of such resolutions until we actually see them, although in general we agree that our present position of neutrality with regard to West New Guinea should be preserved for the present. However, in the future we might wish to say to the Indonesians, in effect, that if they go on to accept Communist rule, we will be obliged to oppose their efforts to secure control of Irian; or, on the other hand, we might find ourselves in a position of desiring to support the claims of a strong anti-Communist Indonesian government to Irian. Hence we need to be flexible.

Asked for his opinion, the Acting Secretary of Defense, Mr. Brucker, said that the Department of Defense approved the recommendations of the Interdepartmental Committee. However, he went on to say that he wished to add a suggestion with respect to the revision of paragraph 9 of the Special Report. He proceeded to read a version of paragraph 9 very much along the lines of the original Defense–JCS proposal which had been supplanted in the Planning Board by the agreed version recommended by the Planning Board.

Upon hearing Secretary Brucker’s proposal, the President expressed the opinion that the proposal contained elements that could not appropriately be placed in an NSC policy. Mr. Cutler added that the Planning Board had considered the proposal read by Secretary Brucker, but had rejected it for much the same reason that the President had just suggested. Secretary Brucker then stated that the Department of Defense was not pressing this proposal, and that it agreed thoroughly with the State Department. He had simply wanted to bring this other version of paragraph 9 to the attention of the National Security Council.

At the conclusion of the discussion of this item, the Director of Central Intelligence warned the Council that if the United States were to support the Dutch thesis as to New Guinea, we might find ourselves alienated from Indonesian Nationalists just as completely as from Indonesian Communists… .

The National Security Council:⁵

a. Noted and discussed the Special Report on Indonesia, prepared by the Interdepartmental Committee established pursuant to NSC Action No. 1758 and transmitted by the reference memorandum of September 6, 1957, and the comments and recommendations thereon by the NSC Planning Board, transmitted by the reference memorandum of September 13, 1957; in the light of views of the Joint Chiefs of Staff as reported at the meeting, and of an oral briefing on the situation in Indonesia by the Director of Central Intelligence.

b. Adopted the Recommendations of the Interdepartmental Committee in the Special Report, subject to the following amendment:

. . . . . . .

c. Noted the observation by the Secretary of State that there is inherent flexibility in the Special Report as to the application of its Recommendations; and that the Department of State should also have flexibility as to the U.S. position in the United Nations on the West Irian question (paragraph 19 of NSC 5518) because all contingencies could not be foreseen.

d. Noted that the early consummation of the loan agreement with Indonesia, relative to proceeds from the March, 1956, P.L. 480 agreement,⁶ would provide assets for the United States to use in implementing the policies in paragraph 8–b of the Special Report.

e. Agreed that the attention of the National Advisory Council⁷ should be called to the national security interest in dealing with the matters referred to in paragraph 6 of Annex A of the Special Report.⁸

f. Directed the NSC Planning Board to review NSC 5518 in the light of the Special Report as amended, and to make recommendations thereon to the National Security Council.

Note: The Special Report on Indonesia, as amended and adopted,⁹ together with the statements noted in c and d above, as approved by the President, referred to the Operations Coordinating Board as the coordinating agency designated for NSC 5518, pending the review of NSC 5518 pursuant to f above.

The action in e above, as approved by the President subsequently transmitted to the Secretary of the Treasury.

[Here follows discussion of the remaining agenda items.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Drafted by Gleason on September 24.
2. Document 262.
3. NSC 5429/5 is printed in Foreign Relations, 1952–1954, vol. XII, Part 1, p. 1062.NSC 5518 is Document 95. Regarding NSC Action No. 1758, see footnote 3, Document 240. NIE 65–57 is Document 257. The memorandum of September transmitted the Special Report on Indonesia to NSC members (see footnote 1, Document 262); the memorandum of September 13 transmitted the comments and recommendations of the NSC Planning Board on the report (see footnote 4, Document 266).
4. Not found.
5. The following paragraphs constitute NSC Action No. 1788. (S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1957)
6. See footnote 4, Document 179.
7. Reference is the National Advisory Council on International Monetary and Financial Problems.
8. The paragraph noted that present and future Indonesian applications to the Export-Import Bank should be “kept under study but no final action should be taken at this time.”
9. Only the Recommendations section of the Special Report (paragraphs 6–10) had been adopted. That section, as amended by the National Security Council and with the paragraphs renumbered as paragraphs 1–5 under the heading “Recommendations on U.S. Policy Toward Indonesia,” was circulated to NSC members with a covering memorandum from Lay dated September 25.