235. Editorial Note
On December 16 at the 429th meeting of the National Security Council, Allen Dulles brought up the subject of recent Indonesian developments during his customary intelligence briefing:
“Turning to Indonesia, Mr. Dulles reported that relations between that country and Communist China had now hit bottom because of the Indonesian policy of re-settling Chinese retailers, most of whom are oriented toward Communist rather than Nationalist China. The dispute, which has been gathering momentum since last summer, is based on an Indonesian decree banning alien retail merchants in rural areas and requiring their re-settlement in towns. When such merchants cannot be absorbed in towns, they are placed in what the Chinese Communists call concentration camps. This decree is a part of the Indonesian campaign of economic nationalism against the Dutch, the Nationalist Chinese, and [Page 458]the Communist Chinese in Indonesia. The Chinese Communists have been demanding repeal of the Indonesian decree, but the Indonesians have refused the Chinese demand. Communist China has ordered the Chinese to resist the Indonesian orders. In a protest of December 9, Communist China renewed its accusation of “intolerant treatment” of the Chinese and proposed implementation of the Indonesian-Communist China Nationality Treaty. Indonesia rejected the Communist Chinese protest and indicated that implementation of the Nationality Treaty would not affect the ban on retail merchants. Sukarno is said to be affronted by Chinese Communist meddling in Indonesia and has issued instructions that the Chinese are to be ‘given hell.’ The Communist Chinese apparently believe that this issue is a critical one in the contest between Taiwan and Mainland China for the loyalty of the overseas Chinese. Communist China has threatened economic retaliation against Indonesia, possibly including withholding of thirty million dollars in trade credits. To ensure that any Chinese exiles from Indonesia will go to the mainland, Communist China has been giving great publicity to the welcome given to Chinese who return there. Indonesia is perplexed as to how to meet this problem.
“Mr. Dulles also reported that Sukarno had decided to continue martial law in Indonesia, a decision which had put the Communist Party on the spot, since the Party opposes martial law but wishes to support Sukarno. The economic situation in Indonesia is deteriorating due to the continued existence of revolutionary forces on Sumatra. These rebels are badly armed, are short of ammunition, and their financial situation is deteriorating rapidly. [2 lines of source text not declassified] Mr. Dulles felt that even though the economic situation in Indonesia was gloomy, a political collapse was unlikely, and that Indonesia was more friendly to us at present than it had ever been.
“The Vice President asked whether Indonesia recognized Communist China. Mr. Dulles answered in the affirmative, adding that the Chinese Communist Ambassador in Indonesia had been active and indiscreet in this controversy. The Vice President said that one argument for non-recognition of Communist China was the effect recognition would have on countries with overseas Chinese. He wondered how one could appraise the effect of possible U.S. recognition on this problem. He wondered whether the situation would be more or less difficult for Indonesia if it had not recognized Communist China. Mr. Dulles felt the situation would be less difficult for Indonesia if it had not recognized the Chinese Communists, because then the latter would not have the same opportunity to protest and intervene. For example, South Vietnam had had an anti-Chinese program, but had not had the same problems as Indonesia because it had not recognized Communist China. The Vice President felt that when a country like Indonesia recognized Communist [Page 459]China, the result was to orient more overseas Chinese toward Communist China. Mr. Dulles agreed. The Vice President asked whether the Nationalist Chinese were already out of business in Indonesia and Mr. Dulles replied in the affirmative. Mr. Allen said he had recently had a letter from our Ambassador to Indonesia which indicated that the time was ripe for a sharp change in the nature of U.S. programs in that country. The Ambassador felt that we could now engage in anti-Communist propaganda in our USIS out-put in Indonesia.” (Memorandum of discussion by Marion Boggs, December 16; Eisenhower Library, Whitman File, NSC Records)
For documentation on the dual nationality treaty and its implementation, see RIIA, Documents on International Affairs, 1960, pages 493–499. The referenced letter from Howard P. Jones to George V. Allen, Director of USIA, has not been found.