Foreign Relations of the United States, 1958–1960, Indonesia, Volume XVII

271. Telegram From the Embassy in Indonesia to the Department of State⁰

Djakarta, August 1, 1960, 7 p.m.

289. Reference: Embassy telegram 288.¹ Since my return, I have heard repeated rumors that Sukarno would make dramatic move against Shell [a?] feature of August 17 address. I raised this question with Foreign Minister this morning, pointing out (a) unfortunate repercussions on US-Indonesia relations that would inevitably accompany movement against an international corporation which is 23 percent American-owned; (b) unfortunate effect such action would have on Indonesia’s international standing; and (c) immediate alarm that would develop from among other countries’ fear that this was first step in nationalizing of oil industry in Indonesia.

I said I could not conceive that GOI would be so lacking in appreciation of its own interests as to take such action but I recognized strong national tide running.

I hoped Foreign Minister could reassure me on point.

Subandrio denied firmly any consideration being given to nationalization of oil industry generally but he admitted there was group within Cabinet which wanted to move against Shell because of its Dutch ownership. He indicated move, if it were made, would probably be against Dutch shareholders in Shell, thus confirming possibility reported by Djuanda to me eight months ago.

If objective were to attack Dutch portion of Shell interests, how did GOI plan to accomplish this? I queried, pointing out practicable and legal obstacles to action against a group of shareholders within an international corporation, situs of which was outside Indonesia. Subandrio admitted this was problem which had not been solved and that final decision as to what would be done and how it would be done had yet to be made. He could not, however, discount possibility entirely that some step would be taken against mixed enterprises which contained Dutch capital; there would be no action whatever, he emphasized, against foreign investment generally.²

Subandrio said he would note my comments and see to it that Sukarno and others who were considering this problem took full cognizance of points made.³

Jones

0. Source: Department of State, Central Files, 898.2553/8–160. Confidential. Repeated to The Hague and London.
1. In telegram 288, August 1, the Embassy reported that a normally reliable labor source revealed that the Indonesian Government had decided to nationalize the Shell Oil Company on August 17. (Ibid.) See Supplement.
2. In telegram 223 to Djakarta, August 10, the Department of State instructed Ambassador Jones to discuss the possible nationalization of Shell with Sukarno and Djuanda before August 17, suggesting that nationalization of Shell might have a serious effect on U.S. interests in Shell and would seem an adverse portent for U.S. oil companies and other U.S. enterprises operating in Indonesia. (Department of State, Central Files, 898.2553/8–1060)
3. In telegram 418 from Djakarta, August 15, Jones stated that the U.S.-British position on the Shell nationalization question had been made amply clear to the Indonesians. “When all is said and done, however,” Jones added, “our strongest ally in this matter is Indonesian army and as Department aware, army has gone to bat vigorously on this matter. At this stage, any further pressure on our part is likely to be resented as unwarranted interference and stimulate ‘I’ll show’em’ attitude of which Sukarno quite capable.” (Ibid., 898.2553/8-160) See Supplement.