290. Telegram From the Department of State to the Embassy in Indonesia0

722. Ref: (a) ALUSNA Djakarta 300932Z September,1 (b) ALUSNA Djakarta 010312Z November,2 (c) Your 997.3 We are naturally most concerned [Page 566] over emerging details new Soviet credit for equipment and training Indonesian Navy (ALRI). If current intelligence correct (ref a), staggering loan offer totaling over $400 million represents supreme Soviet effort bring ALRI under complete Soviet influence in coming years. As you have pointed out (ref c), if Soviet program implemented as planned, this will be the likely result.

Amount of leverage we can bring to bear on this situation however appears limited. As you know, any long-term commitment on our part furnish equipment to ALRI would involve certain political and legal considerations and, in case of providing major ships, prior Congressional authority would be required. Even if these problems were surmountable, expansion ALRI program significantly beyond present level would likely present difficult funding problem. Given current level MS appropriations and world wide requirements, it is improbable we could satisfy ALRI (even if we desired do so) if new Soviet program is indication ALRI desires.

Perhaps best basis for approach to GOI would be suggestion on our part that GOI seriously consider implications new Soviet loan from point of view its own self-interest. Unless objection perceived, request you seek early opportunity for frank discussion Soviet loan with Djuanda, Nasution and other officials as desirable, pointing out obvious dangers to Indonesia’s independence inherent in massive Soviet program for ALRI. Useful peg for discussions with Djuanda might be your recent conversation (Embtel 1100)4 during which he expressed concern over GOI financial position and stated “he was watching GOI commitments very carefully to avoid over-extension” (guidance re payment for MAP will be forthcoming shortly). If Djuanda is seriously concerned about GOI finances, it is not easily comprehensible how he could agree to huge Soviet loan for naval equipment, much of which of dubious benefit to Indonesia. You might also remind Djuanda of our actions in the past to help alleviate GOI financial difficulties (through PL–480 sales, acceptance of token rupiah payment for MAP, etc.) and point out our distress that fiscal benefits to GOI derived from such assistance could be completely negated by multi-million purchase of Soviet naval equipment.5

  1. Source: Department of State, Central Files, 798.5–MSP/10–1160. Secret. Drafted by Wenzel, cleared with U/MSC and in substance with OSD/ISA/FE, and approved by Steeves. Repeated to CINCPAC.
  2. In this telegram, September 30, Lieutenant Colonel Henry A. McCartney, Naval Attaché in Djakarta, reported on several recent meetings with members of the Indonesian Navy, which included discussion of a Soviet offer of a 10-year loan of $20 million. (Ibid., 798.56/10–360) See Supplement.
  3. In this November 1 telegram, the Naval Attaché reported that the conditions of the Soviet loan to the Indonesian Navy had been resolved within the Indonesia Government. (Department of State, Central Files, 798.5621/11–160)
  4. In telegram 997, September 30, Ambassador Jones commented on telegram 300932Z (see footnote 1, above). “If in fact strong element Navy leadership here desires to keep Navy out of Soviet clutches,” he noted in part, “it seems clear to me it is in US interest to help, even if this help means promising them some equipment we would rather they did not have.” (Ibid., 798.5/9-3060) See Supplement.
  5. Dated October 11. (Department of State, Central Files, 798.5–MSP/10–1160) See Supplement.
  6. In telegram 092316Z from the Naval Attaché in Djakarta to the Chief of Naval Operations, November 10, the Attaché noted that there was a growing awareness, as expressed in telegram 722, that the Soviets were determined to win the Indonesian Navy to their side. (Department of State, Central Files, 798.5621/11–960) See Supplement.