184. Memorandum of Telephone Conversation Between the Under Secretary of State for Economic Affairs (Ball) and the Assistant Secretary of State for Far Eastern Affairs (McConaughy)0
Ball said he was just looking at a telegram on Indonesian oil situation.1 It is quite rough. McConaughy said yes, they are quite disturbed. It is going to be awfully hard on all three oil companies. There is a message from Caltex which seemed a little less pessimistic than the Stanvac report, but it is still bad. Ball said just as we are authorizing this road business we now get into this.
McConaughy said it seems like we ought to get some leverage. Maybe we can do it. We have a means of coming back. Sukarno said he would expect the government to bear the additional cost of the program. This is out so this means they have not accepted our terms. We now have a basis for calling it no deal, or at least sparring with them. Ball said he thought we should. We just can’t accept that. Ball then asked what did the Soviets do with the sports palace. Was it a loan or grant? McConaughy said he would have to check. It seems to him it is a grant. Ball said he would be inclined to get a telegram off to Jones saying we are greatly concerned by this oil situation. Certainly it is out of the question for us to pay additional cost of the road. If they want it we would hope they would take some of these other things into account. McConaughy said you don’t think he has to be too indirect about that? Ball replied he would just come right out. McConaughy agreed that he would be inclined to think so too.
Ball said if we go ahead with this thing we are exposing ourselves. This oil thing could blow up at the same time. He thinks Jones should have a very strong talk with Sukarno. McConaughy said Sukarno has already left but Jones could see Subandrio the Foreign Minister. Ball agreed to this. It should be put on record that we do not propose to pay additional cost for this road. McConaughy said he wondered if Harry [Page 416] should not hold off on signing the contract. Ball said to tell him this thing may blow up. McConaughy said Harry’s reaction was adverse. Ball said he was more adverse this morning than last night. McConaughy said we might have some second talks. Ball said he thought now is the time to see how far they are prepared to go. Of course, when Sukarno gets back from Belgrade2 he may be really off the reservation. McConaughy said he is so susceptible to that sort of thing. Ball said Jones should have a tough talk with the Foreign Minister and see if he won’t agree to leaving everything up in the air until Sukarno gets back. McConaughy said every day counts. Ball asked how long would he be in Belgrade. McConaughy mentioned something like several days after the 1st of September but he then may go to UNGA, said he will check on that, however. It was agreed we should put them on notice.
- Source: Kennedy Library, Ball Papers, Telephone Conversations, Indonesia. No classification marking. Transcribed in Ball’s office.↩
- Ball was apparently referring to telegram 333 from Djakarta, August 23, in which the Embassy reported that the oil situation had reached a crisis. On August 22, the Government of Indonesia informed representatives of Shell, Caltex, and Stanvac of a decree that would regulate Indonesian relations with the companies. The decree postulated a 60–40 split, limited concessions to 20 years with 6 years’ exploration, reserved refining and marketing operations to Indonesia, and required that Indonesian national shipping be used for the transport of export crude and products. Caltex considered that American participation in the Indonesian oil business would end if Indonesia was not prepared to negotiate these terms. (Department of State, Central Files, 898.2553/8–2361)↩
- The Conference of Non-Aligned States was held in Belgrade September 1–6.↩