Foreign Relations of the United States, 1964–1968, Volume XXVI, Indonesia; Malaysia-Singapore; Philippines

191. Memorandum of Conversation¹

Washington, February 14, 1966.

SUBJECT

• Indonesia—Consultation

PARTICIPANTS

• The Secretary
• Marshall Green—U.S. Ambassador to Indonesia
• H. Kent Goodspeed—Officer-in-Charge, Indonesian Affairs

1. Ambassador Green reviewed the present situation in Indonesia, four and one-half months after the abortive Communist-backed coup of October 1. He noted that there have been several favorable achievements, albeit mostly of a negative nature: the PKI has been destroyed as an effective political force for some time to come; the axis with Communist China is in disarray; the Afro-Asian solidarity movement has suffered; and Sukarno’s personal image has been tarnished. On the other side of the ledger, Sukarno’s ideology still pervades Indonesian society, Subandrio and other leftist ministers have managed to retain a large degree of their power, and the momentum evident in November and December to reorganize and drastically reform the governmental structure has been lost, largely because of the Army’s fear of widespread civil disorder and chaos. The Army has, in a sense, bought unity at the expense of further action. The Army, as well as Moslem political groups who have a vested interest in preventing the resurgence of the Communists that have been decimated by wholesale massacre, will prevent a renaissance of the PKI. The Army will also oppose attempts to revive close relations with Communist China. Beyond that, the Army is unlikely to openly confront Sukarno, who retains his charisma with the Indonesian people and his domination of the older generation of political and military leaders.

2. The impetus for change at present comes mainly from the younger generation, particularly from student groups, and is sparked by dissatisfaction with the incredibly bad management of government coupled with increasingly chaotic economic conditions. Inflation and the increase in money supply are rampant, and there are some areas suffering from food shortages. In addition, years of living on a structure of pyramiding credits have brought on a severe foreign exchange crisis that is likely to be the spark igniting further political change. Indonesia has a total foreign debt of approximately $2.5 billion on which payments due in 1966 are $470 million. Since foreign exchange earnings are expected to amount in the neighborhood of only $450 million, service on the debt will obviously have to be rescheduled. However, to date Indonesia has offered no signs of being willing to talk with creditors as a group or to demonstrate it is prepared to tackle its problems in a rational manner to induce capital exporting countries to be able or willing to be of any assistance. The Army is following a policy of remaining aloof from assuming the responsibility for economic problems; and although the Army leadership has put out some feelers, it has made it known privately that it does not want outside assistance at this time.

3. Reviewing the present state of relations of various countries with Indonesia, Ambassador Green noted that the U.S. position was at least much better than in the pre-October 1 period, ChiCom-Indonesian relations are becoming increasingly strained, and the Soviet position is at best unenviable. The Russians are in the embarrassing situation where an Army in which they have a large investment is actively suppressing a Communist Party, but at the same time they are not displeased with the destruction of the power of a thoroughly ChiCom oriented Communist Party. The Soviets probably would not object to a situation developing in Indonesia somewhat analogous to India, with both the U.S. and the USSR providing aid and with Communist China out of the picture.

4. The Secretary noted that if the U.S. were ever able to play a role in Indonesia again, particularly in regard to providing economic assistance, there were two important prerequisites: some satisfactory resolution of the Malaysian confrontation irritant, and some rational policy toward U.S. oil companies that would not terminate in precipitous action that would bring the Hickenlooper Amendment into effect.² Ambassador Green said that the military viewed confrontation as an unproductive drain on Indonesian resources that only served to divert military power from more pressing internal security functions, but that a termination of confrontation would more likely take the form of a gradual withering away rather than be the result of a negotiated settlement. The American oil companies are faced with difficult problems, but Ambassador Green expressed the hope that through a moderate and far-sighted approach to negotiations they would find a formula to remain in Indonesia; or that if impelled to pull out, they would do so without retaliatory measures that would set off severe anti-American reactions.

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL 2 INDON. Secret. Drafted by Goodspeed on February 16. The meeting took place in Rusk’s Office and began at 4:47 p.m. Rusk’s next appointment was at 5:10 p.m. (Johnson Library, Rusk Appointment Book) Berger sent Rusk a short briefing memorandum for this meeting. (National Archives and Records Administration, RG 59, EA/Indonesia Files: Lot 70 D 3, PER 9–3 Consultation)
2. The Hickenlooper amendment was to the Foreign Assistance Act of 1961 and was revised in 1963. It forbade U.S. assistance to nations which expropriated U.S. foreign property and assets without compensation. (77 Stat. 386)