47. Telegram From the Embassy in Indonesia to the Department of State 1

2323. During nearly two-hour meeting with Sukarno and Subandrio at Bogor Palace today, tour d’horizon of where we stood on Malaysia issue, U.S.-Indo relations, aid to Indonesia, anti-American campaign and internal economic situation brought forth following major points:


Cancellation of U.S. Aid and U.S.-Indo Relations. After we had discussed new Philippine initiative re Malaysia, reported below, Subandrio said he wished to direct attention to whole question of relations between our two countries which he felt were approaching a new all time low. He referred to Bundy’s threat to withdraw U.S. aid unless Indonesia changed its policy on Malaysia,2 said GOI would have to react strongly to this, suggested that perhaps in interest of both parties most satisfactory reaction would be for GOI to announce it would no [Page 98]longer accept any American assistance. This would relieve U.S. as well as GOI of irritant. His govt was being embarrassed by repeated U.S. official public statements designed to bring pressure on Indonesia. I was fully aware, he noted, of how sensitive Indonesians were on subject of being told what to do. If aid programs could not survive unless GOI changed its policy, perhaps best thing would be to cut it off now; relations between our two countries might be more harmonious without present small aid program than with it.

(As Embtel 2322 reported,3 I had been anticipating something of this sort and had tried to head it off by series of moves yesterday afternoon and last night. Moves did not go unnoticed; indeed Subandrio referred to Yani’s inquiry.) I responded by saying that, as I had repeatedly made clear, I recognized that time might come when our aid program to Indonesia must come to a halt. However, I felt that now was not the time. I pointed out patience of USG in this matter in face of growing Congressional pressures and public opinion in U.S., and endeavored to convince them that Bundy statement was not to be interpreted as a threat but merely factual statement of situation which we faced. I said it would seem bad timing for either of us to cancel U.S. aid program on threshold of new Philippine initiative which might remove some of the difficulties we now faced. If we had any hope of summit meeting and peaceful settlement of Malaysian dispute, surely it was in Indo’s interest to await outcome of these efforts. For our part, we were not contemplating any sudden step of this kind (I trust I was correct) because we sincerely desired peaceful settlement of dispute by Asian nations concerned and we had no intention of introducing new element which might add to current friction between us.

Sukarno and Subandrio both reverted to Bundy statement and asked me direct question as to whether it represented, as they had concluded, major change of direction in U.S. policy. Bundy was new appointee, this was his first public statement, it had more than ordinary significance. People were saying it represented a new and harder line against Indonesia on part of new administration in Washington. Subandrio added that some of his Embassy people in Washington had asked to come home because they could no longer talk to people in Washington.

I replied that there had been no change in U.S. policy. Bundy was making informal speech before Advertising Club of NY. At same time, it must be recognized that Bundy was stating facts of life. I pointed out I had said same thing time and time again. It turned out it was not so much substance of Bundy remarks to which Indos objected as fact that they were made publicly. They hoisted me on my own petard [Page 99]by suggesting desirability of keeping comments of this sort in diplomatic channels. Subandrio referred to considerable improvement in Indo-Australian relations in past couple of weeks as result of fact that case was no longer being tried in newspapers. “This is a very difficult period for us,” he said. “If we want to help U.S.-Indo relations on present level of friendship, it will help very much if your people will not make public threats against us.”

I said I would relay this message to Washington but that there were two sides to this, and suggested anti-American campaign here might be tamped down. But in final analysis I thought best hope for improvement in relations lay in possibility of peaceful settlement of Malaysia dispute. So long as Indonesia appeared in role of aggressor, things would continue difficult. Many people in U.S. and elsewhere were convinced that Sukarno was engaged in a drive for territorial expansion and I suggested his actions had done little to dispel this suspicion. If peaceful settlement of Malaysia dispute were achieved as result of summit meeting, not only would Sukarno’s image improve with this and accompanying withdrawal of his guerrillas but he would be able to concentrate on his increasingly serious economic problem with the possibility of renewed friendly assistance from outside world.


Economic Situation. Subandrio used above as springboard to charge that principal reason for GOI economic difficulties was failure of U.S. to fulfill its promises re balance of payments assistance. I took grim satisfaction in demolishing this accusation in Sukarno’s presence for I am confident this was first time he had ever heard full story. Subandrio beat a hasty retreat after I had made clear way in which GOI had cut its own throat by trade blockade at critical moment in implementation of stabilization plan.

Sukarno then asked me what I meant by “increasingly serious economic problem.” I outlined economic situation as we see it in simplest terms. He asked me if people were going hungry. I pointed out that so far as subsistence was concerned, situation was temporarily better with harvest of new rice crop. But I predicted that beginning October, Indonesia would face real economic and financial crisis unless steps were taken.

“Do you mean collapse” Sukarno asked. I told him I did not mean collapse because Indonesian economy was resilient and not that sophisticated—but I did mean real trouble. I outlined foreign exchange position of GOI, unsatisfactory exports, financial requirements for spare parts and raw materials, debt service and rice and demonstrated how GOI could not possibly make ends meet without outside assistance.

Subandrio said Indonesians had tightened their belts before and could do so again and he added that Pres Sukarno did not want to borrow money from outside. Sukarno looked black as a thundercloud [Page 100]during this exchange. He may have been angry with me or possibly as result sudden realization his people had never painted so dark a picture and might have been misleading him.


Malaysia Dispute. I opened conversation after usual pleasantries by reviewing U.S. position with respect to this subject, pointed out we continued (a) to favor tripartite meeting ending in summit, (b) to consider peaceful settlement vital to interests of all concerned as well as free world, (c) to feel strongly that any settlement to be successful must be reached by Asian nations concerned. Consequently, we welcomed new Philippine initiative and hoped that it would achieve success. I urged Sukarno and Subandrio to make every effort to help bring this initiative to successful conclusion and emphasized importance of keeping discussion in diplomatic channels.

It appeared that Sukarno had not been briefed by Subandrio re Lopez visit because ForMin picked up ball at that point and explained to Sukarno what I was talking about. Sukarno seemed pleased by news but immediately turned to me and asked whether I thought the Tunku would cooperate. He had had no indication from anyone, certainly not from press, that Tunku would come to summit. Both Tunku and Razak continued to make anti-Sukarno statements. I said I thought that Tunku would come to summit, provided all parties gave appearance of being reasonable and approaching meeting in spirit of good will. Withdrawal of Sukarno’s guerrillas was an important element in establishing latter.

Sukarno again repeated his position had not changed. It was up to Tunku. Both he and Subandrio said they looked forward to visit of Lopez as special emissary from Macapagal.

ANZUS Treaty. Sukarno asked whether Bundy statement meant that U.S. was now defending Malaysia. I said if he meant by this militarily defending Malaysia, the answer of course was negative, although, I cautioned, escalation of the conflict could result in ANZUS Treaty being invoked. If he meant politically supporting Malaysia, he was aware that we recognized Malaysia and that we had welcomed its formation. But if he meant were we openly taking sides in Malaysia dispute, answer again was negative. Robert Kennedy had made amply clear that we considered solution of Malaysian dispute to be an Asian problem, that we were keeping hands off in the sense of attempting to dictate a formula, although we would do everything possible to help bring disputants to conference table. We were prepared to accept any solution upon which all parties to dispute agreed.
U.S. Press and Anti-American Campaign. Sukarno complained again about treatment by American press, said Soviet and Chinese press never did this to him, asked if there was not something Dean Rusk could do to tone down anti-Sukarno articles. I reminded him we have free press. I noted Chinese and Soviet press 100 percent controlled. [Page 101]He cited example of Adenauer who had called in certain editors and asked them not to vilify Sukarno, that they were hurting relations with Indonesia. I said I would pass on his comments but best remedy would be settlement of Malaysia dispute. I noted that I felt I had more right to complain to him of treatment in Indonesia where press was controlled, yet anti-American, anti-Jones articles were being published daily. I was not convinced these did not represent government policy or tactics. For example, I said, I was certain that resolutions by numerous organizations declaring me persona non grata would not have been passed and publicized without the specific blessing of the Foreign Minister. So long as these statements solely represented PKI opinion, I considered them compliment. But if they had the blessing of the govt, this was another matter. Subandrio was somewhat taken aback. Sukarno responded saying the day would never come when such actions would represent the opinion of the government.

Comment: Conversation, as foregoing report indicates, was full and frank, with occasional heated exchanges. I think net result was probably constructive.

As for Indo cancellation of U.S. aid, I believe we have headed that off for time being. I recommend that, so far as possible, we not exacerbate situation by further public statements on subject of aid withdrawal. Indos clearly recognize loss of aid as inevitable unless peaceful settlement of Malaysia dispute is achieved but it would be far preferable to let aid die natural death than to provoke Indos into pulling a Prince Sihanouk. PKI of course is calling for this action and I urge that we not play into their hands.

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL INDON–US. Secret; Immediate; Limdis; Noforn. Repeated to Kuala Lumpur, Manila, Singapore, Bangkok, CINCPAC for POLAD, and Canberra. Passed to the White House.
  2. William Bundy made this statement in a speech on May 5 to the Conference of the Advertising Council in Washington, and the speech was reported in The New York Times. Bundy stated that although the United States would like to help Indonesia economically, it was not able to do so. He continued, “We have been forced to cut back our aid programs very sharply and we may have to eliminate them entirely if Indonesia should continue a policy called confrontation against Malaysia—if it continues or is enlarged—to something that could only be characterized as aggression. That must be met.” Bundy’s full remarks relating to Indonesia are in telegram 1193 to Djakarta, May 5. (Ibid.) In a memorandum to William Bundy, May 8, Forrestal suggested that Bundy’s remarks in the speech were not in the long-term interest of U.S. policy. (Johnson Library, National Security File, Files of Robert W. Komer, Indonesia, Nov. 63–Mar. 66 [3 of 3])
  3. Dated May 8. (National Archives and Records Administration, RG 59, Central Files 1964–66, AID (US) INDON)