Enclosed is a paper on Indonesia and the Indonesia-Malaysia dispute for
consideration at the National Security Council meeting originally
scheduled for May 12 and now scheduled for 12:30 p.m. Friday, May
15.2 Should circumstances warrant, a brief
supplemental paper covering last-minute developments will be submitted
later. This paper makes the following salient points:
Indonesian guerrilla activity in Malaysian Borneo is continuing, although
there has been a marked lull in recent weeks. Sukarno may be planning a
substantial step-up shortly, however, to force the Tunku into an early summit meeting on
Sukarno’s terms.
Sukarno’s real intentions
are not clear, but there is a possibility he actually wants a peaceful
settlement. Both the Army and the PKI
would probably oppose a settlement but it is unlikely that either could
block it if Sukarno accepts
it. Sukarno’s terms for
settlement have not been spelled out but probably include, as a minimum,
some sort of pro-forma reascertainment of popular opinion toward
Malaysia in Sabah and Sarawak which he could claim as a victory for
internal consumption.
Internally Indonesia is in major difficulty. The economy is in bad shape
and continues to deteriorate. A regional revolt in Sulawesi is causing
additional strain. Neither, however, is likely to shake Sukarno’s hold on the country.
We have been exerting diplomatic and (through aid) economic pressure on
Sukarno to abandon
confrontation and work out a peaceful settlement. The most promising
current initiative has been taken by Macapagal, who has contacted Sukarno and the Tunku to urge an early summit meeting
of the three.
No change is recommended in U.S. aid policy. We should continue to
refrain from a formal Presidential Determination, at least until early
June.
Attachment
PAPER FOR CONSIDERATION AT THE NATIONAL SECURITY
COUNCIL MEETING, MAY 12, 1964
SUBJECT
- Indonesia and the Indonesia-Malaysia Dispute
Situation
Indonesia is currently pursuing a two-sided policy in its dispute
with Malaysia. On the one hand it is continuing its military,
political and economic confrontation against Malaysia with the
proclaimed objective of “crushing” the state. On the other hand
Sukarno is asserting
both publicly and privately his desire to settle the dispute
peacefully.
Armed Indonesian-led guerrilla units are continuing their
depredations in Malaysian Borneo, and Indonesian terrorists are
continuing to operate in mainland Malaysia and Singapore. Estimates
about a month ago showed some 4–600 Indonesian guerrillas in
Malaysian Borneo and an indeterminate number of terrorists on the
mainland. On both fronts, however, there has been a marked lull over
the past few weeks. Reasons for the lull are unclear. It could have
been brought about by the increased effectiveness of
British-Malaysian countermeasures, by voluntary withdrawals for
regrouping preparatory to further assaults, by a change in
Indonesian tactics from hit-and-run moves to the establishment of
permanent guerrilla pockets in remote areas, by a combination of the
foregoing, or, conceivably, by an unadmitted change in Indonesian
policy.
In the political field, Sukarno has been pushing for an early summit meeting
with the Tunku and Macapagal without “preconditions”
(i.e., the withdrawal of Indonesian guerrillas from Malaysian soil,
which the Tunku has publicly
insisted on before sitting down with Sukarno). He has, however, expressed his willingness
to begin voluntary withdrawals simultaneously with the convening of
a summit meeting or pre-summit ministerial meeting, obviously
intending to control the pace of withdrawals as a bargaining
counter.
[Page 104]
There have been some recent indications that Sukarno, despite the serious
risks involved, may be preparing for a substantial step-up in covert
military activities in the near future as a means of frightening the
Tunku into agreeing to an
early and unconditional summit.
Indonesian Intentions
The sincerity of Sukarno’s
alleged desire for a peaceful settlement can be doubted but has not
yet been fully tested. Conceivably his professed willingness to
negotiate is no more than a blind behind which he is pursuing a
calculated plan to dismember Malaysia and pick up the pieces. The
British incline toward this estimate. We think it more likely,
however, that—as far as Sukarno himself is concerned—his main goal is less
that of bringing about Malaysia’s downfall than that of avenging the
fancied humiliation he suffered when Malaysia was formed and scoring
what he can claim as a major diplomatic victory before the
world.
The objectives of Foreign Minister Subandrio and Sukarno’s other civilian advisers seem to consist of
little more than getting Sukarno what he wants.
The Indonesian Army, however, appears to be genuinely obsessed with
the long-range Chinese threat it professes to see in Malaysia and to
be committed to a long, hard campaign to avert that threat by
bringing Malaysia under Indonesian hegemony. It is doubtful that the
Army would stand against Sukarno if he accepted a peaceful settlement, but it
would probably accept the settlement reluctantly and might even
continue, independent of Sukarno, a low-level campaign of subversion against
Malaysia.
For entirely different reasons—basically a desire to bring about a
complete break with the West—the PKI
is totally committed to an anti-Malaysia policy, and will use all
the influence it can muster to block a peaceful settlement.
Possible Settlement Terms
Assuming Sukarno honestly
does want a settlement, the shape of a settlement acceptable to him
is not clear—perhaps even to Sukarno himself. He is on record as (a) wanting
separate “independence” for Sabah and Sarawak and for Singapore as
well, (b) being willing to accept Malaysia as now constituted if the
people of Sabah and Sarawak really want it, and (c) demanding the
reascertainment in Sabah and Sarawak of popular opinion toward
Malaysia to replace what he claims to have been the faulty UN ascertainment of September 1963.
Privately Foreign Minister Subandrio has indicated that Sukarno is willing to recognize
Malaysia as a fact if he can be given a “pill sweetener” to erase
the humiliation and permit him a victory for internal consumption.
Subandrio has not,
however, spelled out what an
[Page 105]
acceptable pill-sweetener would be—presumably it would have to be
a device offering at least the form of, or substituting for, a
reascertainment in Malaysian Borneo.
It is entirely possible that a summit meeting would not produce a
firm agreement in concrete terms but would, at best, leave numerous
ends dangling. In this event, the test would continue to be the
actions taken by the parties, i.e., a reduction in guerrilla
activity by the Indonesians and some form of ascertainment in Borneo
on the part of the Malaysians.
Internal Developments in Indonesia
Internally the Sukarno
regime is in major difficulty on a number of fronts, although its
manifold problems have not yet reached the stage of seriously
threatening its hold on the country.
The economy continues to deteriorate. Industrial output is declining
in the face of severe shortages of imported parts and raw materials.
Export earnings, hit by the confrontation against Malaysia, are
insufficient to finance an adequate flow of imports, and the regime
can no longer rely on foreign aid to fill the gap. Servicing of the
huge foreign debt load may consume 40 percent or more of anticipated
earnings, and defaulting on payments reportedly is already
beginning.
Unable to feed itself or to finance adequate food imports, the
country has suffered from severe food shortages in various areas
over the past few months, which, although temporarily relieved by
the April–May rice harvest, are expected to recur on a larger scale
next fall. The regime has done little to counteract this rapid
deterioration beyond exhorting the populace and introducing a few
ineffective monetary measures.
Although Sukarno is
notoriously indifferent to economics, there is no doubt that even he
is dimly aware of the country’s plight, and may be worried at its
political implications. Other members of the hierarchy are clearly
disturbed by it. At the same time, there are no signs that popular
discontent over declining living standards has reached, or will soon
reach, such proportions as to constitute a real danger to the
regime.
In the security field, the regime is plagued by a fairly widespread
regional revolt in Southwest Sulawesi and by a few scattered
indications of unrest elsewhere (such as a recent series of army
desertions in Sumatra). There is no evidence, however, that internal
dissidence is likely to spread significantly as long as Sukarno keeps both the Army and
the PKI tied to his regime.
In the context of its anti-Malaysia policy, the Sukarno government has
permitted and apparently sometimes abetted a fairly intense
propaganda campaign against the United States by the PKI, left-wing nationalists
[Page 106]
and the controlled press.
A form of creeping nationalization is slowly squeezing British
investment out of the country (with the major exception of Shell),
and an increasing volume of threats are being leveled at American
enterprises. On the other hand, despite signs of approaching trouble
over certain financial provisions in the 1963 contracts, the foreign
oil companies are currently enjoying generally satisfactory
treatment by the government.
United States Position
We have made entirely clear to the Indonesians our lack of sympathy
with their anti-Malaysia policy and our opposition to their use of
force in pursuing that policy. The appreciable but limited leverage
we have in Indonesia has been brought to bear on the Sukarno government in a
continuing attempt to induce an abandonment of confrontation and the
negotiation of a peaceful settlement. We have not tried to suggest
the form such a settlement should take (although we have indirectly
floated a few proposals) but have stressed to all parties that the
formula for settling this Asian dispute must come from the Asians
themselves.
Our pressure on the Indonesians has been exerted directly, both in
the form of Ambassador Jones’
continuing dialogue with Sukarno and Subandrio and through such wider efforts as the
Attorney General’s mission, Presidential messages, etc. It has been
exerted indirectly by the progressive scaling down of our economic
and military aid, which has contributed to the economic strain felt
by the regime and has served graphically to demonstrate the growing
estrangement that Indonesia’s policies are forcing on us.
The success of our tactics has been mixed. We have not succeeded in
ending confrontation, and we have brought about a heightening of the
regime’s anti-American orientation. Growing isolation from the
United States has probably contributed somewhat to closer Indonesian
ties with Communist China, although—significantly—not with the
Soviet Union. On the other hand, our efforts have probably been the
main contributing factor in bringing about such negotiations as have
taken place and in keeping the door open for further negotiation. In
addition, our efforts have probably been an important element in
restraining the Indonesians from even more rash tactics.
Current United States Activities
Ambassador Jones is continuing
to press our views on Sukarno at every opportunity. His current efforts
are directed particularly at inducing the Indonesians (a) to enter
into communications with the Malaysians through Thai diplomatic
channels rather than relying on provocative public speeches to
convey offers of resumed negotiations, and (b) to spell out for the
other principals what they mean by “pill-sweeteners”
[Page 107]
rather than reiterating vague demands
for reascertainment.
We are also encouraging Macapagal in his current effort to get negotiations
restarted and have instructed Ambassador Martin to hold a
thoroughgoing exchange with Thai Foreign Minister Thanat, with the idea of getting him
ready to resume an active mediatory role if Macapagal’s efforts succeed. As an
alternative should these moves fail, we have asked our UN mission to sound out U Thanat on the
possibility of his taking a more active part in the dispute if
necessary.
Chaerul Saleh, Third Deputy Prime Minister and one of Sukarno’s more influential
advisers, is scheduled to visit Washington briefly during the period
May 18–20. This will give us a further opportunity to present our
views, and we intend to do so forcefully.
In the aid field, we have been bringing home to Nasution and the Army
the fact that Indonesia’s confrontation policy unavoidably affects
our relations with the military as well as the civilian government,
and disabusing them of the hope that close Indonesian Army ties with
the Pentagon can be retained despite the cooling of other
government-to-government relations. Continuing limited military,
economic and technical aid is being kept under constant review to
maintain psychological pressure on the regime and to insure that it
adds nothing to Indonesia’s confrontation capabilities.
In connection with our aid strategy, the question arises of the
Presidential Determination called for by Section 620(j) of the
Foreign Assistance Act. We are continuing to operate in Indonesia
under a Presidential decision that the Determination be withheld
pending the outcome of negotiations which would give us a clearer
picture of Indonesia’s intentions. Our programs are being carried on
under a decision by the Attorney General that the President has a
reasonable length of time in which to analyze the situation and
frame his conclusions.
It may, however, be difficult to maintain this position to the end of
the fiscal year, and we may well have to bring this matter to the
President by early June.
Third Country Activities
The Philippines: Until the past few months the Philippine role in the
dispute was not a helpful one. Inhibited by their own claim in
Sabah, wary of offending their huge Indonesian neighbor and anxious
to display a more “Asian” image, the Philippines were less of an
independent third party to the dispute than a less-virulent junior
partner of the Indonesians. This position has changed substantially
since last February, however, as Macapagal has become increasingly disenchanted with
Indonesia’s rashness and intransigence. Macapagal has begun a rapprochement with Malaysia by
moving to re-establish consular
[Page 108]
relations on May 18, and has told us that he
will make one last all-out effort to bring about a peaceful
settlement—failing which, he presumably will be prepared to part
company with Sukarno.
Macapagal has already started
this effort by sending messages to Sukarno and the Tunku proposing an early summit to
be accompanied by guerrilla withdrawals. He intends to follow this
up by sending former Foreign Secretary Lopez to both capitals during the week of May 10.
The substance of Macapagal’s
proposals has not yet been fully spelled out, but among the measures
he reportedly is considering is that of mediation by outside Asian
powers.
The Tunku has already
responded favorably to Macapagal’s initiative. In a May 9 letter to
President Johnson thanking
him for a congratulatory message on the outcome of the recent
elections, the Tunku stated
that he agreed with Macapagal’s terms for reopening talks but “with a slight
change, i.e., as affecting the withdrawal of guerrillas”.
Thailand: Thanat, despite a
basic sympathy for Malaysia and impatience with Indonesia, played a
most effective role as mediator during the two Bangkok ministerial
meetings earlier this year and seems to have gained the confidence
of all three parties. Although inactive during the prolonged impasse
that has followed the second Bangkok meeting, he has continued to
serve as a channel of communication between the disputants
(particularly in the re-establishing of Malaysian-Philippine
consular relations) and has expressed to us his willingness to take
part in further negotiations.
The U.K.: The British have been Sukarno’s main propaganda target since early in the
dispute and have, of course, borne the brunt of the guerrilla
fighting. Although not willing to foreclose entirely the possibility
of a negotiated settlement, they have been particularly skeptical of
Sukarno’s intentions
and have advocated a generally stiff line with him.
The British have frequently used their influence with the Tunku to urge moderation in his
public statements, with mixed results. They have, however, been
sensitive to any hint that they use their increasingly limited
leverage in Kuala Lumpur to press for substantive Malaysian
concessions in the interest of a settlement. In general, the British
position has been a rather rigid one. While understandable under the
circumstances, this position at times has unquestionably exacerbated
the situation.
Butler’s visit to Manila at
the beginning of May, however, seems to have been accompanied by a
noticeable shift toward greater flexibility, at least in Britain’s
public position. Butler endorsed the concept of an “Asian solution”,
actively encouraged Macapagal’s initiative, and even indicated publicly—as
far as we are aware, for the first time—that the U.K. has no
objection to Maphilindo. On the other hand, shortly
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before the visit the British
government authorized several new retaliatory measures against the
guerrillas in Borneo, including limited hot pursuit into Indonesia.
We are informed that these will begin after May 15.
The United Nations: There remains the question of a possible UN role in the dispute. Although the
Secretary General’s formal involvement ended with his report of the
UN ascertainment in September
1963, he has continued periodically to express his interest in
developments and has recently indicated his willingness to provide
good offices. Apart from the Secretary General, there has been a
rather unclear series of exchanges between the British and the
Malaysians over the possibility of bringing the matter to the
Security Council. The British have told us that they believe an
approach to the UN should, for the
present, be limited to the submission of Malaysia’s case by letter
to the Security Council President for information and distribution
to members. There are, however, some indications that the British
may have gone beyond this at one time by suggesting that the
Malaysians seek Security Council action. Our latest information is
that both sides are now agreed on an informational letter to the
Security Council President and that the text is now being
drafted.
We have engaged in informal contingency discussions in New York with
the British, Australians and New Zealanders over a possible approach
to the Security Council should the situation require it. The
consensus has been, however, that the time for resort to the
Security Council has not yet arrived.
Conclusion
At the moment, prospects for a summit meeting within the next month
or less, perhaps preceded by lower-level talks, seem fairly bright.
It is still an open question whether a summit can produce a formula
for settlement acceptable to both sides, and indeed whether
Sukarno really wants
a settlement. Proposals which might lead to a settlement, however,
are beginning to emerge (i.e., Afro-Asian mediation). In addition,
the very act of attending a summit meeting has on past occasions
instilled in the principals a greater flexibility than they normally
display.
The dispute unquestionably remains a most serious one, and chances
for a peaceful resolution are still very much in doubt. There does
appear to be some promise in the situation, however. As long as it
persists, our interests would seem to require that we continue our
efforts to encourage current moves to convene a summit meeting.
