48. Memorandum From the Executive Secretary of the Department of State (Read) to the President’s Special Assistant for National Security Affairs (Bundy)1

SUBJECT

  • Paper for NSC Discussion of Indonesia

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.

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No change is recommended in U.S. aid policy. We should continue to refrain from a formal Presidential Determination, at least until early June.

Benjamin H. Read

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.

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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 [Page 109]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.

  1. Source: Johnson Library, National Security File, Country File, Indonesia, Vol. II, Cables and Memos, 6/64–8/64, [2 of 2]. Secret. No drafting information appears on the memorandum, but a covering memorandum to another copy indicates that the paper had “internal State and AID clearances” and Harriman and Bell approved its transmittal to the White House. (National Archives and Records Administration, RG 59, Central Files 1964–66, POL 32–1 INDON–MALAYSIA)
  2. Discussion of Indonesia at the NSC meeting of May 15 was canceled; see Foreign Relations, 1964–1968, vol. I, Document 156.