Foreign Relations of the United States, 1951, Asia and the Pacific, Volume VI, Part 1

883.00–FA/6–151: Telegram

The Ambassador in Indonesia (Cochran) to the Secretary of State

secret
priority

[Djakarta,] June 1, 1951.

1685. 1. Consequences stopping all types economic and financial assistance to Indo (Depcirctel 734¹ and Deptel 1298²):

a. Cutting off type assistance handled Embassy on travel grants, scholarships, etc, would have no significant effect. Difficulty experienced in finding Indos qualified and available for taking advantage such opportunities. Indo Govt has not accepted Fulbright arrangement or gone further than initial and long delayed approval some ideas under Point IV.

b. Current program ECA envisages spending approximately eight million dollars for each FY 1951 and 1952. Program encompasses aid particularly to agriculture, public health and small industries. Little progress made on these lines to date except planning and submitting projects and orders to Washington, and ordering some fishing boats from Japan. UN has organization Indo interested in same three lines endeavor and could provide technical assistance. Consequently elimination ECA from these lines endeavor would have little material effect.

c. J. G. White engineers under two year contract to Indo Govt financed by ECA making basic survey transportation, harbors, hydroelectric power, mining, etc, with view help Indo plan rehabilitation economy and achieve increased production and export. Progress being accomplished by engineers which can be highly useful if Indo Govt accepts findings and follows advice. Engineers being used study Indo import requirements, cooperating with ECA and Embassy on recommendations. Also reviewing projects under Exim Bank credit. If contract between Indo Govt and private firm could be considered logical exception from rule, this would merit consideration.

d. Exim Bank credit one hundred million dollars not yet drawn on since Indo Govt has not ratified, as required Indo law, some fifty million dollars of projects already approved by Exim Bank. Indo Govt will seek early ratification. Total projects contemplated under Exim credit are of capital nature destined rehabilitate economy and augment production and export. Effect of Exim credit not yet felt materially altho granting gave internal and international confidence in Indo and facilitated currency reforms. To stop Exim Bank credits would make it more difficult for Indo get machinery, equipment and materials used in building up country’s economic plant.

e. Indo reached point where balance of payments favorable accumulated fifty million dollars in gold and considerable foreign exchange. These resources could be drawn on to take over White engineers contract if so desired. Likewise could pay for essential imports to extent likely obtainable in view short supply such materials as those sought from US under Exim credit.

f. If denial economic aid under Kem amendment also envisages tighter priority policy on exports purchased with Indo’s own resources, this would be genuinely powerful lever toward getting Indo into line with UN–US embargo policies.

g. UN embargo resulted in bitter Indo press campaign against US which would be sharply accentuated by strict application Kem amendment. This should not upset Sukiman Govt. It should not interfere with US purchasing on this market if US willing and capable provide goods required by Indo as adequately as other possible purchasers of Indo products.

h. Stopping aid would encourage some leftist elements argue in favor of more generous trade arrangements with China and other commie countries.

i. Stopping aid might encourage various Indo elements conservative, realist, pro-western, anti-commie et al, to wage campaign in behalf meeting US requirements.

2. Consequences of obtaining exception for Indo:

a. Would leave this rich producer free to disregard UN embargo and to sell to China and other commie countries tin, rubber, petroleum and similar products of strategic value for opposing UN and US.

b. Would lead Indos to conclude lack of sincerity on part US in fostering UN resolution and lack seriousness Congressional legislation.

3. Course to be pursued:

a. If policy making general exceptions is followed Indo would normally be included. US naturally felt its national interests being advanced by financial and economic aid granted and planned for Indo. Furthermore, Indo products definitely contribute to supply war materials required by US and allies.

b. Indo has chosen “independent” foreign policy whereunder present FonMin has stated intent sell to devil if in interest Indo. In UN voting Indo abstained from condemning China as aggressor and in imposing embargo. Indo refused offer of US military aid thru Melby mission. Indo govt has made no statement in support UN policy in Korea or in appreciation US efforts there toward defending free nations, including Indo, from actual and threatened agression.

c. On basis reciprocity for any consideration shown US by Indo, latter deserves no consideration in matter of exceptions. Their sales to us have resulted from our having money, ships and needs for Indo products. Indo will continue sell to US if we are best available customers. Unless we require strict adherence by Indo to UN embargo and Kem amendment rules, Indo will feel free to sell wherever expedient.

d. It is recommended Indo be considered exception only if large number countries so considered. To oblige Indo to respect US legislation and comply with rules thereunder might now really help Indo rather than cause injury. Sukiman govt basically friendly to US. If forced take significant decision toward denying strategic materials to commie areas, including abrogating bilateral agreements providing small amounts tin and rubber to Poland, Czechoslovakia and Hungary, this might strengthen hand Indo govt and induce it follow more forceful policy against communism internally well as externally.

e. If decision is taken not to seek exception for Indo, recommend I be informed in advance, in order give me opportunity for straightforward talk with Indo Govt including President Sukarno with view to showing them advantages of meeting our requirements and disadvantages of not conforming. My hope would be to get Govt make public announcement of policy in line with ours prior to effective date US action. This would offer opportunity save Indo face that would be lost if conforming to our wishes should come only after penalties actually imposed. While admittedly Indo should as honorable member UN respect UN embargo and related US requirements, we unfortunately cannot at this date count on sufficient Indo courage or character to take requisite decisions voluntarily. We might have some chance of influencing in right direction by talking prior US penalties inflicted, always provided we are as strict with and do not permit Malaya receive more favorable treatment than Indo.

Foregoing views not discussed with Indo or STEM officials.

Cochran

1. Not printed.
2. In telegram 1298 to Djakarta, May 26, the Department took the position that tinder the Kem Amendment either all aid to Indonesia had to be cut off, or the Department would have to try to obtain an NSC exception for Indonesia. Ambassador Cochran was asked for his estimate of the consequences if either course was followed, and the Department wanted his guidance as to which course should be pursued. (460.509/5–2651)