856D.2553/12–1751: Telegram
The Ambassador in Indonesia (Cochran) to the Secretary of State
priority
872. Leibacher arrived evening 16th. He and Gibbon called 8 a. m., 17th. We reviewed situation and agreed I shld make first move by calling on Vice Pres Hatta.
I was recd by Hatta 10 a. m. I reminded him of report I made him on November 29 of my visit to US, and particularly assurances I had given my govt. Both active and prospective US investors [promised?] that Amer capital wld be given square deal in Indo if such capital gave govt square deal on profits and did not exploit labor (Embtel 855). I told Hatta test this relationship now arising in connection agreement [Page 758] to be reached between Indo Govt and Stanvac as latter’s “let alone” arrangement expires December 31.
I told Hatta very pleasant rels existed between local Stanvac group and Indo officials incl Roem, head of Mining Comm. I said that in Gibbon’s conversations with Roem on new arrangement former saw problems of such significance arising that he felt New York hdqrs shld despatch one or two high officials for consultation. Consequently I had spoken with Econ Min Wilopo and also with Roem seeking deferment of any crystallization of plans or mtgs toward that end until Stanvac officials might arrive, have opportunity for full consultation with Gibbon, and then one or all of them meet with appropriate Indo group.
I told Hatta that Leibacher had arrived and he and Gibbon had discussed sitn with me this morning. I told Hatta Stanvac always dealt directly with Indo Govt and rels had been so pleasant and orderly there had never been reason for Emb to intercede. I said my entrance into picture now came from fact arrangement to be negotiated with Stanvac in Indo may not only set pattern for it and other Amer investors Indo but might have important repercussions upon arrangements which Amer investors have made with sanction or support US Govt in various areas of world.
I showed Hatta Dept A–121 of December 71 summarizing arrangements for surrender of fon exch and share of profits by Amer oil companies in several different countries. I expressed sincere hope Hatta wld make sure Indo Govt did not exact agreement from Stanvac, or insert in any letter or memo to Stanvac, a fixed requirement for division of profits above 50–50 level. I said Stanvac felt strongly that if 65–35 proportion which Roem had mentioned shld be published, it wld have most deleterious result in Stanvac rels with other govts, and might lead to liquidation interests Indo. I said that mentioning any proportion above 50–50 in even a secret communication wld be dangerous since these things usually leak and trouble ensues.
I recommended Roem refrain from fixing date on which definition decision and recommendation to govt wld be made. I saw no need for any deadline altho I did recognize “let alone” agreement expires end December. I suggested Gibbon with benefit presence and advice Prioleau and Leibacher continue exchange of info and ideas with Roem and other Indo officials with view to reaching provisional agreement soonest. Since Indo Govt has informed Shell and Caltex of plans for Stanvac arrangement, I thought provisional arrangement shld be followed in January by negots with entire oil industry. If this impossible, provisional arrangement cld be supplanted by long [Page 759] term arrangement worked out at least with Stanvac in absence pressure now obtaining. I said arrangement so consummated cld be made retroactive to January 1.
I did not endeavor discuss fairness of present tax and other charges borne by Stanvac. I did make point, however, that Stanvac anxious expand base of production since demand for petroleum products in this area during past year increased over 21 percent and Stanvac believes it advantageous to Indo retain its rank among world producers thru development to meet increased demands. I left to Stanvac to demonstrate whether present Indo tax load may be too heavy to permit them expand. My immediate concern was to see an arrangement negotiated which wld not force Stanvac toward liquidation rather than expansion; wld not deter Caltex from proceeding with immense disbursements it contemplates for developing its undertakings; and wld not discourage fon capital in general, and Amer in particular, from participating in much needed econ development Indo.
Hatta promised confer with Wilopo and Roem today and “see what he cld”. I expressed confidence in and appreciation of his support. When I recalled that Hatta had not met Prioleau, he indicated willingness receive him any time after Tues2 when he will be absent. Have informed Leibacher and Gibbon of above conversation.
Dept pls inform Seitz.3