Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

189. Memorandum From the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Deputy Under Secretary of State for Political Affairs (Murphy)¹

Washington, October 31, 1956.

SUBJECT

• Extension of Increased Developmental Assistance to Indonesia

Problem:

To decide whether the Indonesian Government should now be informed of our decision to extend increased economic aid.

Background:

1. The Indonesian Government, in September 1955, asked for increased economic assistance. In an exchange of correspondence between you and Mr. Hollister (Tab B),² it was decided that a $25 million line of credit would be made available, with $15 million to be obligated in FY 1957. An executive determination to secure the balance from Congress in the FY 1958 MSP program is being sought.

2. It was decided that the Indonesians should not be informed of this decision until after Sukarno’s Sino-Soviet Bloc visit had been evaluated.

3. Anticipated adverse Dutch reactions have prompted our Embassy in The Hague to recommend indefinite postponement of increased aid.

Discussion:

1. Despite extravagant expressions of friendship and restatements of the Indonesian position on a number of issues which are at variance with U.S. views, the Sukarno visit has not changed the basic situation facing the United States in Indonesia, nor that country’s established uncommitted international position. (Embassy Djakarta’s evaluation attached as Tab C.³)

2. Denial of increased aid or further delay in informing the Indonesian Government of our intentions would represent a fundamental departure from the U.S. policy of cooperation and assistance to non-communist elements in Indonesia.

3. Further delay used as a means of conveying our displeasure with Sukarno’s behavior would be interpreted as conclusive proof that U.S. aid has political strings, and would undermine seriously an atmosphere of trust and confidence established with considerable effort over the past three years.

4. U.S. policy toward Indonesia and the pursuit of basic Free World policy objectives in the Far East should not be governed by the unhappy state of Dutch-Indonesian relations. The proposed manner in which Indonesia is to be informed of increased aid is designed to minimize the adverse Dutch reaction.

Recommendation:

That you sign the attached telegram. (Tab A)⁴

1. Source: Department of State, Central Files, 811.0056D/10–3156. Secret. Although this memorandum was addressed to Hoover and sent to Murphy for his concurrence, Murphy initialed it and approved the attached telegram rather than forwarding them to Hoover.
2. The tabs were not attached to the source text, but see Document 177.
3. Presumably telegram 1024, Document 186.
4. Presumably telegram 699, infra, which Murphy signed for the Secretary.