COPT HO.
THE ASSISTANT DH^Wm
FOR REPORTS AND ESTIMATES
CONFtttflTIAl
CONSEQUENCES OF DUTCH "POLICE ACTION" IN INDONESIA
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CONSEQUENCES OP DUTCH "POLICE ACTION" IN INDONESIA SUMMARY
The -police action" launched by the Dutch onecember ha* had far-reaching effects in terms of US security interests The sudden but calculated Dutch move has brought the Far Eastern colonial problem, of special interest to the peoples of Southeast Asia, sharply into focus. It has weakened the prestige of the United Nations, it may seriously jeopardize thc contribution of boUi thc Netherlands and Indonesia to world political stability and economic recovery, and It has certainly provided the USSRowerful propaganda weapon.
Furthermore, the Dutch action has precipitated the emergencean-Asian bloc which, if It despairs ef adequate UN measures, may follow an Independent path While it is not aligned with the USSR, this Pan-Asian bloc may become stronglytoward thc US because of US identification in Far Eastern minds bothiscredited regime In China and as sponsor of continued control by Western colonial powers in Southeastan-Asian bloc under Indian leadership, even though unsympathetic lo the USSR, might become an effective Instrument of Soviet policy.
The USSR can be expected lo give vigorous support to all Southeast Asiaticaspirations, and lo accuse the US of complicity in the Dutch action. The USSR can be expected, furthermore, to utilise to the full the declining US prestige which must follow collapse of UN Good Offices Committee mediation efforts In which the USeading role.
he intelligence orcanluuoru of Uie Departments of State and the aForce havein ihii report; Uie Intelligence Dimion. Department of the Army, had no commentissent by the Office ot Navalnclosure. The information herein is as of9
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CONSEQUENCES OF DUTCH "POLICE ACTION" IN INDONESIA
Thc "police action" launched by the Dutch In Indonesia onecember has had far-reaching effects in terms of US security interests. The sudden but calculated Dutchas brought the Far Eastern colonial problem sharply Intoas weakened the prestige of the Uniteday seriously Jeopardize theof both the Netherlands and Indonesia to world political stability and economicay have precipitated the emergencean Asian bloc which may become strongly antagonistic toward the US;as provided the USSRowerful propaganda weapon.
Effkct oi* the Colonial Peohlkm.
World War II spurred the developmentundamental US security problem in the Far East: that of striking an effective balance between support for local nationalist aspirations while at thc same time supporting the economic Interests of Western colonial powers to which aid has been pledged and from which assistance is needed In Europe. The Indonesian crisis has posed this problem as immediate and urgent. The Dutch action will aggravate an already deteriorating situation rather than control it, and will reduce thc effectiveness of thc Netherlandsestern European power. Thc rich resources of Indonesia and the goodwill of its more lhanillion peoples are at stake,haotic situation in Indonesia may enable the USSR to extend more vigorously its expanding influence beyond China to Southeast Asia.
on Tiit Unitkd Nations.
Persistent Dutch disregard of SC directives will drastically reduce the prestige and influence of the United Nations because it will demonstrate again that UNhowever mild, stand little chance of obtaining compliance unless backed by effective sanctions. Defiance displayed bylate as the Netherlands, which enjoys long-esLablishcd traditions of Western democracy and enlightenment, willeculiarly destructive effect on the basic concept of international law and order.ong term It will furnish means to the Soviet bloc with which to parry the charge that the USSR and Its satellites alone arc responsible for Uie disappointing record of the UN. More immediately, thc Dutch example is giving furtherto such belligerents as Israel to take unilateral action In disregard of the Security Council.
on Political Stability ano Economic Rlcovefy.
In Indonesia the Dutch action has aimedomplete liquidation of the Republicolitical entity. It is believed, however, that thc Republic has built up enough
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military strength and political support throughout Indonesia lo carry out guerrillafor several years. It is known that the Republic has substantial financial resources outside of Indonesia which will be utilized In an attempt both to keep alive external support for the Republic and to strengthen Internal resistance. It Is not anticipated that the Dutch will be successful In winning the supportufficient number of nationalist leaders to undermine the resistance movement. Under present conditions it is expected that widespread sabotage and terrorist activities underleadership will prevent the Dutch from achieving any effective degree of political stability.
In Holland, despite considerable foreign censure, the Indonesian action has initially rallied domestic support for thc Dutch Government However, as military operations drag on. dissatisfaction with the Government's policy and dissension between left- and right-wing groups will probably grow. In the long run, therefore, thesituation can be expected to Increase the difficulty oftablein thc Netherlands.
The Dutch action will have important economic consequences for the US and the rest of Western Europe as well as for the Netherlands. Indonesia Is an Important source of such raw materials as tin. bauxite, rubber, petroleum, and vegetable oils Many of these commoditiesajor role In the US peacetime economy. In itsmaterials stockpiling program, and In its Implementation of the European Recovery Program.
In the case of tin and bauxite, the police action may not result ba an immediate decrease in production because these materials are located in areas under firm Dutchack of internal stabilityeriod of years, however, will probably reduce the production of these important commodities
The rubber production ln Indonesia will be seriously affected because much of the rubber is located in sections which will be subject to concentrated sabotage activities. Allhough the Dutch have captured the Important Republican petroleumerious decline in petroleum outputesult of strikes and sabotage cannot beover the long run.
The fact that Malaya, the only other major source of tin and rubber, may be thc scene of continued internal disturbances, Increases the seriousness of eventsime when such commodities, readily available from Indonesia, arcin short supply throughout the world, the Dutch action will have unfavorable economic implications for the Western worldhole.
Upheaval In Indonesia will increase the strain on Dutch finances and add todifficulties iniable economy Dutch earnings from investments In Indonesia were an important item in Holland's balance of payments, especiallyollar-earning source which offset the unfavorable balance with dollar areas. The Netherlands' eccnomic planning Is based on the assumption that Indonesia willresume its roleajor source of dollar credits. This is particularlybecause of Holland's present heavy imports from the US and the liquidationarge part of Dutch assets in the US. Under the best of cireu instances. It was estimated
Indonesia would notavorable balance of paymentsdelay in realizing returns on Dutch Investments as well as probable loss of some of these assets will prolong the postwar economic dislocation In Holland. Tills will delay the implementation of the Benelux Customs Union and reduce the contribution of the Netherlands to the European Recovery Program.
The probable necessity ofarge army In Indonesia indefinitely will further strain Holland's finances. At present, IS percent of the budget is devoted to military expenditures, ofajor part goes lo support armed forces in Indonesia. Effective use of Dutch troops In any Western European defense system, moreover, may be postponed Indefinitelyesult of this deployment.
S. Effect on Emerging Pan-Asian Bloc.
Dutch action in Indonesia has given Asiaticallying point forexpressions of Far Eastern solidarity; has presented India with an opportunity to assert leadership In the area, and may have precipitated the emergence of an Asiatic bloc whose ultimate influence can lie unfavorable to thc US. India, Pakistan, Ceylon, and Burma imposed immediate sanctions against the Dutch by denying air landing and shipping privileges. Burma's suggestion to India that an all-Asian conference beto consider the extension of assistance to the Indonesian Republic has been acted on. Other measures, Including material assistance to the Republic andoff diplomatic relations with the Netherlands, have been proposed. India, aspiring for leadership in Asia and realizing that the UN Is not yet able to enforce decisions based on lis uwn principles, has seized this opportunity to test the strength of anand potentially powerful bloc Development of any such bloc will stimulate concerted political action outside the UN. It will also tend to weaken further thc remaining bonds between the UK and its Asiatic Dominions (India, Ceylon, Pakistan) and Malaya While not yet the foremost target of this bloc, the US is continuing to be identified in Far Eastern mindsilling assistant in the Dutch action. If tliis situation continues, the Pan-Asian group might become an effective Soviet instrument, even though It does not align itself with the USSR.
G Effect on Soviet Propaganda.
The situation in Indonesia enables the Soviets lo espouse vigorously all nationalist aspirations, and gives them an opportunity lo identify the United Statesartner of the Dutch. While the Soviets have also condemned the Dutch, it is obvious that they are utilizing this situation to the fullest for world-wide propaganda purposes and consider it nn Ideal opportunity lo discredit the US further in the Far Bast,
CONFi^NTIA!
ENCLOSURE A
DISSENT OF THE OFFICE OF NAVAL INTELLIGENCE
1. ONI dissents with subject paper in the following respects:
(a) Pagearagraphixth"and" aftereventhchange period to comma and insert "and It will weaken thc influence of moderate Indo-ncslans while strengthening the position of extremists and Communists."
agedd additional paragraph to Summary as'police action' will have thc eflect of seriously weakening the influence of the moderate Indonesian leaders and strengthening thc position of the extremists and Communists Amovement headed by extremists and /or Communists wouldompromisebetween the Dutch and Republicans more difficult"
Pagearagrapheventh"and" afterighth line-change period to semicolon and insertay result in the moderate Republican leaders being replaced by extremists and/or Communists."
Pagearagraphifth and sixthsentence beginning "Thc Dutch" and substitute 'The Dutch action Is likely to aggravate an already deteriorating situation rather than control it. in which case thc Influence andof the Netherlandsestern European power will be reduced."
(c) Pagenews follows:
"7. EtTKCT on Communism in Indonesia.
The 'police action* and pursuance of repressive measures by thc Dutch lo quell the guerrilla activities of the Republican Indonesians will have the effect of weakening seriously the Influence of the moderate Indonesian leaders, and strengthening thcof the extremists and Communists. Thc moderate Indonesian leaders, al present under custody of the Dutch, are lhe most capable of the native leaders and are oriented toward the US
A continuation of the present economic and social disorders will play into thc hands of the Communists byertile field for the growth and spread of communism in an already chaotic area Since the moderate Indonesians were unable toolution of their problems with the Dutch by peaceful means, the more militant policy of the extremists and communists probably would appeal more lo those natives who are now convinced of the futility of further negotiation with the Dutch.
The Dutch action hi Indonesia brings Into focus the larger problem of the spread of Communism throughout all of Southeast Asia, which will undoubtedly gain impetusesult ol Communist successes In China The 'police action' will be used by the USSR and native communists In SEA to stimulate popular feeling against Weslern powers and to swell the ranks of the native communist organizations. This will result In further political, economic and social disorders, which with the addeddemands of Communist leaders, will Increase the difficulty in settling the problems of the Nationalist-seeking peoples of SEA "
con^5ential
Original document.
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