Created: 9/21/1962

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VPHlYll FIR ICLUSl UTtllllllf




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SUBJECT: Indonesia After Wast Hew GuineaThe Outlook for US Influence


Hiis neraorondun is the one referred to at Thursday's Board and Staff Trot Leg, designed to give the Board's vlcvs on current US opportunities In Indonesia. Theould like the eccplete version by cloee of business today,eptember, so Uiat it nay enter ln to White House policy consideration of thin question.





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SUBJECT: Indonesia After West New Ouineahe Outlock for OS Influence

1. The peaceful settlement of the West Now Ouinea dispute Is advantageous to the US and provides opportunities for the growthnfluence in Indonesia. IndoneBla's last remaining terrltor-.lal claim against Its former Dutch rulers has been satisfied, largelyesult of US good offices for which Indonesian leaders hove expresiied gratitude. Indonesia's need for Soviet military aid end diplomatic support,eak just prior to the settlement, has sharply declined, while Its interest ln economic assistance, from whatever source, has correspondingly Increased. Internally, resolution of the dispute has removed an Issue which enabled the Indonesian Connunlst Party (PKl) to gain strength and respectability by Identifying Itself with Sukarno and his nationalist aspirations. The Jjidoneaian military, no longer preoccupied with the buildup against the Dutch, can restore eaphaole to programs

designed to develop popular identification vita the armed forces and undercut PQ influence In the countryside.

2. The most favorable areas for US Initiative in the nev environment will probably be in support of the military effort to reduce PK2 influence, and ln the provision of much-neededto tbe Indonesian economy. At present, about one-third of tbe Indonesian army ls actively engaged lnfunctions such as civil administration, public works, village development, and the distribution of food and clothing. Plans call for expansion of these programs by the addition of nev and better-trained engineer battalions, and by political Indoctrination and technical instruction of troops slated for demobilization. In hie present relatively expansive tcood tovard the US, Sukarno is probably prepared to accept some IS assistance for the military in tbe civic action field. Bis continuing goodwill could be induced by substantial US contributions toward solution ofeconomic problems in the form of developmental funds, currency stabilization programs, technical assistance, and foreign exchange support. The dividend for the US fron such an investment vouldessening of the economic chaos on which the PKI intends to feed.

3- Despite the improved situation and even assi=ing an all-out OB effort to exploit available opportunities, there areliaitations en what tho US eon hope to accomplish in Indonesia at this tine. Sukarno's neutralist foreign policy, focused tightly on the anti-imperialism issue, will continue to disturbnes ion relations and prevent significant acccctodations to the Western viewpoint. Moreover, with the loss of the profitable West Bow Oulnen Issue, Sukarno is likely to seek new causes with which to divert the populace and rally support, the most obvious selectionsrenewed lrredeatism (Portuguese Timor, British Borneo, and Austral-lar. Hew Guinea) and Western economic Interests ln Indonesiaill almost certainly bring him Into conflict with the OS and Its allies. The prospect of substantial U3 economic aasiatance will not unpoao much restraint on his actions. Sukarno bos little understanding of economic problems which, in any case, arc not susceptible of dramatic solutions and provide little political nourishment for


a. The OS will be handicapped also by the entrenched position of the USSR In the military assistance field. Despite various rlnglvlngs, the Indonesian military will probably go along with its

existing procurement prcgracon-parable source of up-to-doequipnciit, including short-range ciealios, can be found. Tbe exigencies of the Internal political situation, in vhlch Sukarno dcalnates by virtue of his skill ln balancing tbe military and the PKX off one another, vill impel Sukarno to circumscribe the amount and direction of overt US support to the nnti-Coenuniot prograns of the military. He has already moved to insure his ability to restrain tbe military by replacing General Banution ne Amy Cblof of Staff vitb the more pliable General Janl, and by placing tho Vnet Nev Oulnea administration under an old army opponent. Foreign Minister Subandrlo. Bovever, the greatest single threat to tho military'sanonist canpalgn will be tbe probably lifting, vlthear or tvo, of tbe martial lav deercoe under vhlch the army runs tbe civil administration ln most of tbe country.

5. The West Rev Guinea settlement, while it hasajor roadblock to improved Indonesian relations with the US, has not basically changed tbe balance of Internal forces upon which the success of US initiatives largely depend. Sukarno remains the key to Indonesia's international orientation and la unlikely to modify his neutral!at vlevs ln any Important respect. Meanwhile, the USSH vill continue its massive campaign to bind

Indonesia to the Bloc vlth cilitary and econanle assistance, and uninhibited support Cor Sukarno'& anticolonial causes and Afro-Asian leadership actoitior-s. Theespite the loss of the Vest lev Oulnca Issuo, can look forvard to battening upon the chaotic econonlc situation. Effective US support for tho onti-Corxiunlst pregnane of the nllltary will bo haepcred by Sukarno's ground ruloo and by tho heavy dependence of the arced forcos on Sovlot area. On balance, therefore, there seens alight chance of narkedly increased US Influence In Indonesia in the Irradiate future.


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