CONSEQUENCES OF DUTCH POLICE ACTION IN INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A000300140001-9
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: November 9, 2016
• Document Release Date: July 20, 1998
• Sequence Number: 1
• Publication Date: January 4, 1949
• Content Type: IM

Approve or Release: CIA- DP78-0161 40001-9
CENTRAL INTELLIGENCE AGENCY
4 January 1949
INTELLIGENCE MEMORANDUM NO. 113
SUBJECT: Consequences of Dutch "police action" in Indonesia-
1.. The "police action" launched by the Dutch in Indonesia on
18 December has had far-reaching effects in terms of US security
interests. The sudden but calculated Dutch move: (1) has brought
the Far Eastern colonial problem sharply into focus; (2) has weak
erred the prestige of the United Nations; (3) may seriously jeopard;ze
the contribution of both the Netherlands and Indonesia to world polft-
tical stability and economic recovery; (4) may have precipitated the
emergence of a Pan-Asian bloc which may become strongly antagon-
istic toward the US; and (5) has provided the USSR with a powerful
propaganda weapon
2. Effect on the Colonial Problem..
World War II spurred the development of a fundamental US
security problem in the Far Ea,bt: that of striking an effective bale,
ance between support for local nationalist aspirations while at the
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 the
effectiveness of the Netherlands as a Western European power. A
chaotic situation in Indonesia may enable the USSR to extend more
vigorously its expanding influence beyond China to Southeast' Asia:
The rich resources of Indonesia and the goodwill of its more than
70 million peoples are at stake. The development of conditions
favorable to the USSR in Indonesia appears now to require, as a
counter,-measures a consistent application of positive and ympath(tfC
US influence..
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3. Effect on the United Nations.
Persistent Dutch disregard of SC directives will drastically
reduce the prestige and influence of the United Nations because it
will demonstrate again that UN resolutions, however mild, stand
little chance of obtaining compliance unless backed by effective
sanctions. Defiance displayed by such a state as the Netherlands,
which enjoys long-established traditions of Western democracy and.
enlightenmient, will have a peculiarly destructive effect on the basic
concept of international law and order. Over a long term it will fur-
nish means to the Soviet bloc with which to parry the charge that the
USSR and its satellites alone are responsible for the disappointing
record of the UN. More Immediately, the Dutch example is giving
further encouragement to such belligerents as Israel to take uni-
lateral action in disregard of the Security Council.
4. Effect on Political Stability and Economic Recovery.
In Indonesia the Dutch action has aimed at a complete iiquida-.
tion of the Republic as a political entity. It is believed, however,
that the Republic has built up enough military strength and political
support throughout Indonesia to carry out guerrilla operations for
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 suc-
cessful in winning the support of a sufficient number of nationalist
leaders to undermine the resistance movement. Under present con-.
ditions It is expected that widespread sabotage and terrorist activ -
tives under Republican leadership 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 the Dutch Governrn~ent,
However, as military operations drag on, dissatisfaction. with the K govern-
ment's policy and dissension between left and right-wing groups will
probably grow. In the long run, therefore, the Indonesian situation can
be expected to increase the difficulty of maintaining a stable government
in the Netherlands.
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The Dutch action will have important economic consequences
for the US and the rest of Western Europe as well as for the Net cu -
lands. Indonesia is an important source of such raw materials as
tin, bauxite, rubber, petroleum, and vegetable oils. Many of these
commodities play a major role in the US peacetime economy, in its
strategic materials stockpiling program, and in its implementation
of the European Recovery Program.
In the case of tin and bauxite, the police action may not result
in an immediate decrease in production because these materials a.:}?e
located in areas under firm Dutch control. A lack of internal stability
over a period of years, however, will inevitably reduce the production
of these important commodities,
The rubber production in Indonesia will be seriously affected
because much of the rubber is located in sections which will be sue-
ject to concentrated sabotage activities. Although the Dutch have
captured the important Republican petroleum installations, a serious
decline in petroleum output as a result of strikes and sabotage can-
not be discounted over the long run.
The fact that Malaya, the only other major source of tin and
rubber, may be the scene of continued internal disturbances, increases
the seriousness of events in Indonesia.
At a time when such commodities, readily available from Inndo--
nesia, are generally in short supply throughout the world, the Dutch
action will have unfavorable economic implications for the Western
world as a whole.
Upheaval in Indonesia will increase the strain on Dutch finaYnes
and add to Holland's difficulties in evolving a viable economy. Dutch
earnings from investments in Indonesia were an important item in
Holland's balance of payments, especially as a dollar-earning source
which offset the unfavorable balance with dollar areas. The Nether-
lands' economic planning is based on the assumption that:. Indonesia
will eventually resume its role as a major source of dollar credits.
This is particularly important because of Holland's present heavy
imports from the US and the liquidation of a large part of Dutch
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assets in the US,, Under the best of circumstances, it was estimated
that Indonesia would not produce a favorable balance of payments
before 1950. Further delay in realizing returns on Dutch investments
as well as probable loss of some of ` these assets will prolong the post-
war economic dislocation in Holland. This will delay the implementation
of the Benelux Customs Union and reduce the contribution of the Nather-
lands to the European Recovery Program.
The probable necessity of maintaining a large army In Indonesia
indefinitely will further strain Holland's finances. At present, 19% of
the budget is devoted to military expenditures, of which a major part
goes to support armed forces in Indonesia. Effective use of Dutch
troops in any Western European defense system, moreover, may be
postponed indefinitely as a result of this deployment.
5. Effect on Emerging Pan-Asian Bloc.
Dutch aggrepsion in Indonesia has given Asiatic nations a rallying
point for effective expressions 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 be unfavorable to the US. India, Pakistan, Ceylon, and Burma im-
posed immediate sanctions against the Dutch by denying air landing and
shipping privileges. Burma's suggestion to India that an all-Asian con-
ference be convened to consider the extension of assistance to the Indo-
nesian Republic is being acted upon. Other measures, including material
assistance to the Republic and breaking off diplomatic relations with the
Netherlands, have been proposed. India, aspiring for leadership in Asia.
and realizing that the UN is not yet an exponent of its own principles,
has seized this opportunity to test the strength of an Independent.: and
potentially powerful bloc. Development of any such bloc will 'stimulate
concerted political action outside the UN. It will also tend to weaken
further the remaining bonds between the British Commonwealth and its
Asiatic Dominions (India, Ceylon, Pakistan)and Malay4 While not yet
the foremost target of this bloc, the US is continuing to be Identified in
Far Eastern minds as a willing assistant in the Dutch action. If this
situation continues, the Pan-Asian group will become an effective Soviet
instrument, even though it does not align itself with.the USSR.
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C. Effect on Soviet Propagaaznda.
The situation in lndonesi& . enables the Soviets to espouse
vigorously all nationalist asphratirns, and gives them an oppor-
tunity to identify the United States as a partner 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 an ideal opportunity to dis-
credit the US further in the Far East
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