MINI-PRC MEETING ON INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00551R000100200003-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 27
• Document Creation Date: December 21, 2016
• Document Release Date: July 28, 2008
• Sequence Number: 3
• Publication Date: August 28, 1980
• Content Type: MEMO

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DEPARTMENT OF STATE
w~snngton, C.C. 20520
CONFIDENTIAL
With SECRET Fitt achrnent
MEMORANDUM FOR DR. ZEICNIEW BRZEZINSKI
THE WHITE HOUSE
SUBJECT: Mini-PRC Meeting on Indonesia
Attached is a proposed agenda for the mini-PRC
meeting on Indonesia scheduled for August 28,.1980.
Peter Tarnoff
Executive Secretary
As stated.
State Dept. review completed
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Review of U.S. Policy Towards Indonesia
I. The purpose of this review is to assess the risk of a
deterioration in US-Indonesian relations, suggest policies
that will prevent a short run crisis, and consider U.S. long
term interests in Indonesia and appropriate strategies.
II. Problems in US-Indonesian Relations
At a time when President Suharto is under rising domestic
political pressures (Appendix A), and Indonesia faces an
expanding Soviet/Vietnamese presence, a series of U.S. actions
and lapses have created an impression of U.S. neglect, ill-
will towards Suharto's continuance in power, and ungrateful-
ness for Indonesian support on a broad range of important
issues. -Specifically:
1. Insufficient personal contacts between senior U.S.
and Indonesian leaders, especially failure to invite Presi-
dent Suharto for a state visit during the past four years.
Suharto had personal relationships with Presidents Ford and
? Nixon.
2. Failure to deliver on commitments to increase our
economic assistance, and instead a U.S. decision to reduce
PL-480 Title'I by 50 percent in FY 81, and consider a large
reduction in development assistance in FY 82. A US-Japanese
agreement restricting global Japanese concessional rice
sales seriously aggravated Indonesian disgruntlement.
3. Declining U.S. security assistance over the past
four years.
4. Rapid warming of US-PRC relations, creating
Indonesian suspicions of our intentions.
5. Congressional, press and public criticism of
Indonesia's human rights and East Timor policies.
6. Termination of U.S. courtesy notifications of our
warship transits through Indonesian straits in accordance
with a 1979 NSC decision on our global navigation policies.
7. U.S. positions on Israeli policies.
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III. Indonesian Reactions
Angered especially over the ship transit decision,
the GOI has:
-- Delivered a stiff protest note, and threatened to
reassess Indonesia's favorable policies toward the U.S.
-- Advised us informally of a high level decision to
adopt a more distant relationship. (Appendix B)
-- Reportedly decided to reduce our defense liaison
group and shift some military purchases to other countries.
These steps are but initial signals, but they could
lead to serious consequences for.U.S. interests. Moreover,
Indonesia will be under serious economic and social pres-
sures in the 1980's which could generate an Islamic or
leftist backlash if Indonesia's present Western style moder-
nization effort fails.- .(Appendix C)
IV. Indonesia's Importance `to U.S. interests
A July 1977 NSC memo to the Secretary of State cited
Indonesia as one of three key emerging countries, along
with India and Nigeria. Indonesia is important as:
?
-- The world's fifth most populous nation (140 million
people), located astride strategic sea lanes.
-- A moderate, Islamic country which generally follows
policies favorable to U.S. interests. With the world's
largest Muslim population, Indonesia is Western-oriented
and moderate in the non-aligned movement, the Islamic Con-
ference, OPEC and the UN." President Suharto has publicly
appealed for release of the U.S. hostages, supported the
Olympic boycott, and condemned the Soviet invasion of Afghani-
stan.
-- Provider of six percent of U.S. and 13 percent of
Japanese-oil imports.
A key member of ASEAN.
-- A potentially important interlocutor with Vietnam.
-- A major trading partner ($5 billion in two-way
trade) and site of large U.S. investments in oil and mining.
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V. Discussion of Specific Issues
We need to consider short run measures to restore our
relations with a basically friendly and pro-Western govern-
ment. In the longer run we have to establish policies that
will minimize the chances of an ant,i-western backlash.
0
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1. Increased consultatioriand matters of style.
Failure to maintain high level personal contacts is at the
root of Indonesian grievances.
. 2. 'U.S.'Warship Transit Notification. Cessation of
these courtesy notifications has struck strong Indonesian
nationalistic sensitivities. The GOI has refused our offer
to provide briefings on U.S. and Soviet military activities
in the region, including our naval deployments, in lieu of
courtesy notifications.
3. U.S. Assistance.' Despite its present strong
balance of payments and foreign exchange reserves', Indonesia
remains a poor country with serious development problems.
It has the lowest per capita oil exports of any OPEC nation
($82 per year) and will become a net oil importer by the
late 1990's. The balance of payments will begin to deteri-
orate again in 1982 and Indonesia's foreign assistance
needs will rise. Planned reductions in U.S. assistance
lower our share'of foreign assistance to about 8% (Appendices
D and E).-
4. ' Security''Assistance. While Indonesia attempts to
rebuild its antiquated-military. establishment in the face
of growingSoviet/Vietnamese :pressure, the U.S. has reduced
its security assistance'over the past three years. More-
over, long delays "in filling Indonesian equipment orders
have occurred.
5. " East Timor and Human Rights. Congressional, press
and public criticism of these issues is a continuing source
of friction. However, there has been significant progress
in'Indonesia.'s human rights record in recent years.
Long 'Term 'Issues
.. .... .... .... ... .... .
1. Indonesia's long run 'political, 'stability and the
success 'of its 'western 'style. 'modernization efforts. With
two percent annual population growth, high population
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densities, a growing food deficit, and explosive land tenure
and Chinese minority problems, Indonesia will face strong
social and economic pressures in the 1980's. We need to
consider means to help Indonesia weather these pressures
and maintain its moderate, pro-Western orientation.
VI. Recommendations
Short Term Issues
1. Increased Consultation and Matters of -Style.
-We need more high level and working level exchanges,
an invitation to President Suharto for a state visit in
early-1981,-and periodic consultations at the sub-Cabinet
level.
2. Ship Transit Notification..
There are three-options:
? a. Maintain-our present policy and ride out
Indonesian discontent.. We would try to improve the con-
tent of the briefings to better meet Indonesian concerns.
?
b. Search for additional concessions (not involv-
ing notification) in the context of the LOS negotiations
which would be beneficial to Indonesian interests.
c. Reverse. our policy and provide courtesy noti-
fications at risk to our--global navigation interests.
In view of the complexity of this issue, the Department
of State, with clearance" 'of other agencies, should prepare a
fuller exposition of these options, and if necessary, submit
a recommendation to the NSC.
3. 'inC eased Economic Ass'istance.
-- Consider the restoration of all or part of the
$50 million reduction in PL-480 Title I in FY 81. A comple-
mentary or.alternative.'approach would be to promise to
provide 'at least $50'million in Title I in FY 82.
- Consider the feasibility of maintaining development
assistance''at $100 million in real terms for FY 82 and FY 84.
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-- Broaden economic relations through increased
cooperation in science and technology, energy, private
investment, etc. A working group should develop this pro-
posal.
4. Increased Security Assistance
-- FMS should be increased to
$45
million and possibly
$60 million in FY 82 and maintained
at
a similar real level
throu
gh FY 84. IMET should be held
at
$2 million.
-- Work to assure prompt delivery of military items,
especially naval equipment, including patrol vessels.
5. East Timor and Human Rights
-- Maintain our present policy of encouraging Indonesia
to continue-improving-its human rights and East Timor
policies.
Long 'Term Recommendations
? Although internal pressures on the Suharto Government
are not a serious threat at present, Indonesia could face
political instability and/or the rise of an anti-Western
government during 1980s. The beginning of a backlash against
Western influence and modernization is already evident. U.S.
policy should not be tied to Suharto's continuation in power
or to a similar successor regime, but rather should rest
upon the success of the process of-modernization.
1. Pursue a basic U.S. strategy of helping to ensure
that Indonesia's western style modernization effort succeeds.
2. Encourage Indonesia to maintain its current strong
and cooperative role in ASEAN.
3. Increase our discussions and consultations on geo-
strategic issues so that Indonesians leaders will understand
our intentions regarding the PRC, ASEAN and the USSR.
4. Develop a more sophisticated appreciation of the
importance of Southeast Asia.and Indonesia. Keep our human
rights concerns in-'perspective.
5. An interagency working group should monitor imple-
mentation of PRC decisions and coordinate USG positions for
bilateral consultations.
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List of Appendices
A. Indonesia's Domestic Political Situation
B. Jakarta 13259 - General Murdani's Comments on
US-Indonesian Relationship
C. Possible Scenarios for Indonesia's Future
D. Ranking of OPEC Per Capita Oil Income - 1979
E. Economic Assistance by Members of Inter-Governmental
Group on Indonesia
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1. PURPOSE
The main purpose of this-review is to assess the-
risk of deterioration in US-Indonesian relations and to
suggest policies that will preventa crisis from arising
in the short run. A second purpose is to examine our long
term interests in Indonesia and to suggest ways of develop-
ing a more solid and sustained relationship over the longer
term.
II. PROBLEMS IN US-INDONESIAN RELATIONS
The problems occur in the context of rising domestic
political pressures on President Suharto as.he prepares for
his reelection effort in 1982/83 and the increasing external
threat of Soviet/Vietnamese expansion into the region. A
series of unrelated U.S. actions have given Suharto and
other Indonesian leaders an impression that the U.S. is
neglectful of Indonesia, possibly ill-willed towards Suharto's
continuance in power, and ungrateful for Indonesian support
. and cooperation on a range of issues important to us. This
situation has arisen from a number of U.S. actions or lapses:
1. Insufficient personal contacts between senior
Indonesian and American leaders, including failure to
invite President Suharto for a state visit during the past
four years. Suharto believes he had a personal relationship
with previous U.S. presidents, and his resentment over this
perceived slight (plainly visible to his political constit-
uency)'has reinforced his reaction to other U.S. actions;
2. The gap between U.S. rhetoric and actions, includ-
ing failure, in Indonesian eyes, to live up. to commitments
made during the Vice President's visit to Jakarta in May,
1978 to significantly increase our support for Indonesia's
agricultural development. The planned 50 percent reduction
in PL 480 Title I in FY 81 is perceived as inconsistent with
this pledge. (Substantial reductions in development assis-
tance and termination of PL 480 Title I are being recommended
by IDCA for FY 82.) A U.S. agreement restricting global
Japanese concessional rice sales aggravated GOI resentment;'
3. Declining U.S. security assistance and delays in
filling Indonesian military supply requests, regarded as
inconsistent with assurances of U.S. support for ASEAN in
its confrontation with Vietnam and an increasing Soviet
military presence in Southeast Asia;
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4. The rapid warming of US-PRC relations. Indonesia
remains suspicious of PRC intentions and fears the U.S. will
sacrifice Indonesian and ASEAN interests for the sake of its
relations with China;
5. The continuing criticism of Indonesian policy on
East Timor in the-U.S. Congress, press and public;
6. Termination of U.S. courtesy notification of
warship transits through Indonesian straits, in accordance
with a March, 1979 NSC decision on our'global navigation
policies. This decision strikes at fundamental national
sensitivities which could create serious domestic political
problems for Suharto from ultra-nationalists, muslims and
student groups.
7. U.S. positions on Israeli policies. Indonesia has
been under increasing pressure from Middle Eastern Islamic
countries to harden its position on Middle East issues and
perceives U.S. policies as undercutting its arguments for
moderation.
-- Informal notice of a high level GOI decision to
add distance to our bilateral relationship.
The cessation of warship transit notifications in
March, 1980, has, in a sense, been the last straw for an
already resentful GOI, producing a strong negative reaction:
-- A stiff protest note was delivered and informal
threats were conveyed that the GOI would reassess its pro-
U.S. policies if ship transit notifications were not re-
sumed;
-- A decision has reportedly been reached to reduce
our Defense Liaison'Group in Jakarta, move DLG members out
of Indonesian military headquarters, and shift some military
purchases to other nations. President Suharto allegedly
wanted to terminate our DLG completely,-but was persuaded
not to by Defense Minister Jusuf.
These steps may be but initial signals of Suharto's
displeasure over U.S. neglect of Indonesia. Continuation of
this deteriorating trend could lead to serious costs and
problems for the U.S. Moreover, Indonesia is expected to
encounter serious economic and social problems in the 1980's
? which will threaten its political stability. If Indonesia's
effort of Western-style modernization fails, there is a good
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possibility of-a backlash against the West that could bring,
to power a leftist or Islamic revolutionary elite which
would most certainly be more hostile to the West. than the
present military regime. Thus we need to carefully consider
the importance of Indonesia to U.S. and Western interests. -
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IV. IMPORTANCE OF INDONESIA TO U.S. INTERESTS - -
A July, 1977, NSC memo to the Secretary of State cites
Indonesia as one of three key emerging countries. Its
importance to the U.S. includes:
1. Population and Geographic Location
With the world's fifth largest population, 140 million
people, Indonesia occupies a key geographic position astride
the major sea lanes linking the Pacific and Indian Oceans.
U.S. warships and submarines move with increasing frequency
through straits which Indonesia partially or wholly controls.
It is important that these waterways remain in friendly
hands. 85% of Japan's oil passes through these straits.
2._ Moderate Muslim Member of the Third World Favorable
to U.S. Interests
The Muslim nations from Morocco to Bangladesh are in
varying stages of convulsion and xenophobia, and the Third
World is becoming increasingly radical. Indonesia, with
the world's largest muslim population, plays a moderate,
Western oriented role in the Non-Aligned Movement, the
Islamic Conference, OPEC, and the UN. It has signed the
Non-Proliferation Treaty, and plays a constructive role in
Common Fund and LOS negotiations. President Suharto has
personally appealed for release of the U.S. hostages in
Iran, joined the Moscow Olympics boycott, and condemned the
Soviet invasion of Afghanistan. In the Islamic Conference,
the GOI has tried to keep the focus on Soviet actions in
Afghanistan and Indochina rather than on more radical
Islamic concerns. A serious deterioration of the U.S.
position in Indonesia would.contribute to a major erosion of
our influence in the Third World.
3. Source 'of Petroleum,' LNG and: Strategic :Raw Materials
Indonesia provides 6% of U.S. crude oil imports,
13% of Japan's oil and large amounts of LNG to Japan.
Petroleum and natural gas production will exceed $20 billion
in 1980, 85% of it produced by U.S. companies. Indonesia is
the world's second largest rubber producer and will soon be`_'
the second largest tin producer.
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ASEAN. A change in Indonesia's moderate pro-Western policies,
or a move closer to more radical Muslim countries could
shift the balance of forces in Southeast Asia against the
West and weaken the U.S. position in the Middle East and
South Asia.
4. Role in ASEAN
Without a strong, friendly and regionally cooperative
Indonesia, there is little hope for a strong and friendly
5. Potential Interlocutor.with Vietnam
Indonesians believe they have a special rapport with
Vietnam because of their common revolutionary background
and because of their distrust of China. The GOI maintains
a valuable dialogue with the SRV which could help resolve
Kampuchean issues. We need to ensure that this dialogue
does not run counter to ASEAN or U.S. interests.
6. U.S. Investment and Trade
U.S. oil companies are investing about $1 billion
annually in exploration with total U.S. fixed investment
over $2 billion. U.S. imports from Indonesia in 1979 were
$3.2 billion and exports were $1 billion.
The United States has two types of problems in deal-
ing with Indonesia. The first has to do with restoring
our relations with a basically friendly and pro-Western
government that is increasingly displeased with U.S. neglect
and ill-conceived actions, and with what it regards as an
insufficiently high level of attention. Our aim here is
to prevent a major foreign policy debacle, in preference to
dealing with its unfortunate consequences after the fact.
Over the longer run, we have to establish policies now that
will minimize the chances of an-anti-Western backlash
inimical to long run U.S:'interests. We have divided the
discussion into five short run issues and .a long range
analysis.
Short Term Issues
1. Increased Consultation and Matters of Style
At the root of Indonesian grievances against the U.S.
is the strong'feeling that we have neglected them during the,
past four years.. President Suharto has not been invited to
the United States and few high ranking U.S. government
officials have visited Indonesia. This has created mis
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understandings and suspicions about U.S. actions affecting
Indonesia's leadership and raised the spectre that --there
is a "grand design" behind U.S.'actions. Simply put, GOI*
leaders often complain they don't understand why we do what
we do. Ii.
2. Indonesian demands that we notify them of our
warship transits versus our global navigation/law of the
sea interests
Since the early 1970's the U.S. has provided Indonesian
military authorities with 'a written, informal courtesy
notification of U.S. naval transits of certain Indonesian
straits. This is a volatile political issue which strikes
strong nationalistic sensitivities. As a result'of a NSC
review of U.S. global navigation policies, it was decided
to terminate our courtesy notifications in March, 1980, in
order to bring our practices into conformity with our world-
wide policy. Following a strong negative Indonesian
reaction, expressed uncharacteristically in a formal diplo-
matic protest, the U.S.-offered to provide the GOT with
intelligence briefings on U.S. and Soviet military activi-
ties in the region, including U.S. naval deployments.
However, the GOT has refused to accept this in lieu of the
previous courtesy notifications, and in the meantime it has
begun to adopt the retaliatory measures described earlier.
There is an urgent need to reach a mutually satisfactory
resolution of this issue. Three possible courses of action
are discussed under the "Recommendations" section below.
3. The level of U.S. economic assistance appropriate
to Indonesia's development? needs and U.S. interests
During a visit to Indonesia in 1978, Vice President
Mondale informed President'Suharto that the U.S. wished to
do more to help Indonesia's development, including a signi-
ficant increase in our aid to the agricultural sector
(following publication of-a. World Bank Report) and initi-
ation of a PL 480 Title III program. The Title III program
never materialized. Moreover, budgetary constraints and
the perception that Indonesia is an "oil rich" OPEC country
have generated strong pressures within the USG to reduce
our PL 480 Title I and development assistance programs to
Indonesia resulting in a decision to decrease our PL 480
Title program in FY 81 to $50 million, compared to over
$100 million in each of the previous four years. For FY 82
IDCA has proposed eliminating PL 480 Title I altogether and
reducing our development assistance program by 50%. (The
. FY 81 Congressional submission requests $100 million for
development assistance for Indonesia.) Our share of exter-
nal assistance to Indonesia will be about eight percent in
1980, compared to over 30%'in the.early 1970's.
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months worth of imports), in fact Indonesia remains one of
the poorest countries in the world, with a per capita GNP
of $385 (India's per capita GNP 1s?$140.). Thirty-five
percent of the population lives below the poverty line.
Only six percent have access to safe drinking water. Life
expectancy is 48 years. Java and Bali, with about 85 million
people, have one of the highest population densities in the
world. The country has a large and growing food deficit.
Over 1.5 million new job seekers enter the labor market
each year.
increases, to about $6 billion (equivalent to about six
Although Indonesia's foreign exchange reserves have
increased dramatically,. as a result of the 1979 oil price-
Indonesia is also'the poorest OPEC country, with the
lowest per capita oil exports, $82 per year, less than half
the next lowest country, Ecuador and one-fourth Nigeria's
Moreover, Indonesian oil production has stagnated while
domestic consumption is rising rapidly. A recent CIA report
estimates that Indonesia will become an oil importer by the
late 1990's.
Indonesia's present strong balance of payments may
? also be short-lived. According to the most recent World
Bank analysis, Indonesia will again incur a current account
deficit in 1982, climbing to $2 billion in 1985. The Bank
also estimates that to maintain economic growth, Indonesia
will need to increase foreign financing from about $1 billion
(net) in 1980 to $2 billion in 1982 and $3 billion in 1985.
Senior GOI officials, who believe they face difficult
development problems in the 1980's, have clearly signalled
their unhappiness with our decision to cut PL 480 Title I in
FY 81 and the failure to deliver on our previous commitments
of increased assistance. Our agreement with Japan restrict-
ing global Japanese concessional rice exports was perceived
as USG interference in Indonesian-Japanese bilateral affairs.
Under the agreement, Japan-will sell only 150,000 tons of
rice in 1980 to Indonesia, which had hoped for 500,000 tons.
The basic issue for the U.S. is whether our development
assistance support to Indonesia is adequate given the
importance of our interests and the potential for a radical/
nationalistic resurgence if the present Western-style
modernization fails.
4. ' Security Assistance Relationship
The growing Soviet military presence in Southeast Asia,,
Vietnam's invasion of Kampuchea and pressures on Thailand,
. improved Sino-American relations, and most recently the
Soviet intervention in Afghanistan are perceived as threaten-
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ing by Indonesia's ruling military leaders. Indonesia also
has a continental shelf dispute with Vietnam over an area- - -
which may contain large amounts of oil and natural-gas, and
which is adjacent to the world's largest natural gas field,
which ESSO plans to exploit for production of liquified
natural gas at a cost of $5 billion.
The GOI, consequently, has decided to rebuild its
military capability, which has deteriorated since the mid-
1960's. Less than 5% of GNP and less than 15% of the
national budget have been allocated to national defense in
recent years, in order to free resources for economic develop-
ment. Armed forces now number about 368,000 men, about
half the mid-1960's level. Obsolete weapons and equipment,
the remnants of the Soviet-supplied inventory of the 1960's
are worn out and must be replaced by expensive contemporary
systems if Indonesia is to have a reasonable capability of
defending its archipelago, which stretches over 750,000
square miles. In view of the Soviet naval presence, Indonesia
especially needs to develop a stronger naval capability.
U.S. support for Indonesia's military modernization, in
contrast, has been declining: (in millions $)
is
FY '78
FY 79
FY 80
FY 81
MAP
15
0
0
0
FMS
40
32
30
30
IMET
3.0
2.0
1.67
2.0(ABS)
Moreover, delays of up to three years in filling mili-
tary supply requests to the U.S. have occurred, causing the
GOI to shift orders to West European sources.
Indonesian disgruntlement with FMS levels, supply.
delays, and the warship transit issue have motivated steps
to adopt a more distant relationship as previously described.
The basic issue is whether our current military supply
relationship is appropriate to U.S. security interests in
Indonesia and Southeast Asia, and to our relationship with
the politically dominant Indonesian military, and if not,
what steps can be taken to restore the relationship before
serious adverse consequences occur.
5. - East Timor and Human Rights
There is a small, but vocal and active group of Con-
gressmen, media and human rights activists who are critical
of Indonesia's takeover of the former Portuguese colony of
? East Timor and of some other Indonesian human rights prac-
tices. U.S. policy since the Ford Administration has been
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to accept the incorporation of East Timor into Indonesia as
a fait accompli, but to urge and assist the GOI to improve
the welfare of the Timorese through internationally super--
vised humanitarian relief programs, and to begin broader
based development programs for East Timor.
The GOI has responded to international human right
concerns:
-- East Timor has been opened up to visits by diplo-
mats, journalists and parliamentarians; Catholic Relief
Service and ICRC programs have relieved the immediate danger
of widespread famine, and initial efforts to improve medical
care have been taken. The GOI has expeditiously approved of
a planned AID-funded malaria control program.
-- All of the detainees from the 1965 communist coup
attempt have been released, except for a small number which
are being tried in open courts with legal counsel.
-- The GOI permits and cooperates with ICRC visits to
prisons by ICRC inspection teams, except in East Timor.
-- Basic human needs, and the material well being of
the population including the lowest income groups, improved
significantly in the 1970's.
Notwithstanding these favorable developments, human
rights activists in the U.S. remain critical of U.S. policy
on East Timor, although criticism of other human rights
issues has diminished greatly because of release of the
detainees. We anticipate that as the 1982/83 election
campaign approaches, the Suharto government, which already
feels threatened by increased activism by. opposition groups,
including some senior retired military officers, may increase
it use of repressive measures against the opposition, restor-
ing international human rights; concerns.
?
Long.-Term Issues
With a two percent annual population growth, one of
the highest population densities in the world, a chronic and
growing food deficit, explosive land tenure and Chinese
minority problems and a military.based government with a
narrowing base of support, Indonesia will be under strong
social, political and economic pressures in the 1980's.
While this review is focussed on short term issues, we need
to bear in mind, as we adopt immediate recommendations, the
U.S. interest in helping Indonesia to weather these pressures
and maintain its moderate, pro-Western orientation. We need
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to broaden and strengthen our relationship and especially
assure coherence and consistency in U.S. policies toward and
affecting Indonesia. Of particular concern is how we remain
responsive to Indonesia's increasing pressures -- economic
strains predominating -- in a period of budgetary constraints
in the U.S.
VI. RECOMMENDATIONS
Short term
1. Increased Consultation and Matters of Style
-- There should be more high level exchanges of visits
to dispel the Indonesian impression that we do not take them
seriously. President Suharto should'be invited to visit
Washington for a state visit in the first half of 1981; if
we wait until 1982, a visit could be seen as U.S. inter-
ference in the Indonesian elections.
-- It would be desirable for the Under Secretary of
State for Political Affairs to visit Indonesia soon after
the U.S. elections.
-- We should begin to plan visits to the U.S. for .
Defense Minister Jusuf and some of the prospecitve leaders
of the post '45 generation of Indonesian military leaders.
The forthcoming trips by DOD officials Dineen and
Komer should be exploited as a signal to the Indonesians
that we seek a more systematic process of consultation about
Indonesia's security needs.
-- We should revive periodic meetings of the US-
Indonesian Consultative Committee at the sub-Cabinet level.
-- U.S. and the GOI..should have working level visits of
experts in Washington and Jakarta to'exchange views on
strategic, political and economic issues affecting the
region.
-- U.S. officials should seek'occasions to mention the
importance they attach to Indonesia's friendship. USG
policy statements should emphasize Indonesia's importance to
the U.S., to ASEAN, and to Asia. Our fundamental message
should be that we appreciate Indonesia's strategic impor-
tance and that we are sensitive to its development problems.-
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-- We need to broaden contacts with the opposition,
with the younger military leaders, with religious groups and
personages, and with other segments of Indonesian society
in order to be alert to indications of political or social
upheavel.
-- We need to examine programs for cultural communi-
cations, including academic exchanges, other cultural
exchanges, ICA programs, and VOA broadcasts with a view to
considering realignment of existing resources, as well as
need for increased resources.
IMET plays an important role in professional contacts.
Whatever Indonesia's course of.development over the next
decade, the chances are great that it will be led by the
post '45 generation of"Army officers. IMET helps establish
interaction with the middle levels of the Indonesian mili-
tary. It should be increased and then maintained at a level
which gives us a sustained relationship with this key
element of the Indonesian elite.
2. Straits Transit Notification Issue
? We have three possible courses of action:
Option 1: We could pursue our current course of
offering to provide briefings in lieu
of the previous ship transit notifications. We'would try to
improve the content of the briefings to better meet Indone-
sian concerns. If this failed, we would ride out Indonesian
discontent and hope that our relationship would not suffer
serious harm.
Option 2: We could continue to provide the briefings
but also inform the GOI'of our willingness to consider
further steps (not involving prior notification) within the
context of Law of the Sea negotiations which would be
beneficial to Indonesian interests. Such steps could
include discussing implementation of certain aspects of the
agreed Law of the Sea text in advance of U.S. ratification
of the full treaty.
Option 3: We could reverse our decision, inform the-
GOI that we are making an exception to our policy in con-
sideration of the special relationship between our two
countries, and resume official notifications as in the past
until the new LOS treaty is signed and ratified by us. This_
? would pose some potential risk to our global navigation
interests.
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In view of the complexity of this issue we recommend,
that a fuller exposition of the above options be made by
the Department of State, with clearance by other concerned
agencies, and, if necessary, that a recommendation be
submitted to the NSC.
3. Increased Economic Assistance
Our rhetoric must be matched by allocation of sufficient
resources. Specific recommendations:
-- Consider restoration of all or part of the $50
million reduction in FY 81 PL 480 Title I as a gesture of
the importance we attach to Indonesia. A complementary or
alternative proposal would be to promise to provide at least
$50 million in Title I in FY 82.
-- Consider the feasibility of maintaining development
assistance at $100 million in real terms in FY 82 through
FY 84.
-- Broaden economic relations through increased
cooperation in science and technology, energy, nuclear
cooperation, U.S. private direct investment, etc. An inter-
agency subcommittee to develop these proposals should be
established.
4. Increased Levels of Security Assistance
We should allocate resources on a scale commensurate
with Indonesia's strategic importance and make sure our
programs are implemented to maximum advantage. Specific
recommendations:
Provide an FMS level of at least $45 million and
possibly $60 million in FY 82 and similar levels in real
terms through FY 84.
-- Provide an IMET level of $2 million in FY 82 and
a similar level through FY 84.
-- Assure prompt deliveries of weapons systems and
military items purchased either via FMS or for cash. A
special task force should be established to achieve this.
-- Extend the terms of FMS loans from 8 to 12 years.
? -- Explore urgently providing Indonesian Navy two
(and preferably four) coastal patrol vessels.
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5. East Timor and Human Rights
-- We should continue encouraging the GOI to improve
the situation of the people of East Timor and continue our
financial and commodity support for relief, medical care and
economic development of the province.
-- We should continue our policy of accepting East
Timor's incorporation into Indonesia; simultaneously, we
should continue to oppose efforts by Indonesia's opponents
to obtain a UN resolution hostile to Indonesia over East
Timor.
-- We should encourage the GOI to continue.the favor-
able trend in its human rights policies in general.
-- In explaining our policies, we need to allay GOI
suspicions that we have deliberately distanced ourselves
because of human rights issues; in doing so we should
acknowledge progress achieved and point out international
political benefits of positive movement.
-- Above all, our encouragement of human rights
? progress should be conveyed in the context of our overall
support for and interest in Indonesia, and in the light of
overall U.S. interests.
Long Term Recommendations
Indonesia faces the potential advent of a period of
prolonged instability with unpredictable consequences in the
mid to late 1980's,including the possible rise of an anti-
Western Government. President Suharto's "New Order", now 15
years old, is already the object of increasing internal
pressures, although they are being contained'adequately for
the moment. Our efforts to maintain good relations with the
Suharto Government and to assist Indonesia with its economic
development should not obscure the possible emergence of
persons and movements along the lines of one of the scenarios
described in Appendix C.
Although the Indonesian military now plays an essential
role in the management of Indonesia's modernization, American
policy should not be seen as tied to Suharto's continuation
in power, or to a successor military regime of the same
style. We may have to deal with far more radical,.anti-
? Western governments representing a more nationalistic,
assertive Indonesia. Suharto has provided stability and a
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favorable environment for development, and he may continue
to do so for several years more. But U.S. policy rests in
the long run not upon a given regime but upon the success
of a process, the process of modernization.
Opposition Muslim, student and some retired military
groups are already charging that Suharto and his government
are allowing Indonesians to be "exploited" by multinational
corporations, that foreign financial institutions are
dictating Indonesia's "capitalist" development strategy,
that this strategy is not meeting the problems of the poor
but rather creating a new, affluent and corrupt elite, and
that its foreign policy is serving the interests of the
Western "imperialists".
A Basic U.S. Strategy
History and sociological makeup make Indonesia particu-
larly vulnerable to a xenophobic backlash to Western style
modernization. Our basic strategy for pre-empting this
should be to make every effort to ensure that a stable and
broadly distributed Indonesian development program succeeds.
? This will require the investment of much greater levels of
resources by external donors and private investors. We
don't need to do it all ourselves but our particular contri-
bution to rural development, where many of Indonesia's most
critical problems lie, needs to be focused and adequately
financed. A greater effort to help Indonesia acquire appro-
priate levels of Western technology will also be a central
factor in modernization.
?
Indonesian Participation in ASEAN
Indonesia has become a strong and cooperative participant
with its ASEAN partners.` We should encourage this favorable
process. The more Indonesian foreign policies are developed
in concert with ASEAN, the less likely will be a nationalist-
xenophobic drift in those policies.
Geo-Strategic Coordination
Because of its history, geographic location, the 1965
communist coup attempt, and a Chinese minority, Indonesia
fears China more than Russia as a long term adversary. We
must'endeavor to give the Indonesian elite a better under-
standing of the role of China in our own long range strategy.
The Indonesians and other Southeast'Asians should not be -
allowed to conclude that we have relegated Southeast Asia to
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the backburner in the interest of pursuing Great Power
politics or that we have assigned Southeast Asia to a
Chinese sphere of influence. We must also enter into closer
consultation with them on how we intend to pursue our common
effort to prevent an expanding Soviet military presence in_
the region.
An Improved Appreciation of Indonesia's Importance
Finally and perhaps most crucially, there must be a
more sophisticated appreciation of the strategic importance
of Southeast Asia in general and Indonesia in particular.
While we must remain sensitive to Indonesia's abuses of
human rights, and encourage a more liberal political system,
we must also recognize that whatever government holds power,
it is in the U.S. national interest that the Indonesian
drive towards a Western-oriented modernization succeeds.
Inter-Agency Working Group
Progress in implementing these long run recommendations
should be monitored by an interagency working group, which
would also prepare and coordinate positions for the periodic
bilateral consultations.
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Appendix A
Indonesia's Domestic Political Situation
Suharto Under Fire
Since the beginning of the year, President Suharto, now
in his forteenth year in power, has been confronted with -
increasing opposition. His opponents -- retired military,
dissident students, orthodox muslims, human rights activists,
and the remnants of Sukarnoist/nationalist political parties are already preparing for the 1982 Parliamentary elections,
which will be followed by an indirect Presidential election
in 1983. They have been criticizing Suharto for becoming
increasingly isolated from the people; for personal, family
and governmental corruption; for economic mismanagement; and
for subjecting the nation to exploitation by foreign aid,
trade and investment interests. Although the opposition
appears too weak and divided to threaten his control, Suharto's
sharp reaction to opposition criticism indicates that he is
running scared. He has not stated that he intends to run
for reelection in 1983, but it is widely assumed that he
intends to do so. -
Suharto's Opponents
Suharto's opponents are a disparate amalgam of groups
which apparently can agree only that Suharto should be
removed, but on little else. Leftist politicians are
severely factionalized. Students and human rights activists
are vocal but have little. following.
?
Orthodox Muslims, with 20 percent of the population,
are potentially the largest opposition group and could pose
the greatest threat to the regime. However, they have
difficulty overcoming the doctrinal and personal differences
that prevent their forming a cohesive front. As a result,
Muslim organizations are easily.infiltrated and their leader-
ship easily coopted by the government. However, the govern-
ment is aware of the potential the Muslims possess. Fearing
that several large Muslim prayer meetings in Jakarta on
August 12 could become important anti-regime events, the
regime used troops to disperse the audience.
Next to the Muslims, the regime appears most concerned
about the activities of several well-known, respected,
retired military officers. These officers may still have
influence within the military and might attract the sympathy.
of active duty personnel.
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The Military
The'key to any possible opposition success against
Suharto is the military. So far, it has continued to
support the President. Powerful Minister of Defense Mohammed
Jusuf, who owes his position to Suharto, is loyal. The
security and intelligence chiefs are all close to the Presi-
dent and favor a hard line toward his opponents. There is a
report that some officers connected with recently retired
Army Chief of Staff Widodo are worried that Suharto's con-
tinuing as President would "impede Indonesia's national
development". But they are few, and no one appears to want
a "palace coup". Besides, it is doubtful that the mutually
antagonistic cliques could agree on a replacement for the
President.
Suharto is sensitive to attempts to detach him from his
military support. He has been especially intolerant of his
retired military critics, a number of the most prominent of
whom signed a "petition of 50" with muslim, student and
party opponents, strongly critical of Suharto. They have
been subjected to financial pressure,-have had to endure
numerous minor indignities, have had their travel restricted,
and have been subjected to security investigations.
Before his August 17 National Day speech, which was
relatively mild on domestic political issues, Suharto appeared
to be moving toward a harder line vis-a-vis his opponents.
(It is too early to judge if the speech indicated a change
of heart.) Local newspapers were ordered not to publicize
opposition activities and, after September 1, foreign news
agencies would not be-allowed to distribute stories about
Indonesia within the country. Finally, the government
resorted to arrests during the August 12 clashes with Muslims
indignant about the muzzling of'their preachers, who
intended to give anti-government sermons.
Prospects
Suharto is at present in no danger of falling from
power. The opposition is unorganized and has only limited
popular support. There does not appear to be any single
issue or personage behind which Suharto's opponents can
coalesce. This division allows the President to play off
his opponents against one another, and to force them to
react to his moves. Unless the military withdraws its
? support from him, which appears improbable right now,
Suharto should make it through his reelection in 1983.
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Domestic Politics and Foreign Policy
Suharto's concern about domestic political opposition has
heightened his sensitivity to foreign policy issues which
could threaten his position:
-- To assure adequate supplies of rice during the
election period, Suharto decreed in 1979 that a two million
ton rice stockpile should be accumulated. The U.S. decisions
to reduce PL 480 Title I in FY 81 and U.S. interference in
Indonesian access to large amounts of Japanese concessional
rice supplies were received as directly inimical to his
domestic political interests.
-- Senior Indonesian officials have repeatedly com-
plained that the U.S. decision to cease warship transit
notifications could be exploited by the radical Muslim press
to attack Suharto for failing to uphold national sovereignty.
Acceptance of the U.S. actions would also increase his
vulnerability with his most important political constituency,
the military.
-- British imposition of quota's on Indonesian textile
exports, one of Indonesia's most rapidly increasing labor
? intensive industries, was promptly responded to by postpon-
ing Indonesian orders for British Hawk aircraft.
In short, Suharto's problems with the opposition have
strengthened his reaction to foreign actions which could
undermine his reelection possibilities in 1982/83.
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