PROBABLE REPERCUSSIONS OF US AID CUTS TO INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00904A001000050036-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 19, 2016
• Document Release Date: October 26, 2005
• Sequence Number: 36
• Publication Date: January 7, 1964
• Content Type: MF

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CENTRAL INTELLIGENCE AGENCY
OFFICE OF NATIONAL ESTIt4ATES
7 January 1964
SUBJECT: Probable Repercussions of US Aid Cuts to Indonesia
A partial cutting of aid to Indonesia would provide a
serious jolt to UPI-Indonesian relations and invite various
anti-US actions, including protest riots nd demonstrations,
but would probably not lead Sukarno to expropriate US property
or break diplomatic relations. It would reduce such influence
as the US now has with Indonesia, but this influence has long
been very limited anyway. It would probably not moderate
Sukarno's active hostility to Malaysia. It would enhance
Soviet and Coumnunist Chinese opportunities in Indonesia,
though Sino-Soviet competition would work to limit the power
of either party. The UK and Malaysia would be encouraged by
the move.
There would be at least an even chance that a much tougher
US course, such as completely cutting aid, would provoke Sukarno
to permit mob violence against US nationals, expropriate US
property, and break diplomatic relations.'' Sukarno would probably
accord the P-KI a larger role in national affairs, in particular
by bringing Communists into the Cabinet. Indonesia's already
shaky economy would be further disabled, but this would probably
not threaten Sukarno's continuing dominance of Indonesia. We
doubt that even this tough US course would alter Sukarno's plans
with respect to Malaysia.
GROUP 1
Excluded from automatic
S-E-C-R-E-T downgrading and
declassification
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ESTIMATE
1. Any substantial cut in US aid to Indonesia would involve
severe jolts to US-Indonesian relations. Termination of aid on a
gradual, selective, and quiet basis, would come as less of a blow,.
and give rise to less extreme and lasting reactions, than could be
expected if the move were sudden, public, and complete, or if it
were based on the "aggressor" clause. However, we do not want to
underestimate the extent to which the volatile Sukarno's intense
self-esteem and national pride would be challenged by any signifi-
cant move in this direction.
2. Sukarno completely dominates Indonesian foreign policy,
and the manner and extent of Indonesian reactions would be largely
a matter of his personal decisions. Sukarno has repeatedly shown
that he lives by an international double standard, according to
which the great powers, especially those of the West, are expected
to suffer him in ;patience while he himself feels no such restraints.
His defensive pride in the face of a rebuff by the most powerful
Western nation would call,, almost inevitably,, for some retaliatory
gestures.
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A. Consequences of the Gradual and Selective Approach
3. We think it probable that Indonesia would stop short of
breaking relations, though we car-not rule out such a move as part
of Sukarno's first emotional response. Our judgment that he would
avoid such action is based primarily on the fact that Sukarno, for
all his long record of intemperate outbursts, is not in fact quite
as reckless as he often sounds, and would probably be anxious not
to jeopardize remaining US economic assistance.
4. We believe, however, that some hostile acts would be
taken against US interests and personnel in Indonesia. Communists
and other leftists would probably mount protest rallies and demon-
strations, in major Indonesian cities, outbursts which would be
encouraged by the government in the manner of the anti-British
riots of last September. These could become dangerous to life
and property, even though we think the Indonesian authorities
would want to limit them.
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6. Privately-owned US interests,~notably those of the oil
and rubber compEntes, would almost eertzinly come in for increased
restrictions and encroachments, but we think the odds would be
against expropriation, at least under presently foreseeable circum-
stances. Sukarno has too much need forthe dollar earnings accruing
from these operations and probably realizes the difficulties involved
in marketing the output. In addition, he has no wish to frighten
off other, badly-needed foreign capital. In time, of courses
Indonesian restrictions on, or harassments of, these concessions
might grow to the point where th:3 comps*ies lost interest in
pursuing operations, but this would probably not be a short-term
consequence of the kind of move being discussed here.
7. So far as the more genvial effects of the new US policy
on Indonesian foreign policy and orientation are concerned, the
first and most obvious is that US influence on Indonesia would
drop, while the opportunities of the USSR and Communist China
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would be enhanced. This prospect is not so horrendous as it might
appear, since US influence, despite the considerable services of
the US to Indonesia, has been extremely limited for some years.
Sukarno's "neutrall.sm" has long had a distinct pro-Soviet cast,
the result in part of his innate suspicions of the former colonial
powers, and of the fact that his pursuit of Indonesian ambitions
for regional dominance have brought him into recurrent collisions
with Western interests. The Soviets have supported his ambitions
and have supplied military equipment on credit (some $1 billion
worth so far).
8. Malaysian Campa,i~;n. The incre .singly warlike Indonesian
campaign ? ii t Y loyeia would probably not be checked by this
evidonce of US displeasure. on the cunt y, the US action would
dispel such hope as Sukarno now has that the US might, as in the
case of West New Guinea, play a mediator's role, to Indonesia's
benefit; and Indonesia would be likely to press on with military
and paramilitary methods of achieving Sukarno's goal of detaching
Sarawak and Sabah from Malaysia. US economic assistance has never
greatly restrained Sukarno in his foreign adventures and the new
US stance would reduce even the present meager capacity of the
US to influence his actions with respect', to Malaysia, not to
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mention tiny Portuguese Timor. There would probably be an increase
of FKI Influence in Djakarta, which would increase internal pressures
for greater militancy against Malaysia.
9. The new US policy would encouzage British and Malaysian
expectations for stronger US support against Sukarno's Malaysian
confrontations. The UK and Malaysia would in any case be heartily
encouraged by this move. The UK might be emboldened to make more
vigorous responses to Indonesian provocations.
lO. The Soviet and Chinese CommunLat RespRn,es. A substantial
worsening of US-Indonesian relations would be regarded in Moscow as
a windfall. The Soviets have gained considerable influence with
Sukarno, but their efforts have fallen far short of a decisive or
commanding position. A change in the Indonesian attitude, as a
result of a US rebuff, would provide new openings for the Soviets.
Over the past several years, the USSR has extended $368 million
credits for nonmilitary aid to the Indonesians. All of this has
been committed to specific projects, but only about $61 million
has been spent. Given the projected looses in US aid, we believe
Sukarno would seek a more rapid implementation of the Soviet program.
11. The Soviets would probably support Indonesia in defiant
anti-Westernism, and in a more active campaign against Malaysia,
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much as the USSR did at the height of the West Irian controversy
in 1962. At the same time, the Soviets would want to avoid a
fracas in Southeast Asia that threatened a direct US-Soviet
collision, one which would dispel prospects of a general easing
of cold war tensions, in which we believe the USSR now sees con-
siderable advantage. All-out backing of Sukarno against the US
might seem to Moscow too high a price to pay for the value re-
ceived. We doubt, however, that the USSR would be faced with
need to give such backing, since Sukarno himself probably wants
to avoid war over Malaysia.
12. One cloud on the Soviet horizon would be the Chinese
Communists, who would find almost unalloyed good in a heightening
US-Indonesian controversy, and seek to make the most of it. One
avenue of approach for the Chinese would be through the Indonesian
Communist Party;, which along with the Indonesian army has been
Sukarno's main pillar of organized support, and which favors the
Chinese in the Sino-Soviet rift. Competition between the Soviets
and the Chinese would be an extra inducement to both to play an
active role in wooing Indonesia, but it would also serve to
diminish the chances of either side to assume the role of sole
protector of Sukarno against the West.
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13. The new US policy would emphasize the delicate and ambivalent
position of the Philippines. The Manila Government, hoping to be the
honest broker role once again, would probably combine some public
expressions of sympathy for embattled Indonesia with some private
assurances to the US of understanding for its position. In general,
the Filipinos would hope that this stance would get them through,
avoiding the need for clear-cut alignment either way.
ll. In certain states elsewhere in the underdeveloped world,
now receiving US aid, the message would not be lost that the US
was willing to demonstrate its displeasure over unwelcome behavior.
This would give comfort to certain US allies like Thailand. Nasser
would be aware of the danger signals implicit in this move for his
own relations with the US -- as he alroady is of the Congressional
intention in the "aggressor" amendment. Nevertheless, we are not
sanguine that he or any other nationalist leader -- e.g., Nkrumah
or Sihanouk - would be significantly inhibited from any policies
he might otherwise pursue.
B. Consequences of a Much Tougher US Stance
15. A much tougher US course, such as completely cutting
aid, would draw more violent reactions from Sukarno. He would
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probably permit mach violence against US ).ivies and property and,
at a minimum, would severely restrict the numbers and activities
of US personnel in Indonesia. There is at least an even chance
that he would expropriate US properties and break diplomatic
relations.
16. The US aid termination would remove one barrier to
increased PKI participation in the Indonesian Government. Commu-
nists would probably be admitted to the Cabinet for the first time
and the Party would gain a long--sought voice in the management of
nationalized enterprises. It would also benefit from the further
deterioration of the already shaky Indonesian economy, but we do
not believe that either PKI gains or economic deterioration would
be likely to threaten Sukarno's continuing dominance of the country.
17. The US course, unaccompanied by greater US commitments
to the defense of Malaysia would not moderate Sukarno's anti-Malaysia
campaign and might indeed strengthen his determination to wreck
Malaysia and oust the West -- including the US presence in the
Philippines -- from Southeast Asia. His relations with the USSR
and. Communist China would probably become extremely cordial as his
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dependence on their stpport increased,, though we do not believe that
this relationship is likely to be carried to the point of endangering
Indonesia's independence.
FOR THE BOARD OF NATIONAL ESTIMATES:
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SHELRMAN KENT
Chairman
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