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    "label": "Report, Central Intelligence Agency, Review of the World Situation, CIA 1-49",
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    "title": "Report, Central Intelligence Agency, Review of the World Situation, CIA 1-49",
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            "day": 19,
            "logicalDate": "1949-01-19",
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{
    "seq": 8,
    "pageIndex": 0,
    "type": "photo",
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    "ocrText": "SECRET\nterm. \"Police action,\" on the other hand, by calling into play organized guerrilla\ncounteraction, may have exactly the opposite effect in the longer-term; and, even more\nsignificantly, this effect may be communicated to other production areas of Southeast\nAsia.\nFrom the US point of view, Southeast Asian commodities have a major place in US\npeacetime economy, in strategic stock-piling programs, and in the implementation of\nERP. The present situation is that the production of tin and bauxite will probably not\nshow an immediate decrease since production is concentrated in areas that have always\nbeen under Dutch control. Rubber production, however, may be considerably reduced\nsince the growing areas are open to easy sabotage. In addition, the collection and\nshipment of these as well as all other Indonesian commodities will probably be ham-\npered by strikes, sabotage, guerrilla activity, and prolonged instability. And, if the\nIndonesian conflict leads to an intensification of conflict in other Asiatic areas, US\nstock-piling and other programs will be further impeded.\nWith respect to the Netherlands and Western Europe generally, the Netherlands\ngovernment has initiated an action in which it runs a dangerous race against time and\ncircumstances. Dutch economic planning after 1945 was based on the assumption\nthat Indonesia would eventually be reestablished as a major source of dollar credits.\nEven then, the most optimistic Dutch estimate was that Indonesia would not have a\nfavorable balance of payments before 1950. The validity of these assumptions is now\nin serious question. The cost of a prolonged upheaval in Indonesia-and there is little\nevidence to indicate that it will be short-will have to be balanced against the rate at\nwhich Indonesian resources can be converted into dollars through trade. While an\nanswer is being given to this question, Dutch finances will be strained and the difficul-\nties of evolving a viable domestic economy will be increased. At present 19% of the\nDutch budget goes into military expenditures and the major part of this is devoted to\narmed forces in Indonesia. The burden of prolonged weakness and possible failure in\nthe purely economic field will not fall on the Netherlands alone. The Benelux Custom\nUnion is directly affected and the contribution of the Netherlands to ERP will have to\nbe restudied. Finally, the part to be played by the Netherlands in a Western defense\nsystem will need re-examination.\nThe Long-Term Security of the US\nThe preceding analysis has touched on many of the security problems opened up\nby the present situation in Indonesia. It only remains to point out that Dutch\n\"action\" has cut the US position to the bone by touching on nearly all basic US secu-\nrity interests simultaneously. Furthermore, this has occurred at a moment of dubious\nbalance, when possible gains in Western Europe have to be measured against possible\nlosses in the Far East.\nThe validity of this analysis rests to a considerable extent on the answer to the\nquestion, \"Can the Netherlands government stabilize its position in Indonesia in the\nvery near future and at a readily recoverable cost; or, will it fail to do so?\" It is\nbelieved that the Indonesian Republic is capable of maintaining guerrilla operations\nDECLASSIFIED\nE.O. 11652, Sec. 3(E) and 5(D) or (E)\nSECRET\nC.I.N.\n3.31.77\n4\nOSD letter,\nBy NLTXL NARS Date 4-10-77"
}