Leon Hadar – The Clinton Administration, frustrated over its inability to persuade President Suharto to embrace economic and political reforms, has decided to adopt a "wait-and-see" policy towards Jakarta, sources say.

Washington plans to begin distancing itself from the Suharto regime and to work with the International Monetary Fund (IMF), the European Union (EU), Japan and other trade and military allies in East Asia to encourage economic and political changes inside Indonesia.

But the US will refrain from taking any unilateral steps to force change in Jakarta – such as cutting military and economic aid or worse, supporting a military coup against the Indonesian leader, the sources add.

Recent developments have convinced most experts in the US government that Mr Suharto has decided to pursue a more confrontational policy towards the US. This includes the re-election of Mr Suharto for a seventh five-year term on Tuesday, the election of B J Habibie as Vice-President, and the expected naming of a new cabinet dominated by old-fashioned economic nationalists over some of the country's leading economic reformers.

The fear is that Mr Suharto's strategy is to ignite anti-Western and nationalist sentiment in the country by blaming the US and the IMF for his country's economic problems.

"We are not going to play into Suharto's hands by telling the world that we can't or don't want to work with him," explained one US official. "But, at the same time, we need to send him a strong message that our patience with him is starting to run out." US officials say they have begun a process of "reassessment" of its bilateral relations with Indonesia, following the clear signals from Jakarta that President Suharto is backtracking on his commitments to implement the reforms in the IMF's stabilisation programme.

The officials were also less than enthusiastic about reports that Mr Suharto was sending a top-level team of Indonesian officials for talks with the US and the IMF.

They say they had made it clear to Mr Suharto and his aides that Washington was not willing to be pressured to renegotiate the terms of the US$43 billion (S$69.7 billion) IMF programme, and that the issue should be resolved in direct talks between Indonesia and IMF officials.

"It's possible that President Suharto is forgetting that we are not in the midst of the Cold War, that there is no great sympathy among either Republicans or Democrats towards him and his policies, and that there are no major concerns here that the collapse of his regime would produce a 'Who-lost-Indonesia' debate in Washington," said one US official.

While Washington is not planning to play an active role in supporting a military coup or a Philippine-style "people power" revolt against Mr Suharto, Clinton administration officials say they would be willing to support any move towards a change in the country that would enjoy domestic and regional backing, not unlike the process that led to the fall of the Marcos regime in the Philippines.

President Clinton sent former vice-president Walter Mondale to Jakarta earlier this month to try to impress on Mr Suharto the need to implement the IMF reforms, to embrace a series of political changes, and to refrain from adopting the currency board system as part of an effort to strengthen the rupiah to an acceptable level.

But US officials acknowledge that the meeting did not produce any results and reflected what some observers in Washington believe to be the poker-game-style diplomacy the Indonesian leader is pursuing.

Some US officials speculate that Mr Suharto may be under the impression that the Clinton administration and the IMF are so desperate to win congressional support for new US funds for the institution that they would be willing to make any concession to Indonesia – including accepting the currency board plan – so as to prove to Congress that the US$43 billion emergency bailout programme is working.

US officials note that, if anything, Mr Suharto's bargaining power in Washington has weakened in recent weeks. Top officials in the Clinton administration and members of Congress have indicated that they would not approve the disbursement of the next US$3 billion in IMF money unless Jakarta gives a clear commitment to continue with the economic and political reform process.