Paul Blustein – The Clinton administration, worried that political upheaval in Indonesia could wreck the country's international economic rescue, is warning the government of President Suharto to show restraint in dealing with student demonstrations and other forms of dissent.

But administration officials said that despite mounting criticism of the Suharto regime's human rights practices, they are not threatening to cut off Indonesia's $43 billion bailout led by the International Monetary Fund. Depriving the country of desperately needed cash, they argue, would only deepen its economic crisis and increase the chances of social turmoil and bloodshed.

The IMF is expected to approve another $1 billion installment for Indonesia on Monday. Administration and IMF officials said that last-minute negotiations are continuing but that Indonesian authorities, after balking for months, appear to be complying with IMF demands for economic reforms, including the dismantling of monopolies run by the president's relatives and cronies.

Behind the flurry of maneuvers lies the administration's anxiety about keeping the situation in Indonesia, the world's fourth most populous country, from spinning out of control.

Indonesia's financial condition remains extremely fragile, with its currency deeply depressed, inflation soaring and joblessness spreading. An outbreak of social chaos in Indonesia could spook investors in neighboring countries and cause the Asian financial crisis to worsen, US and IMF officials fear. Moreover, the Indonesian archipelago straddles major shipping lanes, and civil strife there could disrupt global commerce.

At the same time, administration officials are worried about the reaction in Congress if the United States is seen to be propping up a regime that is cracking down on student protesters and allegedly abducting and torturing its critics. Brutal repression of dissent could make it politically difficult for Western nations to support the continuation of the IMF bailout and could complicate the administration's effort to win congressional approval of an increase in funding for the IMF.

Accordingly, "we have been very proactive" in admonishing the Indonesians to respect human rights and especially to avoid "unfortunate accidents," a senior State Department official said, adding that Australia and several European governments have echoed the US view.

Three weeks ago, Indonesian ambassador Dorodjatun Kuntoro-Jakti was summoned to a meeting with John Shattuck, assistant secretary of state for human rights, and Stanley Roth, assistant secretary of state for East Asia, "to express concern about the human rights situation and press for police restraint against the student demonstrators," the official said. Roth made similar points to Indonesian officials during a visit to Jakarta in mid-April, and US ambassador Stapleton Roy has also been "pressing for the need to investigate the reported disappearance of some of the student leaders," the official said. "In fact, some [dissidents] have since surfaced, we believe as a result of Roy's pressing."

The specter of violent student-police confrontations has already dealt a blow to Indonesia's prospects for recovery. The country's key stock index, which has been falling most of the week, dropped another 2.5 percent yesterday amid investor unease over spreading social unrest.

Against that backdrop, the flow of bailout funds from the IMF is expected to resume Monday. Having twice suspended the rescue in response to Indonesia's failure to fulfill its promises of economic reform, the board of the 182-nation fund is planning to dole out its loans to Jakarta monthly instead of quarterly, thereby keeping a closer watch over the government's reform efforts than it does with most borrowing countries.

US officials said the new Indonesian cabinet has made impressive progress in halting an explosion in the money supply that was undermining investor confidence.

The rescue's fate appeared in doubt this week because of an apparent attempt by Indonesian authorities to protect a monopoly on cloves, controlled by Suharto's son Tommy, that Jakarta had promised to eliminate. The monopoly, though legally shut down, had opened under a new guise, arousing anger in Washington about yet another example of Indonesian resistance to ending the country's "crony capitalism."

But Stanley Fischer, the IMF's deputy managing director, said yesterday, "We believe the clove problem is being dealt with." Other IMF officials cited a statement on Wednesday in which cabinet ministers formally promised to allow free trade for clove growers, traders and companies that use them. In that statement, Finance Minister Fuad Bawazier vowed there would be no requirements for cigarette makers, which use cloves as flavoring, to buy cloves from any particular source.

The IMF is cutting Indonesia some slack on its promise to allow free trade in another product, palm oil, because the oil is heavily used by poor Indonesians for cooking and ending government control over its sale would likely send the price skyrocketing, IMF officials said. A sharp price hike in such a staple could spark rioting, they said.