Hundreds of thousands of Indonesians supported the Dutch position; when Independence finally arrived, most of them were relocated to the Netherlands. The UK mediated a compromise signed in March 1947 whereby de facto control of the new Indonesian Republic was acknowledged over Java, Maduro and Sumatra, while acknowledging Dutch control over the numerous smaller and far less important islands. Supposedly there would be a federated Indonesian state and a union with the Netherlands, but that never happened. The Indonesians wanted complete transfer of power, and the Dutch refused. By 1946, the United States was financing the Dutch in Indonesia, and was able to exert pressure on The Hague. Increasing international pressure—including American hints about cutting off military funds—forced the Netherlands to withdraw. A decisive episode was the success of the Indonesian Republic in crushing a Communist revolt. Washington now realised that Indonesia was part of the Cold War fight against communism, and the Indonesian government was a necessary ally—and that the Dutch tactics were counterproductive and chaotic, and could only provide help to Communist insurgencies. The Netherlands formally recognised Indonesian independence on 27 December 1949. Public opinion blamed Washington for the Dutch colonial failure.Krabbendam and Van Minnen, eds. Four Centuries of Dutch-American Relations: 1609-2009 (2009) pp. 609–613. Only Irian, the western half of New Guinea remained under Dutch control as Dutch New Guinea until 1961, when the Netherlands transferred sovereignty of this area to Indonesia.
