Indonesia's President Sukarno has threatened the new Federation of Malaysia, insulted Britain and brought his own country very close to disaster. Both Indonesia and the Philippines refuse to recognize Malaysia, questioning the United Nations survey which found that the inhabitants of Sarawak and Sabah favored federation.

But this objection is purely technical. Sukarno has repeatedly called Malaysia a "neocolonialist" attempt to maintain British influence in the area. Behind that charge lies his ambitions for territorial aggrandizement and a desire to give circuses instead of bread to the Indonesian people; to take their minds off hunger, unemployment and a crumbling economy.

The Philippines' objection stems from its claim to Sabah. However, this claim is both tenuous and obscure, and the Philippines have showed no aggressive tendencies. Indonesia has been less reticent. President Sukarno has promised to crush Malaysia and has sent combat troops to the borders of Sarawak and Sabah.

On the surface, Sukarno's belligerence looks very bad for Malaysia. Indonesia's army, largely Soviet-supplied, is the most powerful in the area, Malaysia's one of the weakest. But Malaysia does not stand alone. Britain and Australia are pledged by treaty to defend her and both have planes and troops on Malaysian soil. The United States has promised Britain its full support.

America's interest goes beyond a friendly solicitude for British prestige. The threatened state of Sarawak is less than 650 miles from South Viet Nam, and parts of Malaya are less than 300. The United States hopes Malaysia will form a barrier against the Red Chinese. It certainly will not stand by and see Malaysia taken by Indonesia, a country which has not only signed an amity pact with Peking, but has also recognized Mao's claim to Taiwan.

Sukarno could, of course, enlist Chinese military support, and this is the greatest danger in the situation. But Chinese support would come with many strings attached. Sukarno wants to see the whole Malay Archipelago his domain. He hardly wants to become a puppet in his own land.

Indonesia seems doomed to military failure or, at best, a very limited guerrilla success. Meanwhile, by severing trade relations with Malaysia, Sukarno has invited economic failure. More than half of Indonesia's rubber, which supplies 50 per cent of the nation's foreign exchange income, was formerly processed at Singapore. Indonesian tin will have to be refined in Europe, instead of Penang. And Indonesia's refined oil products, over 60 per cent of which went to Malaya and Singapore in the first half of 1963, will have to find new markets. Indonesia will also forfeit $300 million in proposed American and European foreign aid. The seizure of key British businesses will discourage badly needed private investments.

Indonesia's economy has floundered even without this shock. Exports have declined generally. Production of refined tin dropped over 40 per cent between 1956 and 1962, that of rubber, almost ten per cent. Foreign exchange holdings have declined 75 per cent since 1958. The Indonesian rupiah, which was devalued by 75 per cent in 1960, dropped in May of this year to four per cent of its pre-1960 figure. Rice, Indonesia's staple food, is expensive and scarce, Sukarno will probably have to import over 75 million dollars worth of rice this year, and he will have to sell enough exports to pay for it.

His diplomacy has left him without markets for some 27 per cent of his exports. There seems little doubt which way be will turn. Having found a new set of enemies, he has no need of old ones. Sukarno, the virulent anti-colonialist, the man who fought the Dutch so bitterly for thirty years, will almost certainly seek his new markets in Holland.