Bali as a trading point was known about to the Arabs and Chinese long before Europeans discovered the island. The Chinese were trading with Bali as far back as the 7th Century, referring to it as Paoli (Rice Island). Not having the quality landing points of other islands, or the spices of the Mulukus, Bali was never the priority for these traders.
Bali first appeared on European radar in the 1588, when the Portuguese, who were in the process of controlling Indian Ocean trade, sent a ship from the port of Malacca in what is now Malaysia. Upon reaching Bali the ship hit a reef, many of the survivors drowning, but some surviving. The dewa agung treated the newcomers well but did not allow them to leave the island. That was pretty much the end of the Portuguese exploration of Bali.
The Dutch were the next to attempt to explore the archipelago and on April 2nd 1595, 4 ships left Holland commanded by Commodore Cornelius Houtman. The group reached Bali on February 9th 1597 and anchored at Kuta. Houtman sent 3 men ashore to report on the island. One of these men was Aernoudt Lintgens, credited with the first western account of Bali. The other 2 men decided at first not to return to the ship, with 1 eventually returning, the other choosing to stay in Bali.
This brief visit was followed by another in 1601, under the leadership of Cornelius Heemskerk, who brought with him a formal request for trade relations, from the prince of Holland. In return for the letter, the dewa agung wrote his reply on a lontar palm leaf, accepting mutual trade between Bali and Holland.
The Dutch East India Company was formed on 1602, a headquarters set up in Batavia (Jakarta) in 1619. From this base the Dutch set about controlling the trade in Sumatra, Borneo, Makassar and the Spice Islands (Mulukus).
The period after 1515 saw a massive influx of Hindu artisans and noblemen from Java after the fall of the Majapahit empire. In 1633 the Dutch came to Bali and offered the dewa agung military assistance (divide and conquer) in resisting the Muslim Mataram empire, to which the dewa agung refused.
With Lombok producing large quantities of rice and Bali having no deep water harbors, the Dutch did not have that much impact on the island until the 19th Century. European hunger was never for rice, but the exotic spices such as clove, nutmeg, mace that Arab traders first brought to Europe. A nation that could find the source of the spices and control it could acquire great power.
Christopher Columbus was searching for a alternative route to Asia and its spices when he accidentally discovered America. The first European trader to make Bali his home was the Dane Mads Lange, who lived next to the river in Kuta.
By 1830, the Dutch were not alone in their desire to promote trade in Bali. The British, who briefly took control of Indonesia from the Dutch, after Napolean invaded Holland in the late 18th Century. The British eventually handed back control of the country and set themselves up in Singapore. Mads Lange dealt in rice and intended to do business with Singapore, the Dutch hoping to gain local political control of Bali before the British. With this in mind, in 1840 Huskus Koopman, the Dutch envoy was sent to visit Balinese rajas to try to convince them to moving Bali to Dutch sovereignty.
Another trading issue that was knawing away at the Dutch was the subject of tawan karan (reef rights). The Balinese believed that if a ship wrecked on Kuta Reef, any items recovered were theirs to keep. However to the Dutch, coming from a Protestant Christian background, modeled on small nuclear families, hard work and the accumulation of wealth, this did not go down well. Dutch sovereignty and reef rights were the 2 main issues that led to the puputan, ritual mass suicides that mark Balinese history.