Mr. Godden
Mr Garter No steward-
Mamolin Mimsin of fron
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Cross Harbour Tunnel
The Minister will have seen the Governor's reply (Hong Kong Tel. No. 194) to his personal telegram (FCO Tel. No.153 to Hong Kong). I have discussed these telegrams with ECGD and we both see advantage
in keeping these exchanges going and not allowing the momentum to
flag.
2.
I attach a draft reply which has been agreed with ECGD.
Information on the French terms reaching us through other sources is in line with that given in paragraph 3 of the Governor's telegram. There have also been indications that the French have been pressing
the Tunnel Company to come to an agreement with the French finance house (Société Generale) in time for this to be placed before the "French authorities" for approval on the 10th March. sources indicate however that the Tunnel Company may be aiming to keep the French in play and to avoid the imposed deadline by
continuing to press for improvement of the terms.
The same
they
3. The Governor's telegram ties in with this information from
other sources. In paragraph 3 he reports that the Company are keeping the French offer open. The reason, I think, is clear: want to develop the Dutch auction by opening "detailed negotiations" with ECGD (paragraph 2 of the telegram). The disadvantages of this
situation for us are, of course, considerable; but ever since
French interest in the project developed we have in fact been in such a situation, with the Tunnel Company in a very strong position to play the French and ourselves against each other.
4.
ECGD nevertheless feel some concern that, whatever the advantages of a "Dutch auction" for the Tunnel Company, the French may, for their own reasons, so reduce their terms as to tempt the Company to
conclude a quick agreement and so leave us standing. The chances of this happening are perhaps slight. The state of near completion
of the Costains contract is after all a strong reason for the
Tunnel Company preferring British finance and for not closing the door on its negotiation until it is quite clear that better and
acceptable terms are unobtainable.
/ 5.