IMMEDIATE
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GRPS 380
FM F C 0 1023357
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DESKBY 110100Z
TO IMMEDIATE GOVERNOR HONG KONG TELEGRAM NO 1266 OF 10 DECEMBER. 1
FOLLOWING STRICTLY PERSONAL FOR GOVERNOR FROM MR ROYLE.
YOUR TELEGRAMS NOS 1417 AND 1418: MASS TRANSIT.
1. ALEC DOUGLAS-HOME IS AWAY SO I AM REPLYING FOR US BOTH. 1 AM AFRAID WE CANNOT GET YOU THE GUARANTEE YOU REQUIRE. PETER WALKER IS SENDING A SEPARATE MESSAGE ON THIS. THE TREASURY COULD NOT LEGALLY PROVIDE AN OPEN-ENDED GUARANTEE, NOR COULD THEY GUARANTEE THE ITALIAN ELEMENT. PETER WALKER MAY, AS HE TOLD YOU, BE ABLE TO DO SOMETHING WITH THE ITALIANS: BUT THIS WILL NOT BE
IN TIME FOR YOUR EXCO MEETING.
2. BUT IS THIS REALLY A GOOD ENOUGH REASON FOR THROWING THE ANGLO- ITALIAN BID OUT OF THE WINDOW? YOUR DESCRIPTION OF THE POSITION
ASSUMES THE WORST CASE, IF THE SURVEYS GO WELL, THEN THE FINAL
ANGLO-ITALIAN PRICE COULD BE WELL BELOW THE JAPANESE: WHILE IF
THEY GO BADLY, OUR EXPERTS GENUINELY DO NOT BELIEVE THAT THE
JAPANESE FIGURE WILL HOLD, SHORT OF A SUBSTANTIAL SUBSIDY BY THE
JAPANESE GOVERNMENT WHICH SEEMS IMPROBABLE. THE JAPANESE PREEMPTIVE
BID IS EXPLICITLY AIMED AT GETTING THE OPPOSITION (AND THUS ANY DASIS OF COMPARISON) OUT OF THE WAY. THE CHOICE IS YOURS, BUT
I FIND IT HARD TO BELIEVE THAT IT IS IN HONG KONG'S OWN INTEREST, EVEN ON A NARROW COMMERCIAL CALCULATION, TO PUT YOURSELVES WHOLLY
IN THEIR HANDS.
3. 1 DO NOT NEED TO GO OVER ALL THE POLITICAL IMPLICATIONS AGAIN.
ALEC HAS OUTLINED THEM AND YOU KNOW THE IMPORTANCE OF THIS CONTRACT IN THE GENERAL RELATIONSHIP BETWEEN HONG KONG AND THE UNITED KINGDOM. YOU AND I HAVE BEEN TRYING, WITH SOME SUCCESS, TO INCREASE THE UNDERSTANDING ON BOTH SIDES OF WHAT THE RELATIONSHIP BETWEEN BRITAHL AND HONG KONG IS ALL ABOUT. AT THIS END WE ARE NOW, FOR EXAMPLE, ABLE WITHOUT QUESTION TO USE SOME OF OUR SLENDER POLITICAL CAPITAL WITH THE ARADS TO PROTECT HONG KONG'S OIL SUPPLIES. BUT IF WE ARE TO KEEP TOGETHER THE HIGH-LEVEL CONSENSUS ON WHICH THIS POLICY DEPENDS, WE MUST HAVE SOME TANGIDLE EVIDENCE THAT EXCO ALSO ACCEPT ITS PRACTICAL RELEVANCE TO THEM. IF THEY
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DO NOT DO SO,