CONFIDENTIAL
Sterling
9.
As you know, Hong Kong has accepted the arrangements for extending the sterling guarantee to the end of March. The Treasury have asked the Governor, in common with all other sterling agreement signatories, for his views on what, if anything, might replace the current agreement. The present state of sterling, coupled with the immense increase in revenues accruing to the oil producing states will almost certainly mean that a similar arrangement will have to
follow.
Register of Shipping
10.
The DTI team who were in Hong Kong are still preparing their report. We do not expect any surprises and still hope that the Register will be established.
Air Services
11.
Talks took place in Oslo before Christmas. The DTI team were authorised to offer a once-weekly service to Hong Kong from Copenhagen restricted to the Southern route, i.e. excluding the Soviet Union. In return for the loss this would entail to British Airways there would have to be an aviation quid pro quo.
During
12.
Immediately prior to the talks the Norwegian Consul-General in Hong Kong called on Derek Jones to discuss the situation. the conversation, Jones largely gave away our negotiating position and in particular said the Hong Kong Government would not object to a "blinded" route via Tashkent. The DTI understandably were very put out by this and at one point were refusing to carry on with the talks. Indeed it did make their job very much more difficult and for a long time the negotiations were not serious as the Scandinavians believed that under pressure we should concede to a route via Tashkent. We had to say that even if this route was acceptable to the Hong Kong Government it was not acceptable to IMG (because of the implications for Soviet aircraft to extend their flights also to the Colony).
13.
The Scandinavians finally agreed that a Southern route was viable but not commercially interesting. They refused to discuss any compensation and the talks have been adjourned. No resumption of the talks is on the cards at present. Indeed, in the present unsettled state due to aviation fuel shortages, it is very unlikely the Scandinavians would wish to open up new routes at this stage.
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CONFIDENTIAL
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