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CONFIDENTIAL
(IV) THE FACT THAT PART OF THE BACK-TO-BACK ARRANGEMENT FOR THE BRITISH SHARE OF THE EQUITY WOULD BE BY BNFL WOULD PRESUMABLY BE CONDITIONAL ON BRITAIN SUPPLYING THE NUCLEAR FUEL. THIS ALSO IS IMPORTANT FROM THE POINT OF VIEW OF SECURITY OF SUPPLY. WE WOULD NOT (RPT NOT) WANT THE POWER STATION TO BE DEPENDENT ON FUEL FROM OTHER SOURCES THAT MIGHT BE SUBJECT TO PRESSURES OUTSIDE BRITISH
CONTROL.
(V) FINALLY, OUR GUESS IS THAT THE CHINESE AUTHORITIES WOULD ALSO WELCOME BRITISH FINANCIAL PARTICIPATION IN THIS WAY AS PART OF A BRITISH PACKAGE INVOLVING A HIGH DEGREE OF BRITISH RESPONSIBILITY FOR BUILDING AND INITIALLY RUNNING THE STATION. TAKEN TOGETHER WITH THE IMPORTANCE TO HONG KONG OF A SECURE SUPPLY OF ELECTRICITY, THEY WILL SEE IT AS GIVING SOME ASSURANCE AGAINST A REPEAT OF THEIR EXPERIENCE WITH THE BAO SHAN STEELWORKS. IT WILL ALSO PROVIDE THEM WITH A USEFUL COVER FOR ACCEPTING ASSISTANCE IN MANAGING AND RUNNING THE POWER STATION (SEE 4(111) ABOVE).
5. YOU ALSO ASKED FOR OUR VIEWS ON THIRD PARTY LIABILITY. BECAUSE DR. MARSHALL WAS DELAYED FOR TWO DAYS IN CANTON FOR HIS DISCUSSIONS
WITH LU YING, WE HAVE ONLY HAD TIME TO DISCUSS WITH HIM EQUITY PARTICIPATION AND SAFETY (ABOUT WHICH WE SHALL BE SENDING YOU A FURTHER TELEGRAM SHORTLY). WE DID NOT HAVE AN OPPORTUNITY TO RAISE THIRD PARTY LIABILITY IN DETAIL WITH HIM. AS WE HAVE NO EXPERTISE ON THIS ASPECT HERE, WE ARE UNABLE TO PUT FORWARD AN AUTHORITATIVE
VIEW ON IT AT THE PRESENT TIME.
6. TIMING. THE FEASIBILITY STUDY WILL BE COMPLETED BY THE END OF THIS MONTH. IT WILL BE SIGNED FORMALLY BY BOTH SIDES BEFORE THE / END OF THE YEAR. THEREAFTER, ACCORDING TO KADOORIE, THE CHINESE HAVE SAID THEY WILL TAKE 3-6 MONTHS TO STUDY THE REPORT. KADOORIE BELIEVES THAT IT WOULD BE WAITING TOO LONG TO DELAY A FURTHER EXPRESSION OF BRITISH INTEREST UNTIL AFTER THAT STUDY IS COMPLETED. HE THINKS THAT, IF BRITISH EQUITY PARTICIPATION IS TO BE PART OF THE U.K. PACKAGE IT WOULD BE RIGHT TO DANGLE THE CARROT BEFORE THE CHINESE IN THE FAIRLY NEAR FUTURE. I AGREE.
IT IF THE PROPOSALS OUTLINED BY MARSHALL ARE ACCEPTED BY H.M.G., IS FOR CONSIDERATION WHETHER THE AMBASSADOR (POSSIBLY ACCOMPANIED BY KADOORIE, SOMEBODY FROM THE D OF 1, AND THE P.A.) SHOULD SAY SO IN GUANGDONG AND LATER, SEPARATELY IN PEKING. THE AMBASSADOR WILL BE IN HONG KONG FROM 29 NOVEMBER TILL DECEMBER 6.
7. AS A RESULT OF HIS RECENT MEETINGS WITH BOTH CHINESE AND FRENCH KADOORIE IS SCEPTICAL OF FRENCH HAVING SECURED CONTRACT FOR WHOLE STATION. HE FULLY REALISES THE STRENGTH OF HIS POSITION AS THE END-USER, AND IS DETERMINED TO USE IT TO ENSURE A MAJOR BRITISH
SHARE, THOUGH HE EQUALLY REALISES THIS STRENGTH MUST NOT BE TOO CRUDELY USED. HENCE THE IMPORTANCE HE ATTACHES TO EQUITY PARTICIPATION TO ENABLE THE CHINESE TO DEFEND THE CONCESSION TO
HIM OF CONTROL. MACLEHOSE
MINIMAL HKD JNU
FED
२.
CONFIDENTIAL
COPIES TO: HONG KONG GOVT OFFICE
LONDON
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