SECRET
have much greater priorities than the patrol boats and the Governor has also indicated that if pushed too far he would be prepared to lose the boats.
10. MOD are keen to bring the matter to a head soon; and the issue may anyway be overtaken by the wider questions in the MOD's Operational Plan. In Hong Kong tenders must issue
soon for the construction of a new naval base on
Stonecutters Island for the vessels. We hope to persuade the Chinese to use Stonecutters as their base after 1997; if the vessels are withdrawn, the rationale for a new naval base will fall away.
11. The Secretary of State might press the Governor to find a creative-accounting solution which would not require a
fresh approach to the Finance Committee. The key to resolving the impasse could be an informal intervention by the Secretary of State with the Defence Secretary to discuss strategic issues, followed by an early visit to London by the Financial Secretary to talk figures.
MOPADZ/5
SECRET