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11. The Governor has told us that he found this proposal
profoundly disappointing. He warned that there was the prospect of a very serious situation developing if the MOD
stick to this line.
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12. In an effort to break the deadlock, the PUS spoke to
Sir Michael Quinlan on 11 February.
His minute recording
this meeting is attached. The PUS stressed that the strategic, political and military considerations made the question of the patrol craft a much more significant one
than their size and cost suggested. Lord Caithness then
spoke to Mr Hamilton on the telephone and followed this up
with a letter (copy attached) to which Mr Hamilton has now
replied.
Conclusions and Way Forward
13.
As the PUS has pointed out, there is much more at stake
politically than the sums of money involved would suggest. But equally it would be a mistake to underestimate the tenacity with which the MOD will argue the budgetary case
(notwithstanding a £15 million contribution by Hong Kong to
the cost of the Gulf War). Much of the blame must be laid
at the door of the previous DCA negotiations, which have left a residue of personal bitterness on both sides. The
MOD seem determined to wring further concessions out of Hong Kong; and are not prepared to accept that the Governor's political problems with LegCo are genuine ones.
Way Forward
14. A renewed effort must be made to find a middle way
between the two sides' current position before they become irrevocably entrenched. Neither side will be prepared to capitulate capitalice; MOD have much greater priorities than the patrol
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