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161537 MDHOAN 9727
4. THIS STILL LEAVES THE QEUSTION OF WHETHER TO RETAIN THE OFFER TO CONSULT (PARAGRAPH 2 OF FCO TELNO 68). THE LANGUAGE PROPOSED AT 3(B) OF HONG KONG TELNO 6 TO YOU IS UNACCEPTABLE BECAUSE, IF THE HKG WERE TO GIVE THIS ASSURANCE AND FAIL IN PRACTICE TO MEET THE OBLIGATION, THEN THE RESPONSIBILITY WOULD CLEARLY PASS TO HMG. THAT IS NOT ON. THE FORMULATION SUGGESTED IN HONG KONG TELNO 7 TO YOU SUFFERS FROM LEAVING THE NATURE OF YOUR ASSURANCE AMBIGUOUS. SO TOO DOES THE FORMULA IN PARAGRAPH 1 OF HONG KONG TELNO 9 TO YOU. THE CHINESE COULD INTERPRET IT AS IN PRACTICE A GUARANTEE, SINCE THERE WOULD BE NO HINT THAT THE OBLIGATION MIGHT NOT BE MET. FOR THE PURPOSES OF YOUR MESSAGE, IT WOULD BE SUFFICIENT TO ADAPT THE FORMULA IN PARAGRAPH 1 OF HONG KONG TELNO 9 TO READ QUOTE NEVERTHELESS, IN RECOGNITION OF YOUR CONCERN, I WOULD BE PREPARED TO DISCUSS A FIGURE WHICH WE WOULD AIM TO LEAVE IN THE FISCAL RESERVES IN 1997. UNQUOTE. THIS SHOULD ADEQUATELY REFLECT THE POSSIBILITY OF THE FISCAL RESERVES FALLING BELOW A CERTAIN LEVEL. AN OFFER TO QUOTE ALERT UNQUOTE THE CHINESE OR QUOTE DISCUSS THE CONSEQUENCES UNQUOTE WITH THEM OR QUOTE CONSULT ON POSSIBLE REMEDIES UNQUOTE MIGHT BE LESS BINDING ALTERNATIVES TO BE DEPLOYED IN NEGOTIATION THAN THE OFFER TO CONSULT ON APPROPRIATE MEASURES.
5.
AS REGARDS CHINESE ASSURANCES, WE NOTE THE VIEWS OF SIR D FORD AND PEKING, WHICH YOU HAVE EXPRESSED TO ME TOO, THAT OUR FOCUS SHOULD STAY ON PADS AND THE FINANCIAL POWER NEEDED TO RETAIN EFFECTIVE CONTROL OF THE PROJECT. THE DEAL SET OUT IN YOUR ORIGINAL DRAFT LETTER TO LU PING WILL OF COURSE LOOK SIGNIFICANTLY MORE ATTRACTIVE IF IT IS SET AGAINST THE BACKGROUND OF A BROADER UNDERSTANDING ON CONSULTATION AND CO-OPERATION REACHED DURING THE SECRETARY OF STATE'S VISIT. THIS IS ESSENTIAL AND A POINT WHICH - AS SIR D FORD SUGGESTS YOU WILL NEED TO MAKE TO LU PING WHEN YOU SEE HIM, IN PREPARATION FOR FULLER DISCUSSIONS IN PEKING.
6.
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I HAVE DISCUSSED THESE REACTIONS WITH LORD CAITHNESS AND WILL INFORM THE SECRETARY OF STATE OVERNIGHT. PROVIDING YOU CAN MAKE THE NECESSARY AMENDMENTS, IT SHOULD BE POSSIBLE FOR THE MESSAGE TO ISSUE IMMEDIATELY AFTER THE NO 10 SEMINAR. IF YOU WISH TO TALK THROUGH ANY OF THESE POINTS, I SHALL BE AT MY DESK BETWEEN 1700Z AND 1945Z THIS EVENING (071-270 2214).
HURD
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