S. CRET
Singapore, Tehran. To guarantee a fixed price, however, some 20% below that to which the Anglo-Italian Consortium ne propared to conmit themselves (even if there more lot-outs) would carry in it the terms of another RB211 situ bion. Cuch a guarantee would amount to G buying the business.and could store up future trouble for the relationship between Cs in the UK and Hong Kong. Moreover, no claim that a precedent had not been created could be finally maintained. verywhere British and mixed British and foreign consortia are seeking to persuade G to take the risk out of such overseas projects.
The Governor is aware of the importance that HG attaches to wining thic contract or Britain and of the difficult repercussions which A decision to validate only the Japanese hid would have in the UK. The Foreign and Commonwealth Sporetary has confirmed this to him most recently in a perconal message on 7 ccember. FOO Linicters will be reinforcing this again volay in the light of the Governor's latest reaction. Beyond this, despite the theoretical constitution:1 subordination of Hong Kong, there are limite to our practical FOUR to control their ecisions. Apart from the difficulty, on general ground, of veing constitutional pressure to recure commercial contracts, any attempt at direction would cause a crisis of confidence in Hong Kong. It would also get us into great difficul- ties with the Japanese, The beat hope tuust now be that the Hong Kong Governlicht will recognise that it is in their own interest to validate the Anglo-Italian proposals for negotiation alongside the Japanese bid.
If the Covernor cannot hold the position with the political and economic material he has, the only course which appers to hold out any hope of cocuring part of the business for the UK would soon to lie in cutting UK firms in on a Japanese con ract. Official: would like to return to this concept if the Arco decision (003 against the Anglo-Italian Consortium, but would not recommend raying anything mxplict to the Covernor yet, lost the thought that something less than the success of the Anglo-Italian roug would content the UK Government right wenken the Governor's resolve in eo.
I suggest that the (ecretary of State send the personal nousare to the Covernor of which a draft ic attrahod. I understand that 1:00 Linisters are also sending a personal mecare re-emphasising the olitical in lieuticno. Jeninet Lifies buite that tho Leino inister vichoe to know what line is being baka on the Covuzuoric puumection. Checcretary of state may, therefore, wich to nimu je to the .rime Minister in the bonmo of the recond draft attached to shin minute.
D N ROYCE
OFF
V/207 ext 5067
10 December 1973
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