TNAG-2120-FCO40-3026-Hong-Kong-Garrison-future-of-the-Royal-Navy-presence-1990 — Page 128

CONFIDENTIAL

FM HONG KONG

TO IMMEDIATE FCO TELNO 1582

OF 15095OZ MAY 90

cc Mr Bruns

e.

Mr fuel, HKI)

As I ikoght. This whi

close watching 42111

PERSONAL FOR PAUL, HKD FROM GOVERNOR

YOUR TELNO 962: ROYAL NAVAL PRESENCE AFLOAT

for

175275 MDHIAN 0570

Mul

Where doe

this new

sland?

THE

1. I SHOULD LIKE THE PROBLEM OF THE CONTINUING PRESENCE HERE OF ROYAL NAVAL PATROL CRAFT, WHICH WE ALL AGREE IS NECESSARY FOR BOTH OPERATIONAL AND WIDER POLITICAL REASONS, TO BE SETTLED WITHOUT UNDUE HASSLE. IN PARTICULAR I WANT TO AVOID A SITUATION IN WHICH THE ISSUE GETS TO THE FINANCE COMMITTEE OF LEGCO IN THE FORM OF THE MOD TRYING TO SHIFT THE GOAL POSTS ON THE 65:35 APPORTIONMENT UNDER THE DCA. THAT WOULD BE BAD IN TERMS OF GETTING THROUGH THE FINANCE COMMITTEE FUTURE FUNDING OF THE HONG KONG SHARE OF THE DCA. I WOULD ALSO BE BAD FOR GENERAL HONG KONG/UK RELATIONS.

2. BECAUSE OF THESE CONSIDERATIONS, WE HAVE BEEN WILLING TO LOOK AT ARRANGEMENTS UNDER WHICH WE WOULD HELP MOD MEET THEIR SHARE OF FUTURE CREWING COSTS PROVIDING THIS IS CLEARLY IN THE CONTEXT OF THE 65:35 SPLIT ON COSTS CONTINUING TO APPLY, AND THAT HONG KONG DOES NOT SUFFER A NET DISADVANTAGE IN CASH TERMS AT THE END OF THE DAY.

3. THE DISCUSSIONS WITH HATFIELD LOOKED AT VARIOUS ALTERNATIVES. I UNDERSTAND HE ORIGINALLY PROPOSED THAT HONG KONG MIGHT CONSIDER FOREGOING THE SALE PROCEEDS OF THE PATROL CRAFT BUT WAS TOLD THAT THIS WAS NOT/NOT POSSIBLE. THE TWO SIDES THEN EXPLORED THE POSSIBILITY OF HONG KONG ADVANCING AN AMOUNT EQUIVALENT TO MOD'S 35 PERCENT SHARE OF CREWING COSTS AGAINST REIMBURSEMENT LATER ON BY PROVIDING FOR HONG KONG TO RECOUP THIS ADVANCE EXPENDITURE FROM AN INCREASED SHARE OF STORES 'BACKLOADED''.

4. IT WAS MADE CLEAR TO HATFIELD THAT THESE WERE EXPLORATORY DISCUSSIONS VERY STRICTLY AD REFERENDUM.

5. WHERE MATTERS NOW REST IS THAT WE WILL BE WRITING TO MOD TO EXPLAIN WHY WE CANNOT ACCEPT THEIR PROPOSAL ABOUT FOREGOING SALE PROCEEDS OF THE PATROL CRAFT AND, AT THE SAME TIME, PUTTING FORWARD ALTERNATIVE PROPOSALS TO HELP THE MOD OVER THEIR CASHFLOW PROBLEMS.

1

PAGE CONFIDENTIAL

FRONTLOMONO HK PAY.

i