TNAG-2238-FCO40-3217-Future-of-Hong-Kong-Royal-Navy-presence-1991 — Page 47

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6. In February 1991, Sir Michael Quinlan wrote to the

Governor, making it clear that MOD Ministers were not

prepared to agree to the retention of the patrol craft after

1992 without a "very substantial contribution" from

Hong Kong (over and above what they would pay under the

Defence Costs Agreement). Alternatively, the Hong Kong Government could take over the manning and operation of the

patrol craft from 1992. The MOD would be prepared to

provide, on repayment, loan service personnel to help with the transition to full Hong Kong manning: this suggestion

would not address the political issues involved. The Governor told us that he found this proposal profoundly disappointing and warned that a a very serious situation

could develop.

The PUS spoke to Sir Michael Quinlan on 11 February and

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, following with a letter to which Mr Hamilton has now replied in

uncompromising terms: reaffirming that the MOD was looking

for a contribution from Hong Kong in excess of the normal

DCA arrangements.

Conclusions and Way Forward

9.

The

Much more at stake politically than the sums of money involved would suggest. But the MOD will argue the

budgetary case tenaciously (notwithstanding Hong Kong's Gulf

contribution). Given the squeeze on the MOD we doubt that

they will be prepared to fund their full normal share.

previous DCA negotiations left a residue of personal

bitterness among officials on both sides which bedevils

current efforts to resolve this problem. The MOD seem determined to wring further concessions out of Hong Kong;

they do not accept that Hong Kong cannot find a formula

which avoids the need to go back to Finance Committee. MOD

MOPADZ/4

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