TNAG-2240-FCO40-3219-Future-of-Hong-Kong-Royal-Navy-presence-1991 — Page 97

DESLBY 2701002 HK

PERSONAL FOR GOV

CONFIDENTIAL

DRAFT TELEGRAM FROM FCO TO HONG KONG

MY TELNO []: FUTURE RN PRESENCE IN HONG KONG

1. Further to TUR, this is to confirm that the Prime Minister supports the retention of three RN patrol craft in Hong after 1992, though it has not yet been agreed how the additional

costs to the defence budget should be met.

2. The Defence Secretary is prepared now to plan on retaining

the three vessels in Hong Kong until 1997 and the steps necessary to withdraw them next year have been suspended. This is however on the clear understanding that compensation for

the defence budget will be forthcoming from somewhere. The

only realistic sources are the Treasury or the Hong Kong government. It would be unwise to assume that the former will

necessarily co-operate and the Prime Minister and I agree that

we should continue to pursue the option of seeking funds from

the Hong Kong government. You should therefore take advantage

of the breathing space granted by the Defence Secretary's

decision, to take a further and considered look at how the sum

involved £15m at today's prices - could be found from Hong Kong government funds without causing major political difficulty with LEGCO. The MOD have made it plain that they

are entirely flexible about when such a sum could be paid between now and 1997 and the means by which it might be paid: there is for example no overriding reason for it to be paid

through the mechanism of the Defence Costs Agreement.

3. I appreciate the difficulties involved, but we now have the

opportunity and the time to apply whatever lateral thinking is required to come up with a solution which does not impose

unacceptably on the very hard pressed defence budget which

might still lead to the withdrawal of the patrol craft. You should therefore take full advantage of it.

CONFIDENTIAL