TNAG-2790-FCO40-4029-Future-of-Hong-Kong-1993 — Page 24

11. South Africa: breakdown of the constitutional process, escalation of conflict in Natal, breakdown

of internal order and ethnic conflict.

12. Gibraltar: major financial scandal and/or constitutional crisis.

13. North Korea:(i) Kim Il-Sung dies; major political and/or economic destabilisation ensues; or

CONFIDENTIAL

Major commercial and investment interests; 350,000 South Africans hold British passports; a further 850,000 are eligible.

Large potential costs for the UK: in compensation in the event of a financial scandal, or in ruling Gibraltar directly if its Government refused to cooperate. Gibraltar's inclusion in the Single Market for financial services could lead to the risk of EC-wide financial scandal.

(i) Reunification and/or population exodus from North would affect Southern economy and our interests there: large international aid effort likely to be necessary. UK involved through our seat on the Armistice Commission.

up to

Support for constitutional negotiations; UN/ EC/ Commonwealth observers 100 · are operational, as are experts for the Goldstone Commission.

Some progress with Spanish, and in persuading Bossano to improve standards of government and regulation of financial services in Gibraltar. But the number of issues with Gibraltar is growing and confrontation on any one of them could lead us towards direct rule. Contingency plans drawn up for this and for freeze of assets.

(i) Cannot administer elixir of life and would not want to do so.

(ii) Resumption of withdrawal from NPT; US attacks nuclear sites; perhaps threat or use of force by North against South; more probably, terrorism by North.

(ii) Credibility of NPT. UK involved through membership of Armistice Commission/UNSC. UK also a possible target for North Korean terrorist activity, especially if they do not want to take on USA.

(ii) Action in UN and elsewhere to exert pressure on North Koreans; working on Chinese and others who might have influence; close contact with US and South Koreans.

CONFIDENTIAL

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