7. SOME OF THE FRENCH OFFICIALS WE HAVE SPOKEN TO WERE RELUCTANT TO ADMIT THAT LI PENG HAD ALSO SAID THAT WHATEVER SOLUTION WAS FINALLY AGREED WOULD HAVE TO BE ACCEPTABLE TO HONG KONG AND,
BY IMPLICATION, TO THE BRITISH GOVERNMENT, BUT ABOUDARAHAM IS QUITE SURE THAT THIS POINT WAS MADE DURING THE DISCUSSIONS. THE DREE IN THEIR ACCOUNT WENT OUT OF THEIR WAY TO PLAY DOWN THE IMPORTANCE
OF HONG KONG.
8.
ABOUDARAHAM HAS MADE IT CLEAR TO THE CHINESE AND TO FRENCH OFFICIALS THAT IN HIS VIEW ANY PROPOSAL WHICH LEFT GEC AS SUB - CONTRACTORS TO ALSTHOM ATLANTIQUE WOULD NOT BE ACCEPTABLE TO THE BRITISH. COUNSELLOR TECHNOLOGY OFFERED THE SAME VIEW TO FRENCH OFFICIALS ON A PERSONAL BASIS. THEIR REPLY WAS TO CLAIM THAT ''THEIR PROPOSAL WAS THE ONLY PRACTICABLE SOLUTION IF THE PROJECT WAS TO BE LAUNCHED IN THE NEAR FUTURE.
9. ON FINANCIAL TERMS THE FRENCH CONFIRMED THAT THEY AGREED TO MATCH THE CONSENSUS RATES OFFERED BY THE PRIME MINISTER IN PEKING OF 10% OVER 15 YEARS. THE FINANCING WOULD BE IN US DOLLARS. THE CHINESE DID NOT OBJECT TO THIS BUT FRAMATONE WILL EXPECT SOME GOVERNMENT GUARANTEE TO COVER FLUCTUATION IN EXCHANGE RATE. ABOUDARAHAM HAS ALREADY SPOKEN DIRECT TO HAVELOCK ABOUT THE FLEX IBILITY THAT THE FRENCH WERE PREPARED TO OFFER ON FINANCING LOCAL
COSTS.
10. THE CHINESE DESCRIBED THE FRENCH OFFER AS A LITTLE STEP'' TOWARDS A SATISFACTORY FINANCIAL AGREEMENT. THE FRENCH TOLD THEM THAT THERE MIGHT BE SOME SLIGHT MARGIN FOR MANOEUVRE ON THE EXPORT CREDIT INSURANCE PREMIUM, AND ALSO ON THE PRICE REVISION CLAUSE IN THE CONTRACT. AS TO QUANTITY, THE FRENCH HAD SAID THEY COULD ENVISAGE FINANCING THE WHOLE OF THE FOREIGN EXCHANGE COSTS (IE EVERYTHING OTHER THAN CHINESE LOCAL COSTS).
11.
BAQUIAST MADE A STRONG PLEA THAT WE SHOULD NOT UNDERCUT THE FRENCH CREDIT OFFER, FOR THIS WOULD ELIMINATE ANY PROSPECT
OF PROFIT FOR US AS WELL AS THEM. HE ALSO ASKED THAT WE SHOULD NOT REVEAL THAT WE KNEW THE TERMS OF THE FRENCH FINANCIAL OFFER.
WE SHOULD NOT GO BEYOND ADMITTING THAT WE HAD HAD AN EXCHANGE OF VIEWS ON THE PROJECT IN GENERAL TERMS.
FRETWELL.
LIMITED
FED
ADDITIONAL
DISTN
GUANGDONG
NUCLEAR
NED
TRED
HK &GD
MR. GIFFARD
MR. DONALD
MR. GILLMORE
2
COPIES
001
TO:
CONFIDENTIAL
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