TNAG-2981-FCO40-1473-Guangdong-nuclear-power-station-project-1982 — Page 72

ACTION

CONFIDENTIAL

XIII

8

Mr Manzie felt that a discussion with the French was necessary before Ministers were approached. Mr Moss agreed, saying that the prime need was to maximise background information before putting proposals to Ministers or to the Prime Minister. Mr Donald mentioned

If this

that a particularly important aspect of the current situation was the Prime Minister's high regard for Sir Walter Marshall. This too, would have to be considered in putting a recommendation to the Prime Minister. Mr Donald continued that a response to the French approach was necessary, and said by way of background that during the Prime Minister's visit the Chinese Minister for Economic Relations had been invited by the Prime Minister to London; the Chinese Prime Minister had also underlined Chinese expectations that the UK should match financial offers on favourable terms such as those received already on other projects from Belgium and Denmark. Mr Donald felt that 10% over 15 years would not appeal to the Chinese when set against this background. He felt the best approach would be to explore French intentions. Mr Manzie said that one approach would be to attempt to secure a joint GEC/Framatome bid in exchange for the French government ensuring that Alsthom Atlantique were removed from the scene. was not possible, he felt the UK should pursue the conventional island business only. Mr Thomson said that the French would seek in return the removal of Westinghouse/NNC from the scene which he felt was not immediately desirable. Mr Manzie felt that it was not possible to hesitate any longer. GEC were impatient, and preferred to go with the French. Even if the Chinese went for a US option, the UK need not necessarily be fatally disadvantaged. But success for an all- American bid depended on the removal of political obstacles to direct importation of nuclear hardware and technology from the USA, which seemed unlikely. Mr Havelock stressed that the worst case in immediate prospects would be an all-French bid in the absence of an energetic UK approach. He acknowledged that all options carried some risk, but felt that the overriding need was for the UK to come off the fence and take decisions.

9 Mr Donald asked about US credit terms. Mr Manzie said that EXIM Bank were contemplating 11% over 15 years. Mr Thomson speculated that if the US could overcome their problems, the Chinese could use US participation in the Guangdong project as a lever on US policy in other areas. Mr Donald felt that, in the light of US/Taiwan relations, the US were unlikely to get into that position. He repeated that there was no harm in going to the French immediately to compare notes. Mr Uden said that the Anglo-French option was potentially dangerous only if the US came to a decision on nuclear exports to China. Mr Havelock said that thepricing difference between Framatome and the US/UK option could be crucial; while comparisons were difficult, it seemed that Framatome's price would be perhaps one-third that of the UK/US nuclear island.

10 Mr Moss was concerned that clear and firm signs of interest in an Anglo-French approach was still lacking from the Chinese. Mr Donald felt that a decisive move was unlikely until terms had been offered. Mr Manzie said that a realistic package and a financial offer would probably be decisive: he reminded the meeting that Framatome and GEC had already submitted bids to the Chinese.