CONFIDENTIAL BRITISH RESIDENCY, BAHRAIN 28 December, 1965. Please refer to Angus Rae's letter MID 203./285/01 or 6 December from the Ministry of Overseas Development to Horace Phillips, about negotiations with the Sultan of Muscat ena Oman for the exchange of an Agreed Minute etc. with him repaxding H.M.G.'s final contributions to the Muscat civil development programme. I should like you to open negotiations with the Sultan, as soon as convenient, on the general lines of Raes letter. on which I have the following comments (with welerance to his paragraphs): 2(a) You should do your best to get this point across to the Sultan and to get him to accept the first sentence of paragraph 3 of the Draft Agreed Minute: he may not altogether like it on the grounds that what happens after the ending of the subsidy is hia concern alone, but I would hope he would not be 80 ungracious as this. Il necessary you could make the point that there would be little object in H.M60.8 continuing to pay further subsidies over the next two years if they were not assured that development will continue thereafter and that the existing services will be maintained. 2 (b) This must be said for the record. But I am reasonably sure he is already seized of it. 2(c) In view of our last discussions with the Sultan I think it very unlikely that he will agree to paragraph 4 of the Draft Agreed Minute, but I leave it to your discretion whether to leave it in the draft which you present to him and to try to get his agreement. If you decide to omit it, the development of port facilities and an economic survey could be raised in connection with Gawain Bell's report. 4. I see advantage in a single agreement covering the remaining two years 1966/67 and 1967/68, but I see no reason to think that the Sultan would try to link this with the military subsidy in the manner suggested by Rae. The Sultan is fully aware that the military subsidy ends in 1967 (subject to review only in the very unlikely circumstances mentioned in the last paragraph of my letter of 30 July to him a l is a man of his word and we should not imply that we doubt this by gratuitously mentioning the milita subsidy. In the unlikely event of his raising it, it should be sufficient to remind him of what we geia by Jock Duncan and myself on this point during the negotiations last summer. I would advise you not to use the argument in the last sentence of a paragraph 4: the question of loans was, and is, a vexy bore point with the Sultan. D.c. Carden, Esq., H.M. Consul-General, MUSCAT.
