8 Jun 2015

Closing Sheepgate behind him?

1:36 pm on 8 June 2015

The Foreign Minister has been in the Middle East this week before New Zealand takes on the presidency of the United Nations Security Council during July.

Murray McCully

Murray McCully Photo: RNZ / Chris Bramwell

It represents one of the most enduring and intractable international conflicts.

But Murray McCully must have surely felt relieved to be out of the country and no longer facing questions about his role in the so-called Sheepgate controversy.

Mr McCully and the Government have come under increasing pressure over the $11 million payment made to a wealthy Saudi businessman to kit out his farm in Saudi Arabia. That sum included flying 900 sheep to the farm.

Initially when the matter was first raised the Government argued it had paid the money to avoid the possibility of legal action from the businessman, Hamood Al Ali Al Khalaf, who was reportedly upset by the cancellation of live sheep exports in 2003.

The Government blamed Labour for the predicament. It said Labour misled Mr Al Khalaf about investing in New Zealand, which it said was particularly what upset Mr Al Khalaf, who lost money as a result of the ban.

The Saudi businessman's anger apparently then had a negative effect on Saudi Arabia's commitment to the proposed free trade agreement between New Zealand and the Gulf States.

Opposition parties say the Government effectively paid a bribe to Mr Al Khalaf to try to pave the way for progress to be made in the beleaguered trade talks.

That is an accusation both Mr McCully and the Prime Minister, John Key, have rejected.

They said the payment of money, which helped set up an agricultural hub in Saudi Arabia for New Zealand businesses, was above board and followed appropriate procedures.

Yet over the past week or two, their story has changed.

Having earlier said there was the threat of legal action by Mr Al Khalaf, that claim is no longer stated with such certainty. There is no evidence such a threat existed.

Nor is there evidence the Saudi businessman's anger was prompted by the Labour Government's decision to ban live sheep exports, rather than a later decision by the National Government to keep the ban in place after reviewing it.

Mr Key has further tried to confuse the situation by accusing Labour of considering doing the same sort of deal with Mr Al Khalaf while it was still in government in 2007.

The Prime Minister referred to Cabinet papers which proved his point.

But Labour has called his bluff, with former Trade Minister Phil Goff and his senior colleagues saying they have no objection to the release of the papers.

Labour's trade spokesperson David Parker sought Parliament's permission on Thursday afternoon to table the two documents, which he said proved it did not consider paying money to the Saudi businessman in an effort to placate him.

Government MPs blocked the tabling of the documents and reporters must now wait for National to release it under the Official Information Act, although that is now expected to happen sooner, rather than later.

If the papers prove, as Mr Goff and Mr Parker say they will, that at no time did Labour consider doing a deal with Mr Al Khalaf, then Mr Key's accusation looks disingenuous.

Was it, as Opposition parties asserted, simply a desperate attempt to shake off questions about the Government's deal with Mr Al Khalaf?

But if it was, will it harm Mr Key and his government? And will the public accept the Opposition argument that the money paid to set up a farm in Saudi Arabia was essentially a bribe and corrupt?

Or will voters accept the Government's argument that the deal was done to promote New Zealand agriculture in Saudi Arabia, as well as offset the Saudi businessman's anger at the live sheep ban?

The transaction undertaken by the Government is, at best, unusual. Indeed, Mr McCully has conceded it has never been done before.

The deal might also set a precedent.

What other businesses might now demand payment if they argue their commercial interests have been undermined by a legitimate government decision?

The issue is also complex and government ministers have done their best to make it appear even more opaque.

If a straightforward case of ponytail pulling does not dent support for the Prime Minister and his government, then this latest political controversy is unlikely to either.

At the very least, though, taxpayers deserve a simple and clear explanation about why they should pay to upgrade a farm in Saudi Arabia.

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