New Zealand’s fuel supplies may be saved by a little-known adjunct to our trade agreement with Singapore.
There is now a flurry of diplomatic activity with the island state to confirm the Agreement on Trade in Essential Supplies (ATES) which is attached to the Singapore- New Zealand Free Trade Agreement.
The agreement was agreed by the two countries in October last year and provides for what is essentially a food-for-fuel deal.
Prime Minister Christopher Luxon spoke to his Singaporean counterpart, Lawrence Wong, last night.
In a statement after the call he said: “We’re working hard to ensure New Zealand’s fuel needs are met amidst the conflict in the Middle East, which is causing disruption to supply and higher prices at the pump. With a third of New Zealand’s fuel refined in Singapore, it was great to speak tonight with Prime Minister Lawrence Wong.
“We agreed on the importance of allowing essential goods, including fuel, to keep flowing between our two countries.
“When I visit Singapore in May, we will sign the Agreement on Trade in Essential Supplies, a deal that will help keep supply chains flowing for fuel, food and other products.
“Building on the great platform we’ve built with one another, we also talked about what further work our Governments can do together as we navigate through these supply chain challenges.”
Meanwhile Trade Minister Todd McClay left last night for a World Trade Organisation meeting in Cameroon, where he will meet with Singapore’s Deputy Prime Minister and Trade Minister, Gan Kim Yong.
He will also discuss the agreement but told POLITIK that the two governments had agreed not to impose export restrictions on a list of essential goods.
The list included food, fuel, medical products and construction products.
The importance of being exempt from export restrictions is underlined by what is currently happening in Korea.
New Zealand imports 48 – 51 per cent of its fuel from refineries in South Korea.
But that country has started to impose export restrictions, and its Ministry of Trade, Industry and Energy has instructed refiners to cap exports of gasoline, diesel, and kerosene at 100% of their 2025 monthly levels, limiting shipments to prior-year volumes.
Singapore is our second largest supplier, providing 31 – 33 per cent of our fuel.
We, in turn, provide around 14 per cent of Singapore’s food imports.
A Cabinet source told POLITIK that Singapore is concerned that the international disruption to trade and the rapidly escalating costs of shipping could endanger its imports, which provide 90 per cent of the island’s food.
That is why the ATES agreement is attractive to Singapore.
The New Zealand- Singapore ATES agreement is regarded as world-leading, and last night, in a joint statement with Australian Prime Minister Anthony Albanese, Singapore PM Lawrence Wong committed to “accelerate negotiations” on an Arrangement on trade in essential supplies with Australia.
“As we’ve stepped up to a comprehensive strategic partnership between our two countries, but obviously added also the essential supplies component, put more definition around that, for in the case of a crisis, we would provide Singapore with food, they would provide us with fuel and pharmaceuticals,” said Luxon yesterday.
“And as we go to May, we’ll talk more about that, but we want to deepen the relationship between New Zealand and Singapore quite a lot.
“We see Singapore, Australia and New Zealand as quite critical partners in this region and we want to continue to deepen that up.”
Luxon is planning a visit to Singapore in May this year.
But the proposal to “deepen up” the relationship is a revival of the idea from eight or nine years ago to essentially move to an Australian-style Closer Economic Relationship with Singapore and when Australia did the same the three countries would form a trilateral economic partnership.
That stalled in part because of frictions between the Ardern Government and Singapore over foreign house buying restrictions and the decision to end an agreement for the Singapore Air Force to base a squadron of F-15 jets at Ohakea.
Luxon suggested at his post-Cabinet press conference that, though there is no formal trilateral agreement, the three countries were working informally together anyway.
“Already, increasingly, between the three Prime Ministers and what we’ve been doing together over the last two years, we are doing more and more together, the three of us, naturally,” he said.
“We do that bilaterally, we do it as a threesome, we’re doing it in a number of different ways.
Media: “Is it an option that the three would become one market in some way?”
Luxon: “A lot of hypotheticals, but I’m just saying to you, we have put in place mechanisms to make sure that we’ve got key relationships deepened and broader with a key partner of ours in the region, which is important.”
The agreement with Singapore is just a part of what is emerging as a complex plan of Government action.
Associate Energy Minister Shane Jones met with Australian State Energy Ministers on Friday and proposed that there be an ANZAC pact for the two countries to form one fuel market.
“We’re a relatively small market for these global oil giants,” he said.
Much rests on the 2024 National Fuel Plan.
That outlines a series of response phases to any disruption to fuel supply.
“We are very much only in the initial stage of that,” said Finance Minister Nicola Willis yesterday.
“We will be making announcements later this week about how we envisage that plan applying to this scenario in the first instance.”
Meanwhile, Associate Energy Minister Shane Jones, who is working with Willis on the response to the crisis, has moved to harmonise New Zealand fuel specifications with those of Australia.
This means that the same tanker could discharge in either country.
And Willis will today unveil her relief for low-income families affected by the fuel price.
“This conflict is impacting just about every New Zealander,” she said.
“It has pushed up the price of petrol, diesel and jet fuel, and those increases are already hurting our people and our businesses.
“Unfortunately, the Government is not in a position to mitigate that impact on everyone.”
Willis referred to the Fitch ratings downgrade from Friday and said the agency was watching Government debt levels very closely.
“Borrowing large sums of money to insulate the New Zealanders from this conflict, a conflict that is not of our making, would increase debt and debt servicing costs and potentially lead to a credit rating downgrade,” she said.
“Why does that matter?
“Because that would further push up borrowing costs for the Government, for business and for households.
“However, we are very conscious that the conflict is particularly impacting low and middle-income working families with children, many of whom have no option but to drive the kids to school and drive themselves to work.
“Therefore, the Government will shortly be announcing timely, temporary and targeted measures to support these households most affected by fuel price increases.
“Cabinet did take decisions today (Monday), and we will announce the details of this tomorrow (Tuesday).
“The approach we are taking is consistent with the findings of the Royal Commission of Inquiry into the response to the COVID pandemic, which highlighted the damage that can be done by untimely, untemporary and untargeted spending.”
It has been an impressive start by the Government in managing the crisis.
Incredibly, Labour Leader Chris Hipkins last night declined to offer any ideas from his party on how to manage the crisis.
“We are not the Government,” he said.
That stands in stark contrast to the detailed set of proposals offered yesterday morning by the Greens.
Governments tend to do well when they successfully manage a crisis.
Labour’s landslide in 2020 was a result of their management of Covid.
It would be too much to expect the same result at the ballot box this year for National, but they would settle for a victory, however small.
The election is now National’s to lose.
