It appears New Zealand officials set out to deliberately mislead their Saudi Arabian counterparts that New Zealand would be willing to resume the live sheep trade.
Details of the deception are contained within 800 pages of documents released under the Official Information Act yesterday.
After the Labour Government imposed a ban on live sheep exports in 2008, the issue had been an ongoing irritant between New Zealand and Saudi Arabia.
The new National Government began to deal with the ban in 2009.
Throughout that year New Zealand and Saudi Arabia had been negotiating a Memorandum of Understanding (MoU) on the possible resumption of trade in live sheep for slaughter.
On December 16, a senior MFAT official, Stephen Harris in an email to a recipient whose name has been redacted said: “NZ has a MoU negotiation underway with Saudi Arabia in which very high animal welfare requirements have been set by us as a precondition.
“These requirements are such that it is unlikely the Saudis will be willing to meet them.”
Nevertheless the negotiations continued.
In May 2009 an unnamed official prepared a “response” on Saudi criticism of New Zealand’s failure to reinstate live sheep shipments.
The response emphasised that “since 2004 New Zealand has been negotiating towards a bilateral Agreement with Saudi Arabia to potentially re-open the way for the export of live sheep.”
That written despite the Government knowing Saudi Arabia could not meet the standards New Zealand was asking for in the agreement.
This paper blamed the whole row on “misleading media reporting”.
But three months later, in August, in a report from an unnamed official to an unnamed recipient in the Beehive recounting a meeting between Foreign Minister, Murray McCully; Trade Minister, Tim Groser and Agriculture Minister, David Carter, the New Zealand deception was exposed.
Mr Groser said what was needed was a “sophisticated fix on live sheep”.
“He noted … the history of the MoU negotiations<” the official reported.
“All three Ministers agreed that the negotiation had been dilatory and likely perceived by Saudi Arabia as not conducted in good faith or even as duplicitous.”
The problem the Ministers faced was that the live sheep ban had become political in Saudi Arabia, leading to a deterioration in New Zealand relations with the Kingdom and other Gulf states.
In mid 2010 New Zealand’s Embassy in Saudi Arabia reported that “Riyadh and GCC (Gulf Co-operation Council) capitals are viewing this as a litmus test of the relationship — one being watched at the highest levels of Government (possibly even by the King and the Crown Prince).”
It comments on a letter written to the Prime Minister by Saudi live sheep exporter, Hamood Al Khalaf, which the Embassy says “notes an increasing sense of injustice and frustration of the New Zealand Government acting in bad faith, of being strung along for seven years and incurring significant financial losses while a phantom MoU negotiation was undertaken.”
The Embassy said the exporter and investors accused the Government of mis-representing their positions.
They said they had been denigrated by animal welfare groups, they had lost faith in the New Zealand Ministry of Agriculture and were watching the goal posts being moved regularly.
By December that year MFAT was worried that the “uncertainty over the New Zealand policy in relation to live sheep exports to Saudi Arabia is negatively impacting (words redacted) and if not well managed could have worrying spill over effects on our broader regional economic interests.”
At some point early in 2011 it appears that the Auckland National Party personality, Michelle Boag, introduced Murray McCully of George Assaf, who represented the business interests of Mr Al Khalaf in New Zealand.
Those interests including a specialist Awassi sheep breeding farm in the Hawke’s Bay.
Also at the meeting was Graham Leversha, a business associate of Mr Assaf and a venture capitalist with his company, Laurium Asset Management.
Ms Boag has told POLITIK that Mr Leversha had hopes that if he could broker a deal between Mr Assaf and Mr McCully than Saudi Arabian investors might put money into Laurium.
So after the initial meeting, in July, Mr McCully appointed Alex Matheson, who had worked for him on the World Cup, to negotiate with Mr Al Khalaf “on the possibility of a joint breeding venture and other aspects of a future food partnership.”
In fact what Mr Leversha had proposed was that the Hawke’s Bay farm would be shifted offshore.
New Zealand would supply it with breeding stock which in turn would produce the live lambs required by the Saudi Arabians.
One possible site was in Malaysia.
By mid-2011 the details were beginning to be fleshed out.
By now it was decided the farm would be in Saudi Arabia.
In an email to MFAT CEO, John Allen, Mr Leversha wrote that his proposal had the objective of allowing New Zealand to complete its free trade agreement with the Gulf States Co-operation Council.
Among the details discussed by Mr Leversha is his suggestion that “there is some comforting we will need to provide their (Al Khalaf’s) representative in Auckland.”
He also says that if the Free Trade Agreement is resolved then there are investors in Saudi Arabia who will invest in his company which will enable him facilitate other trade with the Kingdom.
In November 2012 Mr Hamood formally sets out the details of the deal in a letter to Mr McCully after the pair had had a meeting.
“I formally confirm my agreement to both your offer of a capital contribution and a contribution for investment and research and development.”
Mr Hamood says: “In accepting your offer I would like to take the opportunity to expand on some points we discussed that, I believe could help with New Zealand’s wider trade objectives in the Gulf region and in building the relationship between our two countries.
Mr McCully’s reply to that letter confirms that the “capital contribution” will be $4 million as well as another $6 million to invest in the partnership with Mr Hamood for research and development for the purpose of producing and exporting Awassi and New Zealand livestock for breeding.
What is clear from these documents (and these are only half the full release) is that New Zealand got caught out by its own duplicity.
It led the Saudi Arabians to believe the live sheep shipments would be resumed but the Government had no intention of that happening.
It was only when Mr Hamood, who had a vital interest in the shipments resuming, used his political leverage in Saudi Arabia to hold up the Free Trade Agreement that Mr McCully was forced into spending $10 million to get the relationship with Saudi Arabia back on track.