Murray McCully

Hon Murray McCully

Minister of Foreign Affairs

22 June 2012

Speech

Speech to Otago Foreign Policy School

The Middle East unfolding: dreams and dramas in the early 21st century

May I start by placing on record my thanks to Professor Bill Harris and his team from Otago University for inviting me to address the Otago Foreign Policy School once again.

I intend to speak about both the strategic and economic significance of the Middle East to New Zealand.

Sadly, we are reminded by our television screens most evenings that the Middle East remains the world's major source of potential and actual conflict.

We now have, in effect, a civil war in Syria.

The Assad regime is treating its own civilian population with almost unbelievable brutality.

In doing so it is thumbing its nose at the international community.

The UN Supervision Mission, which includes six New Zealanders, has had to suspend its operations.

As a country we have expressed our dismay that the UN Security Council appears to be impotent in the face of mounting brutality.

And we have made contributions to a number of the funds supporting civilian refugees.

Our message to the five permanent members of the Security Council is that if they cannot find a way to work with each other in situations of this sort then the credibility of that organization will continue to suffer.

Tragically, the Middle East is no stranger to conflict.

The fact that many of these conflicts have their origins in past millennia is no reason at all why we should not try to solve them.

One of the world's most enduring, complex and dangerous conflicts is between Israel and the Palestinians.

The basic elements of this conflict are well known.

For too long, the Palestinian issue has been the fuse that threatens to ignite wider conflict in the Middle East.

Festering differences that find their origins in this conflict have done much to inspire extremist attitudes affecting the wider region and beyond.

Defuse this conflict and the region will be able to focus on the other contentious issues that threaten to destabilize it.

Chief amongst these is the Iranian nuclear programme.

Indeed, it is my perception that the Israelis see the question of Iran as inextricably linked to Palestine.

At the end of the day, to Israel, both are about security.

It follows that strong international action to deny Iran access to nuclear weaponry is an important element in arriving at a sensible and durable settlement in relation to Palestine.

For the record, New Zealand supports a very firm message to Iran on this question supported by strong sanctions.

Oil imports from Iran into New Zealand have reduced from nearly NZ$200m worth in 2009 to zero last year - a result of decisions made by Refining NZ, which the New Zealand Government strongly supports.

And I am intent on promoting legislation similar to that enacted in Australia last year to provide the capacity to impose autonomous sanctions.

In an environment in which the UN Security Council appears to have difficulty agreeing about these matters it is my view that New Zealand needs to have the capacity to impose sanctions outside the UN framework.

Why, some may ask, should New Zealand, located down in the South Pacific, trouble itself about these challenges so far away?

The first response to that question, of course, is that conflict in the Middle East has the capacity to cause instability in the wider region and beyond.

The second response is that we do believe we can make a difference.

For the past 30 years New Zealand troops have been based in the Sinai with the MFO.

Since 2009 the MFO have been under the command of a New Zealand general.

Right now, New Zealand de-mining experts are engaged in a programme designed to start the de-mining of the nearly 400 square kilometres of unusable land on the West Bank.

New Zealand is the lead funder of this project, now joined by a variety of other donors.

The reason we are leading both the funding and the actual demining is that a project of this type requires a strong working relationship with both the Israeli and Palestinian authorities.

For that reason, it had been in the "too hard" basket.

Few countries could attempt such a project.

But I am confident that, over time, we will make it work.

My point here is that while we are small and very remote from the Middle East, we can make a difference.

We take a very careful, considered and constructive approach to issues associated with the Middle East Peace Process.

We appear to have won the respect of both sides and work effectively with both.

This was reinforced by my visit to the region a few weeks ago.

Despite our lack of either size or proximity we were given valuable time and a good hearing by all of the senior players: Prime Minister Netanyahu and his senior Ministers in Israel, President Abbas, Prime Minister Fayyad and all the key players on the Palestinian side.

My visit could hardly have come at a more interesting time.

Prime Minister Netanyahu was intending to formally call elections on the morning I met him.

Within 24 hours the Opposition Kadima Party had folded into his Government.

With allies to both the centre and the right there is an opportunity for the next year or so in Israel politics for Prime Minister Netanyahu to reach an understanding with the Palestinian leadership.

We, of course, have urged him to engage in direct talks.

While Europe is distracted with challenges of their own, and the US plays out Presidential elections this year, the immediate prospects are not ideal.

But I remain hopeful that this window in Israeli politics will not be wasted.

And we will certainly be alert to any useful support we might give to progress.

Unless something useful emerges in this regard, there is a real prospect that a resolution on some form of Palestinian statehood will come before the United Nations General Assembly later this year.

I have said publicly that if that happens, we will examine the words used in the resolution and the intent behind them in determining how we will vote.

But while we are open to voting for such a resolution, we do not delude ourselves into imagining that it will bring us any closer to an actual solution.

Before moving on to talk about economic aspects of our relationship with the Middle East I thought I might say a brief word about developments in Egypt.

We are obviously watching the situation there very carefully.

There are clearly reasons for real concern about the ongoing stability of Egypt and the impact on the immediate neighbourhood.

But there are also some prospects that, in their own way, the various actors will broker an accord.

This is a deeply complex situation.

Resolution of the ambitions of the various players was never going to occur in a straight line.

We need to hope that the tortuous events currently playing out result in a sensible, if not very transparent accord.

I took the opportunity on my recent visit to meet with two key Muslim Brotherhood leaders, Speaker of the now suspended House Saad el-Katatny, and Mohammed Khairat al-Shater, initially the Muslim Brotherhood presidential candidate whose candidacy was struck out by the Courts due to a recent period of incarceration courtesy of President Mubarak.

In both cases I sensed a level of realism about the nature of the process that lay ahead - one in which a range of interests would need to be accommodated - and an understanding that any new government would be judged by its ability to deliver economic outcomes for the Egyptian people - something that can only be achieved after substantial inwards investment.

That, of course, is only possible in an environment in which there is relative political stability, and reasonably clear commercial rules of engagement.

I would now like to turn briefly to the economic and trade opportunities in the Middle East.

While there are significant opportunities throughout the region, I want to focus in particular on the natural gateway into the region that is the Gulf States.

In my three years as Foreign Minister we have opened only one new post in the world, and that has been in the capital of the United Arab Emirates, Abu Dhabi.

This decision was guided not just by the excellent air links that exist between New Zealand and the UAE, mostly courtesy of Emirates and Etihad, but also by the huge economic opportunities that exist.

For a variety of reasons New Zealand enjoys an excellent relationship with the UAE.

They take a close interest in the Pacific.

We greatly appreciate their insights into their own region.

And, on a less formal note, close observers might have noticed during last year's Rugby World Cup in New Zealand that seated next me, clothed in distinctive All Black supporters' garb, as my personal guest at both semi finals, and the final, was Sheik Abdullah, the UAE Foreign Minister.

The Gulf countries account for nearly 25% of the world's crude oil supply.

They have a collective GDP of around US$1.5 trillion, forecast to grow to $1.8 trillion by 2015.

Not bad for a group of countries with a total population of only 40 million.

One of the smallest GCC states, Qatar - population 2 million - has the world's highest per capital GDP at US$102,700.

It also had the world's highest GDP growth rate last year of 18.7%.

Qatar was the largest source of imports to New Zealand from the Gulf - at a little over one billion dollars' worth of oil.

Our exports to Qatar at $26 million (last calendar year) suggest there is significant room for improvement in our trade balance.

My briefing notes on a visit to Qatar earlier this year told me I was the first New Zealand Foreign Minister to visit since Don McKinnon in 1984, which suggests that there is room for us to pay them a little more attention.

Qatar is not the only phenomenally wealthy Gulf state.

Kuwait has one of the world's largest sovereign wealth funds, worth around $300 billion in assets globally.

The potential for us to grow the trade and economic relationship is huge.

Already New Zealand exports around $1.6 billion of goods to GCC countries annually.

Saudi Arabia, by far the largest of the Gulf states with a population of 28 million, is a significant partner.

Most of the 8,000 Gulf students studying in New Zealand come from Saudi Arabia.

For that reason the largest diplomatic mission in New Zealand today is the Saudi Consulate in Auckland.

While all of the Gulf states have significant wealth, they all confront one very significant challenge: the challenge of future food security.

In 2010 GCC countries imported nearly 90% of their food at a cost of over US$25 billion.

Saudi Arabia has 1.7% of its land mass in arable production.

For most Gulf states the number is lower - Qatar 1.6%, the UAE and Kuwait 0.8% for example.

Each of the Gulf states has one huge strategic objective - that of securing food supplies into the future.

It is not rocket science to work out the nature of the opportunity for New Zealand - not only one of the world's premier food producers, but the holder of a significant proportion of the world's agricultural intellectual property.

While our world class science and technology still give us significant scope for growth, New Zealand will in future be constrained by the fact that 43% of our land is in agricultural production.

There is little arable land left.

Increasingly the opportunities for agricultural growth will be overseas.

Specifically in relation to the Gulf states, the opportunities will lie in their near neighbourhood - in Africa, where 60% of the world's undeveloped agricultural land is to be found.

The formula I am proposing here is simple: GCC oil wealth partnering New Zealand agricultural intellectual property in Africa to deliver food security for Gulf states into the future.

The Gulf states too recognize the obvious opportunity for food security partnerships with New Zealand.

A recent visit from a senior delegation from the Qatar National Food Security Programme , responding to an invitation issued during my visit, has already led to commercial agreements being pursued.

And there have been discussions about a food security framework agreement between the GCC and the New Zealand Government.

The example of Qatar leads me to the other area where I think we can be getting more out of our relationships in the Gulf.

I refer here to the appetite for purchasing New Zealand's public service intellectual property.

I mentioned earlier that New Zealand has a high quality brand in the Gulf.

Well, Gulf countries are becoming more and more focused on implementing reforms and improvements to their health, education and environmental services among others.

They want to build institutional structures based on world best practices, and New Zealand is near the top of their list of prospective suppliers.

However, we have only lately recognised that our public sector systems and knowledge are internationally tradable commodities.

In that respect we have some catching up to do.

There are now established and successful private sector consultancies from New Zealand attracting interest from state sector entities operating in the Gulf.

They are going some way to meeting the significant demands for services.

However we can leverage more off our positive international profile by having businesses working together with the government under one New Zealand brand.

To drive this strategy of commercialising our intellectual property and building partnerships - beginning in the Gulf - I have recently appointed a Special Representative for Government Commercial Partnerships.

The Special Representative will engage with governments, local private sector players and potential Gulf business partners, to derive for our taxpayers another stream of income from the investment they have already made in our public sector systems and technologies.

The broader point I would like to make here is that as a small trading nation, we do need to have a much more inventive attitude as to how we make an income in the world.

And in the Gulf there is a clear opportunity to do this.

Ladies and Gentlemen, as I have outlined, New Zealand's engagement with the Middle East in the 21st century is vitally important for many reasons.

Our responsibilities to global security dictate that New Zealand contribute to peace-building efforts in the trouble spots of the Middle East.

In our broader relationships, however, we cannot afford to be complacent.

We cannot stick to our comfort zones or remain reliant on our traditional trading models.

This Government's commitment to greater prosperity for our own country means we must make a strong and intelligent effort to obtain closer economic ties to our friends in the Gulf.

I welcome the choice of the Middle East as the theme for your conference.

I thank you once again for the invitation to speak to you, and I wish you success in your discussions over the weekend.

Thank you.