NZ, Israeli business relations seen as sailing through sour diplomatic affairs

The diplomatic breakdown came in a year when commercial relationships appeared to be deepening

Soured diplomatic relations between New Zealand and Israel aren't expected to derail increasingly cosy business dealings between firms in the two nations.

Contact between the nations' official emissaries was put on ice when Israeli Prime Minister Benjamin Netanyahu recalled ambassador Itzhak Gerberg in December and blocked New Zealand's envoy from travelling to the Middle East nation after the Christmas Eve vote on the UN Security Council resolution that Israeli settlements violated international law and undermined a two-state solution.

The diplomatic breakdown came in a year when commercial relationships appeared to be deepening, with a film co-production agreement signed in 2016 and the nations on the verge of completing an innovation deal for joint research and development. Israeli embassy staff have said those initiatives are still going ahead, and New Zealand Jewish Council spokeswoman Juliet Moses expects the diplomatic issues will be short-lived and won't impede commercial ties.

"The UNSC resolution and the New Zealand government's role in promoting it shouldn't, in and of itself, negatively impact existing commercial ties between the two countries," Moses said in an email. "These commercial ties have grown steadily over recent years and the 56-strong delegation of Kiwi business professionals led by Simon Moutter last year reported back that there are tremendous opportunities to be gained for Kiwi companies that are doing business with Israeli companies."

University of Otago international relations professor Robert Patman says any ill-will would be short-lived, with New Zealand enjoying good relations across the entire Middle East.

"I think New Zealand has gone out of its way to be constructive and friendly towards Israel, and I think the relations between the two countries in bilateral terms is quite good and I don't see this being a long-term problem," Patman told BusinessDesk. "New Zealand has tried to balance its deepening friendship with Israel on the one hand, with, on the other hand, its deepening friendship with the countries of the Gulf Cooperation Council in particular and also with Iran."

Patman said officials would have seen the UNSC resolution as in line with their long-held policy objectives and as trying to bring forward the peace process which New Zealand "would see in the long run is in the political, economic and strategic interests of all concerned" rather than for any trade benefit.

University of Auckland international relations associate professor Steve Hoadley said New Zealand has tended to build long-term relations with its partners and while the vote wouldn't have hurt its trade ambitions, making "dramatic gestures is simply not New Zealand's style".

Qatar's ambassador to Australia and New Zealand, Nasser Bin Hamad Al-Khalifa, welcomed New Zealand's sponsorship and support of the resolution, saying Qatar, "highly appreciates New Zealand's courageous and principled stance".

Negotiations for a free trade agreement with Bahrain, Oman, Kuwait, Saudi Arabia, the United Arab Emirates and Qatar, who collectively make up the Gulf Cooperation Council, concluded in 2009, although a final signing of a deal has been delayed by concerns over the way a major Saudi investor was treated when New Zealand blocked exports of sheep for slaughter. Trade Minister Todd McClay has been visiting Kuwait and the UAE to press for a conclusion to the deal, continuing the regular trips New Zealand ministers have made to the region in recent years.

Slumping oil prices reduced the value of two-way trade between New Zealand and Middle East nations over the past two years, although New Zealand's trade deficit shrank to just $110 million in the year ended June 30, 2016, from $2.42 billion in 2013. New Zealand exported goods worth $1.96 billion to the Middle East in 2016, including $26.2 million of products to Israel. On the import side, New Zealand bought $2.07 billion of goods, of which $115.5 million came from Israel.

Auckland businessman Martyn Levy said there were a number of delegations preparing to go to Israel this year after the trip in 2016 that has since led to several deals being closed as a result of the visit.

"Given Israeli companies' significant successes and experience in the commercialisation of technologies and in growing and exiting businesses and in raising venture capital, Israel represents a great commercialisation pathway for NZ companies seeking to commercialise technologies on the global stage," Levy said. "A number of delegations to Israel are already scheduled for 2017 to progress existing opportunities and also establish new relationships and gain ideas in emerging and critical market verticals, where Israel is a leading global player."

While Israel holds opportunities for burgeoning high-tech firms, Otago University's Patman sees New Zealand's trading relationship with the wider Middle East as a "nice fit".

"Many of these countries are rich in oil and gas, particularly in the Gulf Cooperation Council nations, but they actually lack farmland for food production, and therefore they have a high demand for imported food and drinks - New Zealand's highly regarded meat and dairy export go towards meeting those demands," Patman said.


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