Key: Saudi sheep deal helps Gulf FTA

Muhammad bin Nayef bin Abdulaziz Al Saud and John Key (Patrick Gower / Newshub.)
Muhammad bin Nayef bin Abdulaziz Al Saud and John Key (Patrick Gower / Newshub.)

Prime Minister John Key says the controversial $11 million Saudi sheep deal has helped pave the way for a free trade deal with the Gulf states, which could be signed next year.

Mr Key met with Saudi Arabia's Deputy Prime Minister Muhammad bin Nayef bin Abdulaziz Al Saud at the United Nations overnight.

He said a deal could "possibly" be signed next year.

"I think it is making progress actually. I'm quite optimistic about it. These countries are wealthy and they consume a lot of our products and they're growing quite rapidly. We don't always think about it that way.

"Take Dubai, it's the home of Emirates, if we get more and more products on their planes, it's a lot of consumers."

Trade Minister Todd McClay will travel to the capital Riyadh next week to progress the deal. It comes after the Saudi sheep scandal, where Kiwi sheep were shipped to the kingdom and millions of taxpayers' dollars spent on a farm, in what critics say was an effort to curry favour with the regime.

Mr Key says the model farm which the Government set up, which included sending over 900 pregnant ewes, "helped" the negotiations.

"I think those things help, they get access to our products, they can see what we can produce and get a sense of what we're all about. They can see the technology and capability we've got and it's a sign of good faith when there was clearly a demonstrated issue with a particular investor."

That particular investor was Saudi sheep importer Hamood Al-Ali Al-Khalaf, who lost millions when New Zealand stopped live exports of sheep.

Asked whether the issue with Mr Al Khalaf was sorted, Mr Key replied: "That's my sense of it."

The deal is not just with Saudi Arabia, but includes other Gulf states like Kuwait, with New Zealand exporting about $2 billion to them each year.

Negotiations with the Gulf states began in 2007 but stalled in 2009 and have been on hold ever since, with Saudi Arabia believed to be the roadblock.

The dispute with Mr Al Khalaf has been blamed by trade insiders, leading to the sheep deal overseen by Foreign Affairs Minister Murray McCully which is now under investigation by the Auditor-General.

Labour leader Andrew Little says while pen could be put to paper on the deal soon, New Zealanders want to know what the true cost of it is.

"So far we've seen flying sheep, dead sheep, a farm in the middle of the desert," he says.

Mr Little has just returned from a conference in Montreal hosted by the Canadian Prime Minister Justin Trudeau where he tried to explain what had happened to other leaders.

"Last week when I was explaining this situation to some colleagues and counterparts from other countries, apart from rolling on the floor laughing, it was difficult to get into describing this situation without thinking 'how on Earth did we get into this situation?'

"There are real issues here we need answers to."