VZCZCXYZ0000
OO RUEHWEB

DE RUEHWL #0773/01 2750332
ZNY CCCCC ZZH
O 020332Z OCT 06
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3332
INFO RUEHBY/AMEMBASSY CANBERRA PRIORITY 4558
RHEHAAA/NATIONAL SECURITY COUNCIL WASHDC PRIORITY
RUEKJCS/OSD WASHINGTON DC PRIORITY
RHHMUNA/CDR USPACOM HONOLULU HI PRIORITY
RHHJJAA/JICPAC HONOLULU HI PRIORITY

C O N F I D E N T I A L WELLINGTON 000773 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR P (FAGIN), PM/RSAT, EAP/FO, EAP/RSP, AND EAP/ANP 
NSC FOR VICTOR CHA 
SECDEF FOR OSD/ISA (JPOWERS) 
PACOM FOR J01E/J2/J233/J5/SJFHQ 
 
E.O. 12958: DECL: 09/28/2016 
TAGS: PGOV PREL ECON MOPS NZ
SUBJECT: DELAY IN USG APPROVAL OF NEW ZEALAND'S A-4 PLANE SALE A 
FISCAL AND POLITICAL HEADACHE FOR GNZ 
 
REF: A. 9/21/06 RICCI/EMBASSY E-MAIL (NOTAL) 
     ¶B. 8/29/06 RICCI/EMBASSY E-MAIL (NOTAL) 
     ¶C. WELLINGTON 449 
 
Classified By: Charge d'Affaires David J. Keegan, 
for reasons 1.4(b) and (d) 
 
¶1.  (SBU) This message contains an action request at para 
¶8. 
 
¶2.  (C) Summary:  The New Zealand Defence Force is 
evaluating how the further delay or cancellation of the 
GNZ's proposed sale of its last air combat planes to a 
private U.S. buyer could impact defense planning.  NZDF 
will probably be able to readjust its spending to make up 
for the shortfall, or else may ask the Government for 
additional funds.  The political ramifications of the delay 
could be more difficult for the Government: the opposition 
National Party claims that Labour purposely presented the 
sale as a done deal before the election in order to gain 
votes.  The Nat's linkage of the issue to Labour's campaign 
could not come at a worse time for the Government, already 
facing voter unrest over its clumsy handling of accusations 
that the party knowingly misused taxpayer money on its 
campaign.  Embassy Wellington anticipates media interest in 
this case, and would appreciate guidance soonest.  End 
Summary. 
 
¶3.  (C) Ref A reported that a September 21 meeting between PM 
Assistant Secretary Hillen and New Zealand Ambassador Roy Ferguson on 
September 21 identified two factors complicating New Zealand's 
proposed sale of its A-4 Skyhawk attack aircraft to a U.S. private 
company: 
 
i) the proposed sale of U.S. combat aircraft to private hands in the 
U.S. raises new U.S. policy concerns in the post 9/11 era.  Comments 
from the Departments of Homeland Security and Defense are still 
pending before  the State Department can make its decision, and 
 
ii) there are several active investigations on the resale of 
"non-demilitarized" property, some of which DoD may refer to the 
Department of Justice for possible criminal proceedings. 
 
---------------------------------------- 
Implications for NZDF: Show Me the Money 
---------------------------------------- 
 
¶4.  (C) The delay in the sale could negatively affect New 
Zealand Defence Force (NZDF) planning. Last month (Ref b), 
Vice Chief of the NZ Defence Force (NZDF) David Bamfield 
told DoD that GNZ has included money from the sale as part 
of NZDF's 2007 naval budget.  At that time, NZDF Assistant 
Chief for Development Brigadier Rhys Jones told the DATT 
that NZDF's Long Term Development Plan (LTDP, see ref C) assumes the 
money from the sale will be available for the Defense Force's general 
use in future years.  While it is not specifically tied to the Navy's 
budget, Rhys Jones said the upgrades for the navy's ANZAC Frigates 
are the most likely program to be affected if the sale does not go 
through. 
 
¶5.  (C) On September 26, Deputy Secretary of Defense 
Christopher Seed confirmed to the DATT that the NZDF Long 
Term Development Plan (LTDP) includes money from the sale 
of the eight A-4 Skyhawk fighters and eight Aeromacche 
fighters as the source of funding for various LTDP and 
other Defense programs.  He also confirmed that although 
the sales are not directly tied to navy programs, the ANZAC 
frigate upgrades are most likely to be affected because of 
NZDF's spending schedule. 
 
¶6.  (C) Seed said the Government would have to look at a 
range of options to manage the shortfall of funds if the 
sale does not go through.  These could include a decision 
to sell the eight Aeromacches separately since they do not 
require U.S. approval, which would net an estimated NZD 75 
million out of the estimated NZD 110 million expected for 
the sale of all 16 planes. Another option would be to make 
adjustments to the planned redevelopment of Ohakea Air 
Base; to replace or make changes to the planned maintenance 
and upgrades to New Zealand's only supply ship, HMNZS 
Endeavour; or to request that the Government allocate more 
money to the LTDP.  Seed seemed confident that if the sale 
is delayed NZDF could find ways to adjust its spending to 
 
do everything planned under the LDTP, using the funds from 
the sale once it goes through.  He indicated that while the 
GNZ has not yet calculated the costs or implications if 
the sale is canceled, they are beginning to consider the 
possibility. 
 
--------------------------------------------- ---- 
Yet Another Potential Election Problem for Labour 
--------------------------------------------- ---- 
 
¶7.  (C) While the NZDF may be able to adjust its spending 
if the A-4 sale is delayed or canceled, the Government will 
likely have a harder time dealing with the political 
ramifications.  The deal to sell the Skyhawks and 
Aermacchis was announced two weeks before the September 
2005 general election.  The opposition National Party has 
recently asked Defense Minister Goff for a full explanation 
of why the deal remains stuck a year later, and has pointed 
out that the planes' continued maintenance is costing 
taxpayers an estimated NZD 130,000 (USD 82,000) a month, on 
top of the NZD 1.5 million (USD 945,000) already paid in 
agents fees. National's Defense spokesman Murray McCully 
has accused Mark Burton Minister for Defense at the time of 
the announced sale, of "pre-election window dressing" for 
having trumped up the sale without indicating it might be 
difficult to get USG approval.  In response, current 
Defense Minister Phil Goff said the Government's 
announcement of the sale noted that it was contingent on 
State Department clearance, a process which the GNZ has 
been unable to speed up. Goff also pointed out that because 
of the limited market there are no other buyers on the 
horizon. 
 
-------------------------- 
Comment and Action Request 
-------------------------- 
 
¶8.  (C) While Kiwi voters do not normally focus on defense 
issues, this case may prove an exception. National will use 
the delayed or canceled sale to reinforce its contention 
that the Government has not only misled the public but also 
has once again exercised bad judgment on a defense matter. 
The Labour Government has been criticized for poor defense 
procurement decisions in recent years and its 2001 decision 
to disband the combat air wing was strongly derided by 
National and former defense officials at the time. In 
addition, National's claim that the Government used the 
sale as an election ploy ties into its broader effort to 
attack Labour for its 2005 election tactics. Labour is 
already flailing badly over its decision to defy the 
findings of a soon-to-be- released Inspector General report 
that says Labour illegally spent taxpayer money for its 
campaign. 
 
¶9.  (C) Action Request:  We understand that Washington 
agencies are working on talking points that Mission New 
Zealand can use to answer future media inquiries about this 
case.  Although the Parliamentary recess has pushed the 
issue off the front pages for now, we anticipate we will 
get questions so would appreciate receiving guidance 
soonest. 
 
 
Keegan