Clueless or cynical?

datePosted on 15:19, February 9th, 2021 by Pablo

So, it turns out that Air New Zealand accepted a contract to service three gas turbine engines for the Saudi Arabian Navy through its wholly owned subsidiary, Air New Zealand Gas Turbines. It turns out that Air NZ has a side bar in the gas turbine maintenance business and even has dedicated service facilities for maintenance on military machines (of which the US and Australian navies are clients). Air NZ claims that the contract with the Saudi Navy was actually let by a third party but has not said who that is. Some have speculated that it might be the US Navy, using Air NZ Gas Turbines for what is known as “spillover” work.

This has just come to light via the dogged persistence of a TVNZ reporter who faced more than eight weeks of stone-walling from the company before he got an answer. When he did, he was told that the contract was “small” (worth $3 million), signed off by people well down the executive chain of command, and let in 2019, when current National MP Chris Luxon was CEO. Apparently MFAT and government ministers were not advised of the contract offer, which is doubly problematic because doing business with the Saudi military is controversial at the best of times and Air New Zealand is 52 percent owned by NZ taxpayers through the Crown (as Minister of State Owned Enterprises Grant Robertson being the minister responsible). The issue involves more than potentially bad PR. It has potential diplomatic implications.

Revelation of the business relationship has sparked a bit of a furore. With typical understatement, the Greens are calling for an investigation into Air NZ involvement in Saudi genocide and war crimes in Yemen. Other leftists extend the critique to any relationship between Air NZ Gas Turbines and the US and Australian militaries. Right-wingers say that it is a simple commercial decision and so is business as usual, plus Saudi Arabia is a “friendly” country while Iran is not (yes, they get that simplistic). Much frothing has ensured.

Iranian news outlets have picked up on the story, questioning why a trade partner like NZ would provide support to a major military and political rival in the Gulf region. NGOs like Amnesty International are also aghast at the news, especially since NZ provides millions of dollars in humanitarian aid to Yemen in an effort to help alleviate the humanitarian crisis produced by the proxy war conducted between a Saudi-led Arab military coalition and Iran-backed Houthi rebels in the North and West of the country. Houthis compromise the majority of the 45 percent of Shiia Muslims in Yemen, with 55 percent of the population being Sunni Arabs and various smaller sects in the South and East.

in order to put context on the situation, let’s consider some background. The fault lines of contemporary Middle Eastern conflicts are drawn along the Sunni Arab-Persian Shiia line. The Sunni Arabs, most of who have quiet understandings with Israel that permit discrete cooperation between them and the Jewish state, are implacable enemies of the theocratic Shiia regime in Teheran. Although born of historical enmity between the two branches of Islam, in modern times the conflict between Arabs and Iranians has been accelerated by Iran’s efforts to be recognised as a regional power, including by acquiring nuclear weapons. Most of the principals in the conflict are authoritarians, but the Sunni Arabs have the backing of the US and other Western nations, much of which is specifically due to the shared hostility towards the Iranians and their purported “rogue” international behaviour (including their nuclear weapons desires and support for irregular fighting forces in and out of the Middle East). Iran, for its part, receives support from Russia, China, North Korea, Cuba and Venezuela precisely because of its anti-US and anti-Western orientation since the 1979 Revolution, so the vicious circle of homicidal enmity and distrust has global reach.

Over the years the main conflict zones between Arab Sunnis and Iranian Shiites have been in Lebanon, Syria (the Alawite regime led by Bashar al-Assad is a sub-sect of Shiia Islam), Iraq and Yemen. Because of the fear of escalation into major war if they fight directly, physical confrontations between Iran and the Sunni Arab states are conducted by proxies such as Hamas, Hezbollah, the Syrian military and the Houthis (for Iran), and (for the Arabs) various Sunni militias and/or governments in the contested areas, as well as Israel directly and indirectly.

The results of this multi-dimensional conflict ebb and flow over time, but the situation today is that the Iranians have increased their influence in Iraq after the US invasion and fall of Saddam Hussein, have successfully (along with the Russians) propped up the Assad regime against ISIS, Kurds, Turkey and the US-led military coalition that began as an anti-ISIS force and then mission-creeped into a regime change-focused (and now departed) occupation inside Syria, have maintained the stalemate in Lebanon between Hezbollah and various other armed sectarian movements while threatening Israel, continue to support Hama’s standoff with Israel in Gaza and have helped prevent the Houthis from being cleansed from Yemen by the Saudi-led and US-supplied Sunni Arab military coalition. Domestically, the Iranian regime, while fronted by an elected executive and parliament, is dominated by conservative clerics and military hard-liners who have a poor human rights record and little tolerance for dissenters at home or abroad. They are no angels but are a force to be reckoned with in Middle Eastern politics.

For its part, Saudi Arabia is a despotic, deeply corrupt oligarchy with a notoriously poor human rights record at home, involvement in war crimes in Yemen on an industrial scale, responsibility for the murder of dissidents abroad (because Jamal Khashoggi was not the only one) and which has within its ruling structure people who support, fund and arm Sunni extremists world-wide. It is, in a phrase, an international bad actor. One that is deeply mired in a proxy war in Yemen in which its Navy is used to enforce a maritime blockade of Houthi-held regions, including the blockade of humanitarian assistance to displaced and starving civilians.

Against that backdrop, why on earth did Gas Turbines go through with the contract? Did it ask about what naval ships were the end users of the equipment (since it could be argued that supplying equipment destined for support vessels was ethically different than supplying equipment destined for warships)? Did a bunch of clueless engineers sign off on the deal because it was within their authority as a commercial transaction and they did not even consider the PR, domestic political or broader geopolitical ramifications of the end user? Or, because middle management recognised the political sensitivities involved, did the contract offer get pushed up the hierarchy to the parent company and its senior management at the time but that is now being denied?

Was there anything in place to prompt a “trigger” for higher level vetting of the contract and/or automatic consultation with MFAT and the minister responsible for SOEs? After all, this type of potentially controversial transaction would seem to fall under the “no surprises” bureaucratic dictum dating back to the 5th Labour government, and it would only seem surprising if the foreign ministry and minister responsible for the Crown’s stake in Air NZ were not informed prior to signing the deal.

Or did Air NZ management decide that they could slide the contract under the radar, perhaps using the cover of existing contracts with the US Navy (which does in fact have a logistical support and weapons supply arrangement with the Royal Saudi Navy, which uses a mix of French and US-built ships in its fleet). If so, did they think that they could keep knowledge of the contract away from government as well as the public, or did they let someone in a position of political authority in on the secret? If all of this was above-board, why did Air NZ delay responding to the reporter’s requests? Why did Grant Robertson initially say that the issue was “an operational matter” for Air NZ and why has MFAT said nothing about the affair?

Given the potential political fallout and diplomatic blow-back, can we really take at face value assurances that no one outside of Gas Turbines had knowledge of the contract when it was negotiated?

NZ has good trade relations with both Saudi Arabia and Iran, the former much more extensive than the latter. NZ has good diplomatic relations with both countries, although unlike other Western countries it has been viewed as an honest interlocutor by the Iranians in the past. Given the ongoing conflict between the two countries, it would seem that providing any sort of material assistance to the military of one rather than the other is like sticking a NZ pinky into a pot of boiling water. It could get burned.

NZ professes to have a “principled but pragmatic” foreign policy. Semantics aside, the decision to accept the contract to service Saudi Navy turbine engines was neither principled or pragmatic. No due diligence or political risk assessment appears to have been done during the contract negotiations. Instead, the deal reeks of myopic commercial opportunism disengaged from the larger context and consequences of the transaction.

Whether than was caused by cynicism or cluelessness is the question of the day.

17 Responses to “Clueless or cynical?”

  1. James Green on February 9th, 2021 at 16:23

    “Instead, the deal reeks of myopic commercial opportunism disengaged from the larger context and consequences of the transaction.”

    I’ve just come off reading your Academic Decline post and I feel you can draw a line connecting them: it is much more likely to be cluelessness than cynicism, there simply isn’t the broad knowledge out there for something like this to trigger a red flag.

    After all our main trading partner is a government that is on a par with Saudi Arabia when it comes to interference with it’s citizen’s lives and atrocities committed (China just has a better PR sense than the Saudis).

  2. Pablo on February 9th, 2021 at 17:53

    Yeah, I have seen all the moral relativist arguments about NZ trading with the PRC, Russia, the various oil oligarchies in the GCC etc. I agree that they are all bad. I also think that what is different here is a NZ SOE with a direct commercial connection to the military of a regime credibly accused of war crimes and ethnic cleansing/genocide outside of its borders. The only comparison I can make is if Fonterra contracted with the PRC to serve cheese slices at Uyghur concentration camps or Fletcher contracted to construct the buildings in those camps, and neither one of those is an SOE.

  3. Atrocitator on February 9th, 2021 at 22:44

    In the words of Miliukov, “is it stupidity, or treason?”

    And in the words of Richard Pipes, whatever Miliukov meant to say, the answer is always, inevitably, treason.

  4. Scud on February 10th, 2021 at 00:30

    It’s been nearly ten or so yrs since I last spoke to anyone who worked with TAE at RAAF Amberley QLD, back then it was still an AirNZ subsidiary company.

    Where I asked a question over a few beers at RAAF Bowls Club about overseas Defence Contract work.

    The answer given, Is there is a list of approved countries vetted by NZ’s MFAT, Oz’s DFAT, with both the Australian Defence Dept & NZ’s MoD approval as well. Plus it had to IAW the various Arms Treaties, end user certifications & 3rd party IP licensing etc. If a certain country was not that list or there were certain caveats to a certain country, then prior approval was to be sort with the various government departments for a risk assessment, Security also including Political assessments and any other associated assessments like the UN and or arms treaties etc.

    So yes MFAT & NZ MoD should’ve been told that AirNZ was bidding as a 3rd party contract for the repair of the Saudi Navy Gas Turbine Engines.

    Now my theory at what possibly has happened, since the selling off those so-called “Non Core AirNZ assets” of TAE and Safe Air to Foreign owners. That AirNZ has lost the Subject Matter Expertises in dealing with Foreign Defence Maintenance Contracts at Senior Management level and possibly even at Broad level as it was no longer in the game to say the least. It all sounds like it was done on the hoof at AirNZ senior to broad level management to raise funds etc.

    Had they still owned the likes of Safe Air & TAE, then AirNZ would’ve still had the correct SOP’s & Management Teams in place to prevent this almighty cockup. Obviously some muppet thought it’s just an engine and no would be silly a enough to ask silly questions?

    P.S both TAE and Safe Air were sold off and I believe under the orders of NZ Treasury, Bling English & old mate Donkey as they were “Non Core Assets” according to the Informal Defence Rumour Network I belong to.

  5. James Green on February 10th, 2021 at 21:27

    Safe Air a “non-core asset”, that’s pretty incredible since they are critical to keeping the Air Force flying.

    That’s some interesting insight though Scud.

  6. peter sim on February 11th, 2021 at 20:29

    Air lines need avgas. Where does avgas come from?

  7. Sam Brown on February 12th, 2021 at 05:39

    I’d rather crash in the ocean than aid in a crime against humanity. That’s how much I care about stupid avgas.

  8. James Green on February 12th, 2021 at 19:55

    New Zealand gets just 5% of our oil from Saudi Arabia. These figures change around every year though as oil is such a liquid market that a small buyer like NZ can afford to be choosy, much oil is imported from Malaysia and Brunei for example.

    https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-statistics-and-modelling/energy-publications-and-technical-papers/energy-in-new-zealand/

  9. Scud on February 13th, 2021 at 17:05

    Yes James,

    There were a lot of shocked people at what Donkey, Bling, NZ Treasury, the likes of Luxon and his AirNZ Broad. Did by selling off Tasman Air Enterprises (TAE) and Safe Air as they were & still are world class organisations which were known to think outside of the square.

    Even the US Foreign Military Sales Office reps for the A4’s, C130’s and the P3’s saw Safe Air & TAE as they go to people if they had no luck with Marshalls and Cobham from the UK. Yet our Government and our airline threw it all away for short term economic bastardly. Because if anyone follows the Aviation & Military Sector, the real money is in the Deep level maintenance and Systems upgrade sector. Not bums on seats or how much cargo you can stuff into an an aircraft before you max out on take off or all up weight which ever comes first.

    There was a very good rumour going around, that the sale of Safe Air & TAE was to set up AirNZ for a possible sale if the National Government had got back in, but that went all to poo when Donkey suddenly resigned which we all know why now and Bling losing the election?

    This is also from the same government that also approved the sale of Airwork NZ Ltd which was one of NZ’s old Aviation Companies to the Chinese which also did a some Military work & NZG work.

    But the real tragic story which has only come to light over the 3 or 4 days now, is the Chinese owners are now liquidating NZ’s last remaining Aircraft Construction & design Company which produces some very unique and niche aircraft for the world & the Sth Pacific Region. This sale to the Chinese even pissed off the Australian MFAT, AusAID & the ADF (RAAF) as they were buying a number of Aircraft for the Sth Pacific countries for Military & Civilian use.

    Rumour has it within NZ & Australia Aviation circles is that the Chinese have Asset Strip the Company in order to avoid its obligations to the NZ Foreign Investment Broad and its promises to the then NZG that won’t move its design office and construction of Aircraft to China.

    Have tired to raise this issue with Megan Woods and Michael Woodhouse but typical NZ Labour Party Middle Class toff’s appears they don’t give a toss about NZ losing highly skilled jobs in the STEM area.

  10. Sam Brown on February 16th, 2021 at 17:50

    We still have to approach geo politics with a new approach at a time when the pacific leaders forum and APEC is fracturing. That will take hard cash. At least another 10 billion on top of the already 20 billion NZDF recapitalisation fund. Once we have an Air Combat Force of our own others will take notice when we say to them stop being human rights abusers.

  11. Atrocitator on February 16th, 2021 at 20:44

    ” Once we have an Air Combat Force of our own others will take notice when we say to them stop being human rights abusers”

    Back in the 90s, when we did have an Air Combat Force, others didn’t listen. Right now Myanmar is not listening to the USA, despite the USA having a very formidable air combat force. Why would NZ with 6-18 air superiority fighters have better luck?

  12. Sam Brown on February 17th, 2021 at 11:01

    Chinas strategic direction doesn’t align with New Zealand’s. China has 1 billion people to feed and New Zealand has an abundance of resources so long term there will be conflict over those resources.

    First of all, today’s state is a withering decay announced by John Key so that the state no longer functions. In contrast and you can draw a conclusion is The Government have to do wonderful things with market competition and ruthless manipulation. Men declare they are in touch with their emotions and woman are hard, stoic, and a social climber and now we have to care for the marginal and victims.

    So we shouldn’t be seduced by the feminism y’know that NZDF should be defunded for some theory of a future. We are dealing with China subjecting land and joyfully reinventing itself and rejecting any cultural germs and attack to anyone who’s in full retreat.

    China I don’t believe is the centre of the conflict. There’s a global struggle going on for freedoms and we should fully give in to this way of life. Where our customs stop and the struggle to be tolerated begins the task is here. To proceed we will require the alliance of not only climate refugees it has to be conceived as the same struggle.

    All the desperate calls for the unification of everyone’s struggles and we almost cried when Jacinda put on the burka which had proven simply impossible to unify. to construct a shared space for all of us who come from different places. You can not unite different nationalities with different languages just by mandating the English language will require the utmost finesse and dedication.

    What we will suffer is just a general plate of horrors. To really grasp the horrors it has to be thrown could you imaging hunting endangered whales for food. Or why not say back in the ’80s no one listened to us when we had an Air Combat Force and make safe spaces from patriots.

    We need brave politicians who can spend taxpayer money wisely and spread resources efficiently with clear moral organisation and a clear awareness of the immense task and build a new society fit for the challenges of the twenty-first century. Sadly there is no desire for a future vision. So we will deal with the chaos the usual way. She’ll be right mate and procrastinate. Clearly not the way.

    What should a majority government be compelled to do with its power. Lets not keep our old achievements. We all know we live in new times where tremendous things are happening. I’m not blinded by old philosophies the market mechanics are grinding people out in so many ways. In a post-market economy more and more undermines private property where something new is emerging and some new society is emerging with very low homeownership rates.

    What happens now. How do we organize work, housing, organising peoples lives and its a horrible vision of an alienated NZDF?

  13. Atrocitator on February 18th, 2021 at 00:31

    “Or why not say back in the ’80s no one listened to us when we had an Air Combat Force and make safe spaces from patriots.”

    Sorry was that a response to me?

  14. Barbara Matthews on February 18th, 2021 at 08:38

    What’s with Evensong?? Morrison and the Isis bride? Good to see Ardern standing up to the Aussie knocking machine.

  15. Pablo on February 20th, 2021 at 11:38

    Sam:

    Another reader asked me to interpret what you wrote since s/he could not decipher your comment. Alas, I do not understand it either. Hence my lack of comment on it.

  16. Sam Brown on February 20th, 2021 at 18:01

    It’s kind of sad that the mega catastrophe is now regularly forcasted so much so that a hundred thousand deaths is the only way of imagining great social change. I want name names fir ethical reasons but I guess iv been guilty of that too. We could keep playing the small game and keep cutting expenditure.

    I prefer not thinking about what kind of society New Zealand is becoming. One where war between great states is possible and the great changes that have to happen with incrementalism and budget cuts.

  17. Sam Brown on February 20th, 2021 at 18:05

    Tried to edit comment it never works

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