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### Viewing cable 06WELLINGTON773, DELAY IN USG APPROVAL OF NEW ZEALAND'S A-4 PLANE SALE A

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06WELLINGTON773 | 2006-10-02 03:32 | 2011-04-28 00:00 | CONFIDENTIAL | Embassy Wellington

`

    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

`