Hon Murray McCully Speech Minister of Foreign Affairs

"The Arab Spring"

NZIIA Conference 8.35am, Tuesday, 2 August 2011 Turnbull House

The protest movements that have swept through the Middle East and Northern Africa since December last year have collectively overturned the landscape of the Arab world.

Some have said that the impact of the Arab Spring on world affairs is on par with the fall of the Berlin Wall.

So what has changed?

At the big picture level, there is widespread support for genuine democratic and economic reform.

We are operating in an environment where old assumptions are no longer valid.

There is a new awareness that leaders cannot afford to be complacent about large sections of their populations who feel their future is hopeless.

What is not clear is what the new order will be.

Today's conference is a timely opportunity to stop and think about the impact these changes might have on New Zealand's interests and on our engagement with partners.

It's fair to say that no-one predicted that a 27 year old street vendor setting himself on fire last December would trigger a movement that led to the fall of the Tunisian government only a few weeks later.

When that unrest spilled over into neighbouring Egypt, resulting in the fall of Mubarak, the world truly took notice.

The seismic shift in Egypt, the heart of the Arab world, sent ripples into the entire region.

To Egypt's West, Libya then descended into a state of civil war.

Algeria and Morocco have come through periods of unrest and are now embarking on a series of limited reforms.

To Egypt's east, Shi'a/Sunni tensions were exacerbated to the point that troops from other GCC countries were sent into Bahrain, and the Yemeni President has been forced to leave the country, leaving Yemen with an uncertain political future.

Thrown into this turbulent mix, we have Islamic suspicion of Western intervention, the Arab and Israeli perception of threat from Iran, and stalled bilateral negotiations between Israel and Palestine.

Why has this happened?

We can find the same drivers across the region: a young demographic, high unemployment, widespread dissatisfaction with ruling elites, economic disenfranchisement, and access to new social media.

However, we may never be able to explain how those drivers converged such that the fear barrier was broken, leading to the toppling of multiple authoritarian leaders within months; in some cases, weeks.

What we do know is that we are now dealing with a series of very different leadership models and high expectations for a better future.

While elites remain unchanged in many countries, Arab leaders will have to become more responsive to their people.

And economic enfranchisement, human rights and democracy will be part of the future trajectory of the region.

As will resistance to those changes from those on the extremes.

Events in the Arab region have implications for countries as far away as New Zealand.

The changes present opportunities, but there are risks - we should not be naïve about that.

While there are new governments in place, it will take commitment and tenacity to create genuine and sustainable democracies.

Taking a positive view, we have an unprecedented opportunity to work with Arab and international partners to promote development, democracy and modernisation.

Tunisia and Egypt offer real opportunities for political, social and economic reforms.

But we know the transition to democracy will not be straight-forward.

It will require the new governments and leaders to act constructively in the interests of their people.

And it will require the people to use their new-found freedoms responsibly and to be realistic in their expectations.

And we need to be realistic that the increased uncertainty in the political landscape may have dangerous implications for regional security.

Collectively, we cannot allow events elsewhere in the region to soften our resolve on other pressing issues, such as Iran's nuclear programme.

And the international community needs to ensure that its response to the Arab uprisings is not detracting attention from the Middle East Peace Process at the very time when a resolution to this conflict is most urgent.

Taking stock of the implications of the Arab Spring for New Zealand, we can now assert a number of conclusions:

Of course our immediate concerns in response to the unrest in the region were consular.

The Embassy in Cairo worked 24 hour shifts ensuring that about 200 people wanting to leave Cairo and 35 wanting to leave Libya were successfully evacuated.

We are especially grateful to the British, Canadians and Americans, who provided invaluable consular assistance under very difficult circumstances.

So we can be pleased that New Zealand's response to the immediate challenge was handled well.

Our current assessment is that our major trading markets in the region are largely unaffected by recent turmoil.

That said, we have been negatively affected by the closure of several medium-sized markets, such as those in Yemen and Libya worth about $50m each.

And there is still reason for concern on two fronts:

If EU dairy markets in the region are disrupted, then EU product could be diverted onto the global market, depressing global dairy prices.

Clearly this is something New Zealand exporters will need to continue to watch.

Equally, the EU and other partners may seek to support the transition process in Egypt and Tunisia by putting preferential trade arrangements in place.

This, together with other assistance they are offering, may affect New Zealand's market share or market access.

So that is something we'll be dealing with over the next few weeks and months. However, it is the longer term implications that I want to focus on today.

The Arab Spring came at a time when our engagement with the Middle East and North Africa was growing.

Take the Gulf area as an example.

New Zealand has significant commercial and political interests in the GCC states, underpinned by significant expatriate populations.

The GCC represents New Zealand's seventh largest market for goods, taking $1.2 billion of New Zealand products in the year to December 2010.

8,000 Gulf Students are currently studying in New Zealand. Eight of Fonterra's top 30 global markets are in the Arab region.

We are within a hair's breadth of concluding an FTA with the GCC which is hung-up on the bilateral issue of live sheep exports to Saudi Arabia.

But our relationship with the Gulf is not just about trade.

We have real political relationships in the region which we need to take to the next level.

For example, the United Arab Emirates, the only place in which we opened a new post last year, is an increasingly important partner on a number of fronts.

Amongst other initiatives, we are currently exploring joint development projects in third countries, which could be a model for our engagement with others in the region. In Egypt, we are engaging with civil and political institutions, in niche areas such as electoral support.

We are supporting the economic development agenda of Egypt's interim government.

And we are engaged in an agricultural development project in Egypt's North Western desert to convert mine-cleared land into productive pastures, crops and orchards.

New Zealand has lent its support to the UN resolutions on Libya.

There are differing views in the international community about the enforcement of those resolutions, but it is fair to say there would not have been a lot of point in a resolution without teeth.

It was telling that the Arab League, amongst others, was supportive of some form of action.

We have been monitoring developments closely and I have in recent weeks asked our Ambassador to Cairo to visit Benghazi to see how we might best engage with the Transitional National Council.

These examples illustrate the point that though small, New Zealand can make practical contributions in specialised areas.

Turning to the region as a whole, there is a significantly changed political landscape.

On balance the glass looks half full in respect of Egypt, Bahrain and Tunisia.

But we only have to look at what's happening in Libya, Syria and Yemen, and the glass looks half empty.

Just over the past weekend over 100 people were reportedly killed in the streets of Hama.

Importantly, beyond those regimes, we need to factor Palestine and Iran into the dynamic.

A key part of this equation of regional security is how the international community deals with the Middle East Peace Process.

The unresolved conflict between Israel and its neighbours remains a significant trigger of unrest in the region.

In the wake of the Arab Spring, the changing regional dynamics make the need to resolve this conflict even more pressing.

And to ensure that the constructive Palestinian voices of moderation prevail, we need to see progress now.

It is my firm view that resolving a basis for a two-state solution can only be achieved by getting the two parties into direct talks.

We also need stable regional players committed to that settlement if it is to endure, lest the unrest in neighbouring countries provide a cover for continued violence.

Egypt is playing a crucial role in mending the fracture between Gaza and the West Bank, and in the negotiations between Israel and the oPt; so it's important that the new government in Egypt is able to maintain these brokering roles.

Sitting behind these developments is the issue of Palestinian statehood.

This will find its way into the UN General Assembly in September this year if another solution is not forthcoming.

Taking the issue to the United Nations General Assembly to seek an imposed resolution is less than ideal.

For a start it will not work, because such an initiative will attract a veto in the Security Council.

And such a strategy, designed to isolate Israel and some supporters, clearly risks rendering direct negotiations even more difficult to achieve.

However, in the absence of a credible process to advance discussions directly between the parties, the UN resolution process will remain attractive to the Palestinian side.

I have been very clear that New Zealand will study the actual words contained in any such resolution before deciding how we should deal with it.

We have not ruled out voting for such a resolution, despite the wishes of some of our good friends.

Our relationships with both Israel and the Palestinian Authority are good.

We are one of a small number of countries trusted by both sides.

That is a deliberate position.

We pride ourselves on being fair minded and even handed.

That is the character of our voting record in multilateral institutions.

On the Palestinian side we are providing support for the state building efforts of Prime Minister Fayyad.

We are also formalising regular Foreign Ministry dialogue with the Palestinian Authority.

And we have just finalised plans to take a leadership role in a de- mining programme with the United Nations Mine Action Service, now supported by other donors, designed to free up many hectares of West Bank land otherwise capable of agricultural production.

These are small but symbolic steps of constructive engagement.

On the Israeli side, our conscious effort to re-balance the relationship has seen a reopening of their embassy in Wellington after an eight year absence.

They know that we understand their need for a guarantee of security as part of any settlement.

And they know that we understand the need for a firm international position on Iran's nuclear ambitions as part of that improved regional security environment.

So we can clearly say that we enjoy good, constructive relations with both parties.

Over recent weeks I have directly urged representatives of both Israel and the Palestinian Authority to find their own basis for direct discussions to establish the ground rules for two states to co-exist peacefully, side-by-side.

It's fair to say many of us are deeply frustrated by the current situation.

The most frustrating aspect of the current stalemate is that, broadly speaking, the parties are not that far apart.

During my visits to the oPt and Israel, the various actors were talking in almost identical terms, about settling on the 1967 borders, plus or minus landswaps of 4-5 or 6%, with appropriate buffer zones.

The very clear impression I received in those engagements and in talking to Quartet Representative Tony Blair last week is that if we can get the parties to the table we should be able to get a deal.

New Zealand is ready to support a negotiated process where we can.

Clearly, maintaining a security zone would be a precondition of any settlement acceptable to Israel.

We have supported peace between Israel and Egypt in the Sinai since 1982, through our support of the MFO operation.

In fact, a New Zealand General currently heads the MFO operation.

We have made a firm offer to support any operation that might maintain a buffer zone between Israel and Palestine as part of a negotiated settlement, and both sides have made it clear that they would want us to be there.

At this point, you might ask why I am so focused on this issue within the context of the Arab Spring.

The situation in the oPt is a fuse that is capable of igniting an entire regional conflagration.

We simply cannot afford to let developments in the wider Arab region divert much needed attention away from the urgent need to resume meaningful negotiations between Israel and the Palestinian Authority.

In conclusion, Ladies and Gentlemen, whilst the Arab Spring may seem distant from New Zealand, the reality is that it directly affects us more than many New Zealanders may think - strategically, politically, economically and socially.

We can't afford to lose ground in the region, particularly at a time when its importance to us is growing. I believe that there are sufficient positives to make early investment in the region worthwhile for New Zealand on many fronts.

We will play our part in international efforts to maintain pressure on the Gaddafi and Assad regimes to prevent atrocities against civilians.

We will continue to support outcomes that allow populations to express their democratic voice.

We will continue to support real economic reforms and sustainable development.

And we will maintain our niche contributions to regional security.

Ladies and Gentlemen, I am optimistic that the Arab Spring can deliver lasting and positive change to the region.

Will it ultimately deliver on the aspirations of the Arab people?

I am confident it can.

But this transition process will not be straightforward.

We cannot take the changes for granted.

Across the region events are changing quickly, in some cases taking the international community into unknown territory.

Our challenge is to be clear about how to support the positive changes and at the same time to manage the significant inherent risks.

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