Fonterra JV sought to send then-PM to Russia

At a meeting in March last year between representatives of Fonterra and Galaktika – the partners in joint venture Unifood – and Ministry of Foreign Affairs and Trade officals, a proposal was floated seeking to engineer the first visit by a New Zealand Prime Minister to Russia in decades. Neither Bill English, Sir John Key nor Helen Clark visited Russia during their leadership.

“Made a plug for the PM to visit St Petersburg for the opening of the Fonterra/Galaktika joint venture packing facility,” an Mfat official wrote in a notes summarising the meeting.

A Fonterra spokeswoman said the suggestion the PM open the facility did not come from its staff, but declined to identify the source of the request.

The Unifood joint venture, having been quietly negotiated for at least two years, was eventually launched in December last year with no New Zealand ministers in attendance. Mfat officials had in the interim advised Fonterra to downplay the new investment as merely the “formalising” of existing relationships with Foodline.

Despite the deal seeing Fonterra pay tens of millions of dollars for a minority stake in the venture named Unifood, and it putting Anchor butter back on Russian shelves for the first time since 2013, it was not publicly announced by the dairy giant.

Mfat officials briefed on the launch – including a cocktails function in St Petersburg for senior figures from the Russian Government and New Zealand embassy officials including the ambassador – noted of the dairy giant: “They’re not looking for a big profile in New Zealand.”

This two-track strategy – understood to be at least in part driven by concerns expanding into Russia risked upsetting relations with traditional allies and trading partners who had imposed sanctions following the annexation of Crimea – is revealed in documents obtained by the Weekend Herald under the Official Information Act.

Fonterra said none of its executives were available to be interviewed about the Russian play by the Weekend Herald this week A spokeswoman instead insisted on answering questions with written answers.

The suggestion the then-PM English visit Russia to open the facility was downplayed by the spokeswoman as something “mentioned informally and just in passing during a meeting” and “no formal invitation was made to the Prime Minister’s office”.

Asked why the Unifood deal had not been publicly announced – as similar joint-ventures with German and Chinese firms had been – the spokeswoman said their farming shareholders had been kept informed “directly through our own channels”.

The documents show close co-ordination between the dairy giant and diplomats, with media queries to Fonterra about the deal from an agricultural trade journalist seeing more than a dozen Mfat and Ministry for Primary Industries officials looped into discussions around how to manage fallout, and then CEO Theo Spierings being accompanied by New Zealand’s ambassador to Moscow for meetings with the Russian agriculture ministry.

The dairy sector still accounts for almost a third of New Zealand’s exports by value, and the dairy giant has long had significant ties to the country’s diplomatic and trade bureaucracy.

This is illustrated by key staff regularly traversing the public-private divide – most recently when Philip Turner left his position as chief government lobbyist for Fonterra to become New Zealand’s ambassador to South Korea – and Mfat being nicknamed in non-dairy trade circles as the “Ministry for Fonterra Affairs and Trade”.

The dairy-diplomacy nexus with Russia has been particularly delicate in recent years, complicated by food-safety wrangles, international sanctions, chemical weapons use in English towns and election promises made by minor party leaders.

Anchor butter was effectively booted off Russian shelves in 2013 after the botulism scandal, and market access had not been re-secured when the situation became further complicated after Russia’s annexation of Crimea in 2014.

The resulting trade war between the European Union and Russia saw European dairy imports banned and Russian state TV showing bulldozers crushing giant wheels of now-illegal German cheese.

New Zealand was obliquely encouraged by Russia to help fill the resulting gap in the market, but Key’s Government suspended nearly completed free trade talks and urged exporters not to take the bait.

Key told Parliament in late 2014 trade opportunities caused by sanctions were not in the national interest: “There would be great opportunities for our companies, in particular dairy companies like Fonterra to exploit that and they’re not doing that.”

These informal sanctions from New Zealand became a cause of some political tension, with New Zealand First leader Winston Peters urging closer trading ties with Russia – leading to the coalition agreement between Labour and New Zealand First including a clause calling for free trade talks to be restarted.

That clause sparked concern amongst the EU, with its ambassador to New Zealand telling civil society figures in a briefing that moves to restart the stalled talks risked setting back parallel negations with the EU.

It took international condemnation of the use of a banned nerve agent in the British city of Salisbury – an alleged attempt by the Russia Government to assassinate defectors – for Peters to put his Russian aspirations on ice.

“If you’re engaging or assisting a party that is involved in a chemical weapon attack then all such progress must stop right there,” Peters told reporters during a recent trip to the United Kingdom.

“But it does not mean that if they come to their senses, that it may not be something in the future. But it’s not on our agenda.”

By: Matt Nippert

Source: NZ Herald

Link: https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12044102

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