Cabinet papers reveal the Government has spent more money than originally thought on creating a demonstration farm on a Saudi Arabian millionaire's farm.
Cabinet papers released by the Minister of Foreign Affairs Murray McCully reveal the Saudi businessman, Hamood Al-Ali Al-Khalaf and his company, the Al Khalaf group, threatened to seek up to $30 million of compensation after the New Zealand Government banned the live export of animals for slaughter.
Mr Al Khalaf bought farms in New Zealand to breed Awasi sheep and export them live to be slaughtered in Saudi Arabia, however ten years ago that practice was banned, and caused his relationship with the New Zealand Government to turn sour.
The Cabinet papers reveal Murray McCully said the matter had become a serious irritant to the relationship with Saudi Arabia and it posed a major threat to New Zealand's trade and economic interests.
The Prime Minister has acknowledged that Mr Al Khalaf is one of the barriers to securing a free trade agreement with the Gulf States.
The papers show the Al Khalaf group was going to seek compensation of up to $30 million, but the New Zealand Government refused to enter talks of compensation.
Instead, it is spending $6 million building an agri-business hub on Mr Al Khalaf's farm, $1.45 million on flying 900 pregnant ewes to Saudi Arabia, and the Cabinet papers also show that in 2013, Murray McCully suggested an additional $4 million should be spent on a food security platform, taking the total bill to more than $11.5 million.
Primary Industries Minister Nathan Guy has defended the money being spent and said the agri-business hub was an important opportunity to showcase New Zealand businesses.
But the Cabinet paper suggests the country's exports to the Gulf States could double to $3.5 billion in five years, if a free trade deal was signed with the Gulf States.
The Green Party is calling it a dodgy deal and said taxpayers' money was being used by the Government to buy off the businessman to get a deal.