Jul 18, 2008

Condi's Inbox

We thought we would make things easy for the US Embassy so have drafted their reporting message for them

Confidential and Highly Sensitive

From Wellington

To State FLASH

Please draw to immediate attention of Asst Sec Hill

From DCM Keegan

Change Of Foreign Minister Likely - Early Election More Possible

New Zealand Foreign Minister Peters has tonight admitted that his party received the $100,000 donation from Owen Glenn (there is an extensive Glenn file held by CIA). Peters has been denying this donation for some time, indeed he has been extremely strident in his denials. Peters has chosen to admit the donation late on the afternoon of the day his mother died and on the eve of his party conference. No doubt he his hoping that he will be cut some slack by the media and opposition politicians and that the public will be more forgiving. We are not sure. Given the nature of his denials and the fact that this donation has not been declared in any of his party's election returns the ramifications of this news could be very significant. We have real doubts that Winston Peters will still be Foreign Minister at the time of Secretary Rice's visit.

This situation is incredibly difficult for PM Clark. She faces a tough choice. A continuing scandal that will inevitably lead to an erosion of support for her Government in the run up to the election (as we have been reporting all polls are pointing to a huge loss for Labour as things stand) , or resolute action which could cause Winston peters to withdraw support for Labour, thus risking an earlier election than the PM was planning. The PM had as recently as Monday been defending Peters on the basis of assurances she had received from him. Now, it seems, these assurances were false. We think she has to act, and it may well be that the National Party will be prepared to offer he sufficient support until November to keep the Government going so long as she removes Peters from the Foreign Minister position (some analysts have suggested that Peters might be prepared to remain as Minister of Racing - a portfolio untainted (as yet) by the Owen Glenn scandals.

The PM is going to face huge pressure on this issue on Monday and an announcement could be made as early as then on Peters' future.

While it would bee most logical for the PM to appoint former Minister Goff to his old portfolio - which he did extremely well, she sees Goff as a rival. She will not be wanting him to get the exposure that the Secretary's visit will inevitably bring. We are therefore picking the PM's current favorite - David Cunliffe as the likely replacement. Cunliffe is a former diplomat who served in Washington. He is also a Harvard Graduate. There are extensive Secret Service and CIA files on Cunliffe. He is regarded as friendly to the US.

Secretary Rice might like to send a message of condolence about Minister Peters' bereavement.