New revelations demand answers from the Prime Minister and Foreign Minister about how knew what in the Saudi sheep deal. Has Murray McCully misled cabinet?

It is one of the most puzzling... and troubling... sagas in New Zealand's recent political history. And that's saying something. The Saudi sheep deal's always felt like the sword of Damocles hanging over Foreign Minister Murray McCully, and today that sword may finally have fallen.

To remind you of the essence: New Zealand, under Labour, had banned live sheep exports for slaughter after thousands of sheep died on the Cormo Express back in 2003. But National wanted a free trade deal with the Gulf States. They talked about changing the law, but public concern about animal welfare made them stick with the ban.

Hamood Al Khalaf had invested in New Zealand to send sheep to Saudi Arabia for slaughter, and got burnt by both these governments. So what, right? New Zealand is a sovereign country and can make its own laws. But remember the trade deal. National wanted it badly and so wanted to find a way to walk the tightrope between what the Saudis wanted and New Zealand public opinion.

McCully's solution was this deal. Convinced that Hamood was the main obstacle to the deal, he got creative. New Zealand would spend $6m on an "agrihub" in Saudi Arabia to promote New Zealand's agricultural technology and would transport some of Hamood's sheep over there (900 as it turned out, and, remarkably, by plane at a cost of $1.5m).

But on top of that McCully paid Hamood $4m in cash because, he said, the Saudi billionaire was threatening to sue New Zealand for $20-30m over the law changes and his lost earnings.

An investigation into the deal by reporter Phil Vine on The Nation has revealed several significant new facts in this saga, bringing renewed calls for McCully's resignation:

• Sheikh Hamood's business partner George Assaf says, contrary to McCully's claims and his cabinet paper in 2013, that they never had the ambition or appetite to sue the New Zealand government.
• Despite confirmation from John Key even today that his government has never considered resuming live sheep exports, MFAT documents show McCully was asking officials about how and when live sheep exports could be restarted. Specifically, he was investigating the possibility of a shipment in late 2015 of 45,000 sheep to Saudi Arabia. 
•  Assaf says the planeload of 900 sheep sent to Saudi in 2014 was "a trial shipment before one day they decide to take a bigger shipment by sea".
• McCully, Hamood and Assaf discussed the possibility of creating a satellite farm in Ethiopia, using official development assistance funds.
• And an MFAT document includes an action point: to develop a "scientific trial" that would involve a shipment of sheep, based on a suggestion by Hamood.

While the Auditor-General is still investigating this case, it's unlikely the sword will claim its victim, even though the Greens have said MCully remaining in the job is untenable. Both the Foreign Minister and Prime Minister can buy time until the report. But these facts create a bundle of questions that they will find very hard to answer satisfactorily.

Key's reliance on that 2013 cabinet paper gives him space to sack his minister if he decides to. He can say McCully misled cabinet in his claims of a $20-30m legal risk. He could also find McCully misled cabinet by saying the planeload of 900 sheep was a one-off "relocation" and not the resumption of sheep exports, given Assaf says otherwise and the documents show, at very least, McCully was looking into more live exports.

Assaf could, of course, be re-writing history. But his claims about the lack of a legal threat make sense when you consider the bizarre story of this supposed legal action. McCully and MFAT have refused to release what legal advice they received on that matter, if any, which raises questions as to whether there is any proper advice at all.

McCully has insisted Hamood had grounds to sue, but no-one has been able to figure out under what law and what the legal basis for any suit would have been.

What is just as striking today is the fact that McCully seems to have gone rogue by investigating ways to resume live sheep exports to the Gulf.

See this from The Nation this morning:

 Paddy Gower: "...have you ever thought about restarting live sheep exports to Saudi Arabia? Just restarting. Not the breeding; the actual exports of them.

John Key: No, because I think, in the end, I don’t think that’s really where New Zealanders want to go. We do export cattle, and we do export sheep for breeding purposes, but not live—

Never consider it? Not on the agenda?

It’s not on the agenda."

So Key says his government has never considered restarting the exports. He's clear about the politics - New Zealanders don't want it, it's a vote loser.

Why then was MCully asking officials in 2010 how big a shipment might be and where the sheep might come from? And why was MFAT looking into that 45,000 sheep shipment to depart in October 2015 - the one Assaf called a trial run - when Key says there were no plans to resume shipments?

This is why Greens co-leader James Shaw has today said:

"It’s impossible for John Key to continue to have confidence in Murry McCully. McCully appears to have misled Cabinet, Parliament and the public, in which case he should no longer be a Minister. The public has never seen any proof of this so-called legal action against the Government. Unless Murray McCully can produce the evidence now, he needs to go as Minister."

So now the ball is firmly back in Key's court. Does he stand by his minister now these new facts are known? Can he be sure there was a legal threat? And can he explain why his minister was investigating live sheep exports behind his back?