It is fundamentally absurd to believe Benjamin Netanyahu threatened to declare war on New Zealand in retaliation for co-sponsoring the successful UN resolution against Israel.

Netanyahu has far bigger fish to fry than New Zealand.

In fact, he has considerable respect for this country having based the economic reforms he launched when Israel's Finance Minister on Sir Roger Douglas's economic policies. "Sir Roger has bold ideas. He really gets down to the bone. To the core of it," he told me in Israel a decade ago.

What is at issue now is the controversial report citing two unnamed "Western diplomats" that said Netanyahu had phoned Foreign Minister Murray McCully and asked him to neither support the resolution nor to promote it.


"If you continue to promote this resolution from our point of view it will be a declaration of war. It will rupture the relations and there will be consequences," the Israeli prime minister is reported to have said to McCully.

Some have misread the reported comments and interpreted them in an overly literal fashion suggesting Israel has declared war on NZ.

Obviously it hasn't and won't.

It is important to recognise that Netanyahu - commonly known as "Bibi" - is a polarising yet skilled rhetorician.

He has accused the nations involved of a "gang up" at the UN.

President Barack Obama and his Secretary of State John Kerry had four years to drive progress on a two State solution to enable a Palestinian State to co-exist alongside Israel.
They failed.

Yet ,with just a month to go before the Obama Administration hands over power to Donald Trump it decided to hide behind NZ's diplomatic skirts instead of proposing the resolution condemning the West bank settlements itself and voting in its favour.

It's not surprising that Netanyahu and Trump are now hyperventilating about the Security Council's action.

It was a long shot by McCully.

New Zealand has made no direct political gains from this action.

Its reputation will be enhanced in some quarters.

It may also have been consistent with New Zealand policy on the dispute but the real issue is timing.

The Obama Administration, McCully, and the 12 other Security Council members who endorsed it, clearly believe this resolution boxes Israel (and also the Trump Administration) into a corner and puts it onto the two State track.

The question is does this move also put New Zealand offside with incoming Trump Administration?

From a principled standpoint it should not matter.

But this is politics.

The possibility of sanctions against New Zealand and Senegal have since been discussed in Jerusalem.

Currently, Israel has withdrawn its ambassadors to both countries.

And it has suspended diplomatic representatives from both NZ and Senegal from entering Israel.

Embassy officials are not expecting any further announcements this week.

Like NZ's own foreign affairs establishment most are on holiday. Israel's public affairs officer Patricia Deen - who also headed off today - refused to be drawn on what, if any, sanctions were under discussion.

She earlier confirmed that Israel's Ambassador to New Zealand Itzhak Gerberg would meet Netanyahu to discuss what steps were warranted.

Trade Minister Todd McClay is wisely taking a wait and see approach. McClay makes the point that two way trade is not large.

He is focused on an upcoming trip to the EU in January to progress free trade negotiations with the European bloc.

McClay would not be drawn on how the Middle East viewed NZ's diplomatic initiative at the UN. But he said he was optimistic that the free trade deal with the Gulf States would be progressed.

The future of the pending bilateral innovation agreement between Israel and New Zealand will now also have to be discussed at higher levels.

It requires sign-off by the Israel Government to proceed.

Details on the joint funding mechanism have yet to be agreed.

Israel has an existing agreement with the US known as BIRD which is managed on the Israeli side by the Israel Innovation Authority. That authority and NZ's Ministry of Business ,Innovation and Employment are pulling the deal together.

It is expected that Israeli and New Zealand firms will first form joint-ventures which will then apply for innovation development funds. It is expected that three JVs will be funded in the initial round.

Business lobbyists on the Israeli side are expected to argue this should not be a casualty of the bigger political game.

There is a way to go before this plays out.

But both sides will be cognisant that next October New Zealand and Australia commemorate he 100th anniversary of the Battle of Beersheba on what is now Israeli soil.

They will want the issue put to bed well before then.