Scott Morrison fielding questions from reporters about Australia’s potential policy shift on its embassy in Israel with foreign minister Marise Payne on Tuesday. Photograph: Mick Tsikas/AP

Moving Australia's embassy to Jerusalem a 'fatal mistake', Middle Eastern envoys warn

Katharine Murphy

Representatives from 13 Middle Eastern and North African embassies in Australia have condemned Scott Morrison’s signal that the Australian embassy could be moved from Tel Aviv to Jerusalem, declaring it a “fatal mistake” that could lead to a breakdown in economic relations with Arab and Muslim nations.

With Indonesia also expressing concern at the development, Izzat Salah Abdulhadi, the head of the Palestinian delegation to Australia, said at the conclusion of an emergency meeting in Canberra on Tuesday that people “were really angry, really frustrated, and disappointed with this policy”.

“It was a surprise for all of us … they can’t understand this, especially with the trade and good relationship with Australia. Australia has a good reputation with the Arab world. We have a lot of students coming from the Gulf states and other countries, we have a large community.”

Abdulhadi said the group would issue a statement on Wednesday and send a letter to the prime minister and foreign minister explaining the risks of the proposed shift in policy, which was unveiled by Morrison in the closing week of the Wentworth byelection contest.

The putative shift includes the possibility of moving Australia’s embassy to Jerusalem and recognising the city as Israel’s capital, as well as reviewing Australia’s support for the Iranian nuclear agreement – policies that mirror the widely-criticised position of the Trump administration in the US.

While the group meeting in Canberra on Tuesday afternoon was not yet ready to propose stopping trade with Australia over the issue, Abdulhadi said it was possible that could be the eventual outcome.

There have been reports that Indonesia, the world’s most populous Muslim country and one of Australia’s most important neighbours, is considering suspending its free trade agreement with Canberra as a consequence of Tuesday’s events.

The Indonesian government has not confirmed that course of action, and that sentiment has not been conveyed to Canberra during conversations between Morrison and the president, Joko Widodo, over the past 24 hours, according to government sources.

Abdulhadi said if Indonesia pulled the trade pact, it could ripple out and have further impacts. “It’s a circle, it will start with Indonesia and we don’t know how it will end. Australia should understand it’s a very sensitive issue,” he said.

“If the Australian government does not reverse the statement or does not clarify the statement maybe we will have more drastic measures from Muslim and Arab countries. It’s really a fatal mistake, to do this to next-door countries like Indonesia.”

Abdulhadi said he did not know why the government had chosen to propose such a drastic shift in policy, saying he assumed it was down to “the charm of Mr Sharma” – a reference to the Liberal candidate running in the Wentworth byelection this weekend.

“If it’s just for the byelection, I think it’s a big mistake. It wasn’t worth the risk,” said Abdulhadi.

New Zealand’s prime minister, Jacinda Ardern, told reporters on Tuesday Morrison’s proposal would not help Middle East peace. Earlier in the year Ardern described Trump’s decision to move the US embassy to Jerusalem as “a step backwards, not forwards”.

“We support a two-state solution and our view has been that any shift in representation, in the way we saw with the United States, does not move us closer to that peaceful resolution,” Ardern said of the Australian move.

While Morrison has publicly denied the putative shift in policy is connected to the Wentworth byelection – with the area home to a substantial Jewish population – government sources concede Tuesday’s signal is about appealing to young Jewish voters resident in Sydney’s eastern suburbs who are disaffected with the Liberal party’s lack of policy on climate change, and about the treatment of asylum seekers in Nauru.

The Liberal party has conducted focus groups in the Wentworth contest, with respondents quizzed on their attitude to the government’s stance on Israel.

The Liberal party enjoys a substantial buffer in Wentworth. Malcolm Turnbull turned the electorate into a safe seat with a margin of 17%. But party strategists believe there is a significant protest vote that could deliver an upset in Saturday’s contest, and if the Liberals lose the seat, the government will lose its one seat majority in the lower house.

Morrison has been warning voters in the contest since the weekend that a protest vote this Saturday would deliver instability, and imperil the government’s capacity to manage a strong economy.