KOTA BHARU, Jan 29 — Umno veteran Tengku Razaleigh Hamzah has insisted that Kelantan is entitled to a five per cent royalty for oil extracted off its waters, saying it was time to “re-examine the relationship between the states and the federal government”.

The Gua Musang MP told a packed Stadium Sultan Mohamed IV last night that national oil firm Petronas was bound by law to give the money to states where oil is found, adding Kelantan was not interested in compassionate payments.

“Kelantan may be poor. But we are not beggars. We demand what is rightfully ours,” the Kelantan prince said to cheers and cries of “Allahu Akbar (God is great)” at the last night’s gathering organised by the state government over the oil royalty issue.

The PAS government had demanded the oil royalty payment from Petronas last year, after the Statistics Department revealed that Kelantan, together with Sabah and Terengganu, had contributed 62.5 per cent of the oil extracted in Malaysia

The Barisan Nasional-ruled federal government has insisted oil from the joint development area with Thailand was not from part of Kelantan’s waters and has only offered RM20 million as “compassionate payment”.

But Razaleigh, the founding chairman of Petronas, disagreed with the government’s move, saying the formula for oil royalty was first agreed with Sarawak and later extended to all states.

“If Sarawak is due her five per cent royalty, no less is Kelantan, by the same principle,” thundered the Umno politician popularly known as Ku Li.

An estimated 50,000 turned up to hear Ku Li’s speech.

Razaleigh said he has received the blessings of the Kelantan palace to speak on the issue and also confirmed that he will lead a parliamentary caucus to press the ruling coalition Barisan Nasional to honour the Petronas agreement.

“The oil caucus I will lead is not just about oil. It is to re-examine the relationship between the states and the federal government,” he told the crowd, adding the larger issue here was state rights as Malaysia was a federation of sovereign states that have assigned only certain rights to the federal government.

“Let us re-examine the terms of the Federation Agreement signed in 1948,” Razaleigh added, referring to the founding of Malaya before it gained independence from Great Britain in 1957.

He repeated his earlier argument that Putrajaya should respect the agreements made and not change them depending on who ruled the states, saying “How are we to ask investors to have confidence in us if we can’t even keep contracts between ourselves!”

The move has a precedent in Terengganu after the 1999 general elections, when PAS won the state, prompting the federal government to convert oil royalty payments to compassionate payments managed by a federal department. Terengganu had sued for its right and Putrajaya relented only after Barisan Nasional recaptured the state.

Ku Li, who noted to the crowd that he was entering the stadium after 15 years, was earlier escorted in by a convoy of 50 trishaws. Among those sharing the stage with him were Kelantan state executive councillors, led by Mentri Besar Datuk Nik Aziz Nik Mat.

The approximately 50,000 crowd cheered and clapped when Razaleigh began his speech with “I stand here representing only myself. I am here upon principle.”

The former finance minister and one-time Umno vice-president, who had unsuccessfully challenged Prime Minister Datuk Seri Najib Razak for the Umno presidency, had no kind words for his party during the speech and later when speaking to reporters.

He described Kelantan Umno chief Datuk Seri Mustapa Mohamed, also International Trade and Industry Minister, as a sycophant, and party-owned newspaper Utusan Malaysia as reporting fiction.

“Don’t mention those names to me. Mustapa is a sycophant, Utusan is just [reporting] myths,” he retorted.

Razaleigh has, in recent months, taken a strident stand against his party, particularly over the oil royalty issue and the larger issues of governance in Malaysia.

He had earlier written in his weblog (razaleigh.com) that by ignoring both the letter and the spirit of agreements over oil found in Malaysia, the federal government sets aside the very purpose of Petronas.

“More importantly there is a failure to understand the origin of federal powers over state resources.

“We have forgotten that the states existed prior to the Federation. The Federation only exists because the states were willing to vest their rights in it, such as their rights in oil. Not the other way around,” he wrote.

Razaleigh noted the federation itself rested on the principle of fairness to all the states, and to its citizens, wherever they may live.

“When the government of the day ignores this principle, it is ignoring a basic principle holding our country together.

“There has been too much centralisation of power in the federal government. Powers functions and rights that belong to the states must be restored to them,” the Gua Musang Umno chief said.