A week after 17 people were arrested in anti-terrorist raids, New Zealanders are asking whether their security forces foiled an astonishing plot by militant Maori separatists – or whether they made a monumental error of judgement.

Extreme secrecy surrounds the affair, with only two of the 17 detainees being identified and the media excluded from court hearings. But those held in dawn raids across the nation are said to include a mixture of white anarchists and environmental activists as well as Maori radicals.

As well as swooping on homes in cities including Auckland and Wellington, police sealed off a hamlet in the Ureweras, a mountainous area of the North Island, which they claim was the site of terrorist training camps. The isolated, thickly forested region, home to the Tuhoe tribe, is now the focus of national attention.

New Zealand is not usually associated with terrorism. The only terrorist act carried out there was the bombing of the Greenpeace flagship, Rainbow Warrior, by French secret agents in Auckland harbour in 1985.

New Zealand sent small numbers of troops to Iraq and Afghanistan and passed tough anti-terror laws following the 2001 attacks in the United States. Last week, those laws were invoked for the first time – not against al-Qa'ida, but against locals allegedly harbouring much older grievances.

The Tuhoe – sometimes called the "Children of the Mist" after their mountain homeland – are a proud, independent people. They say they never signed the 1840 Treaty of Waitangi, in which Maori chieftains ceded sovereignty to Britain in exchange for recognition of their ownership of the land and waterways.

In the 1860s, much of the Tuhoe land was seized and the tribe was confined to one side of a so-called "confiscation line". Last week, heavily armed police set up a roadblock on that line, outraging the inhabitants of Ruatoki, the hamlet targeted. Locals recalled a raid on a neighbouring valley in 1916, when police shot dead two people while arresting a self-styled Maori prophet, Rua Kenana.

Last week, after a dramatic operation that reportedly included snipers leaning out of helicopters and school buses being searched, just one Ruatoki man was arrested: Tame Iti.

Mr Iti, a veteran Maori activist, is regarded by most New Zealanders as a publicity-seeker rather than a security threat. An advocate of Maori independence, he has – like many Tuhoe men – traditional tattoos covering his entire face. In 2005, he fired a shotgun during a ceremony to welcome the Waitangi Tribunal, which adjudicates on historic compensation claims. One shot shredded a New Zealand flag.

The police operation in the Ureweras mountains, which are sacred to the Tuhoe, is said to have begun after two hunters from Auckland stumbled across a group of armed men in military camouflage.

During a year-long investigation, police tapped telephones, intercepted text messages and took secret video footage. They say napalm bombs were tested at the camps. They seized semi-automatic weapons and Molotov cocktails in last week's raids.

Police sources suggest that assassinations were being planned in preparation for declaring the Tuhoe region, in the Bay of Plenty, an independent state. The Prime Minister, Helen Clark, and even President George Bush, who was supposed to visit New Zealand recently, were among the potential targets.

The Tuhoe admit that they own guns. They use them to hunt wild pigs and other animals. And that was what the camps were for, they say – training young men in hunting and bushcraft.

Some politicians and commentators are sceptical about a plot. They suggest that the people arrested are no more dangerous than similar armed backwoodsmen in the United States. They point out that the 17, who include four women, have been charged with firearms offences, not under the anti- terror legislation.

One suspect, Jamie Lockett, has claimed that he knew his telephone was being bugged, and that he made inflammatory statements – such as "white men are going to die in this country" – in order to provoke police.

The co-leader of the Maori Party, Pita Sharples, said that the "stormtrooper" raids had set back race relations in the country by 100 years. But in the Ureweras, people observed that relations between Maoris and Pakehas (white New Zealanders) have always been bad.

Interesting? Click here to explore further