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|07 August, 2018

Canada spat: As Saudi Arabia cuts diplomatic, trade and investment ties, what is at stake?

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A Canadian flag flies on a vehicle parked outside a Target store in Hamilton.

A Canadian flag flies on a vehicle parked outside a Target store in Hamilton.

REUTERS/Peter Power

Arab countries, including Bahrain and the United Arab Emirates, have expressed their support for Saudi Arabia in its growing dispute with Canada, following the kingdom's decision to severe all diplomatic and trade relations between the two counties.

The Saudi government on Sunday declared the Canadian ambassador was “persona non grata”, giving him 24 hours to leave the country. It also recalled its own ambassador from Ottawa and froze “all new businesses transactions and investments linked with Canada”.

The move was in relatiation after the Canadian Minister of Foreign Affairs, Chrystia Freeland, last week said she was "alarmed" over the arrest of activists in Saudi Arabia, including prominent women’s rights campaigner Samar Badawi, and called for their release.

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Saudi Foreign Minister Adel Al Jubeir on Monday said in a Twitter post that his country would not “accept any attempt to interfere in our internal affairs”.

Riyadh’s angry stance was met with statements of support from Bahrain, the UAE, the Arab League, Palestine and the Gulf Cooperation Council (GCC). However, Qatar, which has been involved in its own diplomatic dispute with Saudi Arabia, Bahrain and the UAE since the summer of 2017, said the statement of support by the GCC secretary general did not represent its views.

As Saudi Arabia moves to freeze all trade and investment links with Canada, we look at some of the effects this could have for both countries and the wider GCC region:

Trade impact
Figures from Trade Map, international trade statistics portal, showed that Canadian imports to Saudi Arabia amounted to just $969 million last year. The North American country was the kingdom’s 28th biggest import partner, with Canadian companies sending items such as vehicle and vehicle parts, machinery, pharmaceuticals and iron and steel.

In terms of exports, Saudi Arabian companies sent nearly $90 million worth of goods to Canada, including chemical products and plastics. This means Canadian companies have the most to lose if the diplomatic dispute escalates further or drags on indefinitely.

This week’s spat comes at a bad time for Canadian traders as the Canadian Saudi Business Council, which was set up in 2015 to promote ties between the two countries, was planning to send a trade delegation to the kingdom later this year, according to its website.

Arms deal
There is also concern over the future of a $15 billion arms deal for Canada to supply Saudi Arabia with light armoured vehicles (LAV). “Saudi Arabia can get the LAVs from elsewhere,” Thomas Juneau, an assistant professor at the University of Ottawa and who specialises in Middle East relations with Canada, told the Vancouver-based Global News media portal. “The cost for Saudi Arabia is manageable. If you only look at the numbers, this is a bigger loss for Canada.” The Global News said in a report that around 3,000 Canadian jobs were at stake if the deal fell through.

Students and planes
Saudi Arabia on Monday also announced that around 16,000 Saudi students studying in Canada would be recalled and would be sent home or sent to alternative universities in the United States or Europe.

Saudi Arabian Airlines also said in an official statement on Monday it was suspending flights to and from Toronto as part of the dispute with the Canadian government. (Read more here).

UAE support
Across the Gulf region, the Bahraini foreign ministry on Twitter said it “affirms its full solidarity with the Kingdom of Saudi Arabia ...against anyone attempting to undermine its sovereignty". (Read more here).

The UAE also expressed its solidarity with Saudi officials. "The UAE stands in solidarity with Riyadh in the confrontation of any foreign interference that may undermine its sovereignty," the Ministry of Foreign Affairs and International Cooperation said in a statement on Monday. Anwar Gargash, UAE Minister of State for Foreign Affairs, also tweeted that “the belief of some countries that their model or experience allows them to interfere in our affairs is rejected”.

While the UAE has not taken any direct action against Canada, the emirates does have a lot to lose if the diplomatic dispute escalates to engulf the wider GCC region.

Approximately 45,000 Canadian citizens reside in the UAE and over 150 Canadian companies registered across the country. Canadian citizens also currently enjoy visa-free entry for business and tourism on stays of up to six months. (Read more here).

The UAE and Canada previously had their own diplomatic dispute when Canada refused to allow Emirati airlines permission to increase flights to the country. This was only resoolved recently and last month Abu Dhabi-based Etihad Airways and Dubai’s Emirates airline announced they were increasing daily flights to Toronto, Canada’s largest city, from later this year.

Port expansion
Port operator DP World also announced in June it was planning to expand its Canadian operations at the Prince Rupert Fairview Container Terminal. Speaking on the plans, DP World group chairman and CEO, Sultan Ahmed bin Sulayem, said, "Canada is an important part of our global network and we are delighted to confirm these plans, which underline our commitment to Prince Rupert, which plays a major role in enabling trade in the region and across the west coast with rail connections inland to the rest of the country and the United States. (Read more here).

Trade deals
Canadian diplomats also announced in July last year Canada was looking to attract UAE companies to invest in $125 billion in infrastructure development projects across the country, Gulf News reported. (Read more here).

In May this year, Sheikh Abdullah bin Zayed Al Nahyan, UAE Minister of Foreign Affairs and International Cooperation met with Canadian officials and the two sides discussed cooperation ties between the two countries in the areas of military, security and defence. (Read more here).

U.S. response
While the row over human rights at present is just between Saudi Arabia and Canada, the United States has commented on the situation. Initially, a State Department official said the U.S. will “encourage” Saudi Arabia to uphold international standards on human rights.

“The United States supports respect for internationally recognized freedoms and individual liberties including dissent and due process,” the official wrote. “We have asked the Government of Saudi Arabia for additional information on the detention of several activists. We continue to encourage the Government of Saudi Arabia to respect due process and to publicize information on the status of legal cases. We address these broad concerns in our annual Human Rights Report.”

Later on Monday, the U.S. appeared to try to distance itself from the diplomatic row and another State Department official said in an email statement published by the Huffington Post: “We are aware of Government of Saudi Arabia’s statement recalling the Saudi ambassador to Canada and expelling Canada’s ambassador… Canada and Saudi Arabia are both close allies of the United States. I refer you to the Canadian and Saudi Ministries of Foreign Affairs for further information.”


Further reading:
Saudi Arabia asks Canadian ambassador to leave
Saudi Arabia would not tolerate outside interference in its affairs - foreign minister 
Saudi Arabian Airlines suspends flights to and from Toronto
Bahrain says supports Saudi Arabia in rights row with Canada
Canada-UAE business ties stronger than ever - Consul General
Etihad Airways to increase frequency to Canada
Dubai's DP World closes deal to expand in Canada

(Writing by Shane McGinley; Editing by Yasmine Saleh)
(shane.mcginley@thomsonreuters.com)

Our Standards: The Thomson Reuters Trust Principles

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