Unprecedented escalation in diplomatic rift between Saudi Arabia and Canada

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Bloomberg reports how the diplomatic spat with Canada has escalated very quickly, leaving Prime Minister Justin Trudeau wrestling with how to respond to cool the tensions without backtracking on his support for women’s rights.

Since Canadian Foreign Minister Chrystia Freeland called on Saudi Arabia to release rights activist Samar Badawi from prison on Aug. 2, Saudi Arabia has expelled the Canadian ambassador, frozen new business deals, suspended flights to Toronto and ordered the return of thousands of students who are studying at Canadian schools. The Saudi Grains Organization, a state-run grains buyer, told traders it will no longer accept milling wheat or feed barley from Canada, according to people familiar with the matter.

The Financial Times reports how Saudi Arabia is selling Canadian assets as the kingdom escalates its response to Ottawa’s criticism of the arrest of a female activist.

The Saudi central bank and state pension funds have instructed their overseas asset managers to dispose of their Canadian equities, bonds and cash holdings “no matter the cost”, two people with direct knowledge of the orders said. Third-party managers are estimated to be mandated to invest more than $100bn of Saudi funds in global markets, executives say.

While the proportion of that figure invested in Canadian holdings would be “fairly small in absolute terms”, the asset sale sent a strong message, one of the people said. The sell-off began on Tuesday and underlines how the Gulf monarchy is flexing its financial and political muscle to warn foreign powers against what it regards as interference in its sovereign affairs. “This is severe stuff,” said one banker.

CBC reported how Saudi Arabia’s main state wheat buying agency has told grains exporters it will no longer buy Canadian wheat and barley. “As of Tuesday, Aug. 7, 2018, Saudi Grains Organization (SAGO) can no longer accept milling wheat or feed barley cargoes of Canadian origin to be supplied,” the notice to grain traders said.

The national Saudi Arabian airline, Saudia, said this week that it would suspend all flights between the country and Canada, starting next week.

Saudi Arabia also said on Monday that it would suspend all its educational exchange programmes with Canada. An official told state television there are more than 12,000 students and their families currently in Canada. They will be transferred to universities and schools in the US, UK, Australia, New Zealand and Singapore, he said.

Bloomberg wrote that the kingdom’s foreign minister, Adel Al-Jubeir in a news conference in Riyadh, said that “Canada knows what it needs to do,”saying there was no need for mediation in the dispute. “We don’t accept interference in our affairs.”

The Saudi government’s unusually severe response is the latest evidence that while touting himself as a champion for economic and social progress — including by letting women drive for the first time — Crown Prince Mohammed bin Salman won’t accept any outside criticism or perceived challenges to his authority.

Under his watch, Saudi Arabia has implemented an increasingly aggressive foreign policy.

In November, the kingdom recalled its ambassador to Germany and cut back commercial ties with some German companies after the then-foreign minister suggested the kingdom had orchestrated the surprise resignation of Lebanese Prime Minister Saad al-Hariri, a charge it denies.

“The fact that the Saudis have made similar noises about Germany is further evidence that they are just more willing to escalate with important trade and political partners than in the past,” said Gregory Gause, a professor of international affairs and Saudi specialist at Texas A&M University.


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