On Thursday, Saudi Arabia’s Energy Minister Khalid al-Falih said the diplomatic dispute between Canada and Saudi Arabia will not impact any Canadian imports of Saudi Arabian crude. AFP photo by Fayez Nureldine.
Saudi Arabia expelled Canadian ambassador
Saudi Arabia’s energy minister said on Thursday that the diplomatic dispute between the kingdom and Canada will not impact Saudi Arabia’s sale of crude supplies to Canada.
Khalid al-Falih said in a statement that the kingdom has a “firm and long-standing policy” that petroleum supplies are not to be influenced by political considerations.
“The current diplomatic crisis between Saudi Arabia and Canada will not, in any way, impact Saudi Aramco’s relations with its customers in Canada.”
Refineries in Eastern Canada import about 75,000 to 80,000 barrels per day (b/d) of Saudi Arabian crude, according to Judith Dwarkin, chief economist with RS Energy Group in Calgary.
Al-Falih’s comments came after Saudi Arabia froze new trade with Canada and ruled out mediation efforts soon after Canadian Global Affairs tweeted that jailed human rights activists in Saudi Arabia should be freed immediately.
On Wednesday, Canadian Prime Minister Justin Trudeau extended an olive branch by saying that he would keep pressing the kingdom on civil liberties, but adding that the Saudis have made some progress on human rights.
In response, Saudi Arabia’s Ambassador to Canada said that while Trudeau’s comments were positive, more needed to be done.
“There is no doubt that the Prime Minister’s talk can be described as positive but we are still waiting for more to bridge the gap between the two friendly countries,” Naif bin Bandar al-Sudairi said.
The kingdom may see the Canadian Global Affairs tweet as a negative impact on Saudi Arabia’s foreign investment drive. According to Reuters, the campaign is somewhat controversial following a series of political and diplomatic initiatives by the Saudis.
Along with shutting down new trade with Canada, the Saudi central bank and state pension funds have instructed their overseas asset managers to sell Canadian equities, bonds and cash holdings.
Reuters reports that a banking source said the Saudi central bank had asked for the bank’s exposure to Canadian assets, but did not offer any instructions to sell them.
CIBC says Canadian dollar-denominated FX reserves held by the kingdom amount to between C$10 billion to C$25 billion, or about one tenth of daily volume in the currency.
And Riyadh’s Center for International Communication (CIC) tweeted late on Wednesday that “neither the government nor the Central Bank or the state pension fund has issued any instructions regarding the sale of Canadian assets”.
The post was quickly deleted without an explanation and the agency did not respond to a Reuters’ request for comment.
“From a mutual funds perspective, I don’t think there’s any significant investment in Canada from Saudi Arabia,” a banker based in Riyadh told Reuters. “The footprint is light and very small compared to in the United States.”
“The new Saudi leadership is leveraging economic and political tools to send a message to its partners that intervention in its domestic affairs will not be tolerated,” said Eurasia Group in a note, adding the easing the crisis will take time.
Despite Trudeau’s dovish efforts, Saudi Arabia’s Foreign Minister Adel al-Jubeir said on Wednesday that he is ruling out any mediation efforts and added that the Saudis may take more measures against Canada.
Recently, Saudi Arabia detained a number of women’s rights activists. The protestors had campaigned for the right to drive and to end the male guardianship system in Saudi Arabia.
Crown Prince Mohammed bin Salman has warmed to Western allies in an effort to support his plans to modernize and open up the kingdom. He has offered billions of dollars in arms sales as part of a promise to fight radicalism in Saudi Arabia.
Despite the seeming shift to modernization, bin Salman has not eased the monarchy’s total ban on political activism. As well, he is more aggressive with Iran, started a three-year-old war with Yemen and led a boycott of Qatar.
The spat with Canada is seen as a sign that to stay in control of the process of change, the prince is willing to risk riling international investors, according to RBC Capital Markets Helima’ Croft.
“Western governments expressing concerns about human rights issues in the kingdom is nothing new and Saudi authorities have long pushed back against what they characterize as inappropriate interference in their internal affairs,” Reuters reports she said in a note.
While Prince Mohammed bin-Salman seems more willing than his predecessors to throw caution to the wind, added Croft, he may be extra sensitive to outside criticism due to recent challenges in implementing his economic reform agenda.
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