How Saudi Arabia selling Canadian assets could affect our economy

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Amid a deepening diplomatic dispute, Saudi Arabia’s determination to unload its Canadian property in a hearth sale may gain advantage buyers exterior the dominion and have little impression on Canada’s financial system, say consultants.

The Saudi central financial institution has instructed its abroad asset managers to promote Canadian equities, bonds and money holdings “regardless of the fee,” the Monetary Instances reported Wednesday.

Managers are estimated to speculate greater than $100 billion price of Saudi funds in international markets, based on the report.

WATCH: Tensions between Saudi Arabia and Canada affecting worldwide college students


However this newest retaliation from Saudi Arabia may very well be helpful for buyers exterior of the dominion seeking to decide up property for reasonable, stated Rex Brynen, a political science professor at McGill College who focuses on Center East politics.

“Because it’s a hearth sale, it’s the Saudis that shall be shedding cash and different persons are going to make a revenue at their expense,” stated Brynen.

“You might snap up a Saudi-owned asset for 50 cents on the greenback.”

Brynen stated that whereas there may very well be some unfavourable short-term financial results — a decrease greenback worth, slumping inventory costs or funding capital leaving Canada — Riyadh’s determination will largely harm Saudi-owned companies.

“The Saudis are capturing themselves within the foot,” he stated. “They appear completely prepared to lose cash and inconvenience their residents with the intention to make some extent.”

“Canada appears to be a straightforward goal to sign to remainder of the world ‘you possibly can’t criticize us.’”

READ MORE: Is Canada being inconsistent about human rights considerations in Saudi Arabia?

The Saudi-Canada feud started after International Affairs Canada known as for the “speedy launch” of girls’s rights activists Samar Badawi and Nassima al-Sadah.

In response, Saudi Arabia’s Crown Prince Mohammed bin Salman expelled Canada’s ambassador, froze new commerce and funding, suspended a scholar change program and halted flights by state-owned Saudi Arabian Airways to Canada for what it known as “blatant interference” in its home affairs.

WATCH: U.S. State Dept. urges Canada, Saudi Arabia to resolve dispute





On Wednesday, the dominion suspended all medical therapy packages in Canada and regarded to switch Saudi sufferers in a foreign country. Saudi Arabia stated there isn’t any room for mediation on the escalating diplomatic spat and that Ottawa is aware of how you can “repair its massive mistake.”

“There may be nothing to mediate,” International Minister Adel al-Jubeir instructed a information convention in Riyadh. “A mistake has been made and a mistake needs to be corrected.”

READ MORE: Saudi Arabia says ‘nothing to mediate’ in dispute as stories emerge of promoting Canadian property

Walid Hejazi, professor of worldwide competitiveness on the College of Toronto, stated the financial sanctions may have little impact on the Canadian financial system as Saudi Arabia — Canada’s 20th largest buying and selling associate — solely represents roughly $four billion in commerce yearly.

Canada and the U.S. commerce roughly $2 billion price of products each day, Hejazi stated.

“It is a political assertion on the a part of the Saudis,” he stated. “Their Canadians holdings aren’t massive sufficient to have any significant impression.”

Hejazi stated the people travelling to and from the dominion and firms seeking to construct enterprise ties within the area will largely be harm by this transfer.

READ MORE: Canada can simply exchange Saudi Arabian crude oil, economist says

The Saudi Grains Group additionally introduced it’s halting purchases of wheat and barley from Canada, nevertheless it was unclear whether or not this transfer affected solely new purchases or supply on beforehand agreed contracts.

Based on Statistics Canada, the overall quantity of Canadian wheat gross sales to Saudi Arabia, excluding durum, was 66,000 tonnes in 2017 and 68,250 tonnes in 2016. Canadian barley gross sales totaled 132,000 tonnes in 2017.

In 2015, the Canadian Wheat Board was taken over by the state-owned Saudi Agricultural and Livestock Funding Co. and U.S. grain firm Bunge. Now often known as G3 Ltd., the majority-controlled Saudi agency stated it has no plans to alter or cut back its purchases of Canadian crops.

“It’s enterprise as common,” G3 vice-president Brett Malkoske instructed Reuters. The Saudi authorities has not stated whether or not it should promote its stake in G3.

READ MORE: As Saudi-Canada feud escalates, right here’s how axing armoured car deal may harm Trudeau in 2019

Chuck Penner, an analyst primarily based in Winnipeg with LeftField Commodity Analysis, instructed International Information that if Saudi Arabia had been to unload its stake in G3 the impression on Canada could be “comparatively seamless.”

“We’ve purchased and offered grain firms earlier than and enterprise continues to go on,” Penner stated. “Even when that was included within the listing of property they need to promote, I don’t suppose it will have a big impact.”

“That is actually a symbolic sort of factor,” he stated. “Canada received’t have any hassle promoting its wheat and barley elsewhere.”

There may be additionally concern over the uncertainty of considered one of Canada’s largest arms offers that noticed Common Dynamics Land Programs promote mild armoured autos, often known as LAV IIIs, to Saudi Arabia in a $15-billion deal in 2014.

GDLS spokesperson Doug Wilson-Hodge declined to touch upon the difficulty.

Freeland has stated that “Canada will at all times rise up for human rights in Canada and around the globe” and that her division continues to hunt readability from Saudi Arabia on “numerous points.”

“The Embassy’s Commerce officers, along with the broader Commerce Commissioner Service, are actively engaged with Canadian enterprise pursuits and can proceed to work with them and the related authorities within the coming days,” International Affairs stated in an announcement. “Our authorities will at all times assist Canadian employees and industries, and defend their pursuits at house and overseas.”

—With information from Reuters

© 2018 International Information, a division of Corus Leisure Inc.



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