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Forget U.S.-China Boring Trade War – Saudi & Canada Diplomatic Feud Has Become Financial War



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Aug 09 2018
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China has threatened to slap 25% tariffs on US$16 billion worth of U.S. goods. It is the latest retaliation against the U.S. finalized list of US$16 billion worth in Chinese goods that will be hit with 25% tariffs – supposedly to take effect on Aug 23. China will pretty much match what Trump administration does until they have no more levers to pull. Then only the game will become interesting.

 

There’s a more exciting war going on between two unlikely rivals – Canada and Saudi Arabia. The Arabs would normally confine their war within the Middle East, except when they launch terrorist attacks on the West. But what began with a statement of concern over human rights has ballooned into the biggest diplomatic feud in years between Canada and Saudi Arabia.

 

That diplomatic feud has now escalated to financial sector following a report that the Kingdom of Saudi Arabia has instructed its brokers to sell Canadian assets. Initially, the Canadian Foreign Ministry said it was “gravely concerned” by the arrest of women’s rights activists Samar Badawi and Nassima al-Sadah, hence called for their “immediate release”.

Canada vs Saudi Arabia - Feud - Sweeping Leaves

Little did Canada realize they have rubbed the Saudi up the wrong way. The annoyed Saudi government immediately went ballistic – expelling the Canadian ambassador from Riyadh and recalling the Saudi envoy to Ottawa, suspending Saudi state airline flights to Toronto, and ending Saudi scholarship programs, numbering to 16,000, in Canada.

 

Still very irritated, Saudi subsequently announced they would halt all medical treatment programs in Canada and transfer Saudi patients to hospitals outside the country. Its Foreign Minister Adel al-Jubeir said Saudi Arabia would not tolerate any foreign meddling in its internal affairs – “Canada has made a mistake and needs to fix it. The ball is in Canada’s court.

 

The sudden burst of jaw-dropping reactions from Saudi has made many dumbfounded. It’s not like the Sheikhs have not been criticised before by the West on their horrible human rights. The overreaction from Saudi has gotten U.S. Senator Bernie Sanders so flabbergasted that he described the Arabs “outrageous”.

Saudi Arabia Tweet To Canada - September 11 Style Attack

Heck, the Saudi has gone so mad and crazy that a government-linked account unleashed a tweet (and deleted after being condemned) which seemed to suggest that a September-11-style attack could be launched against Canada. The tweet, with its warning “sticking one’s nose where it doesn’t belong”, included a graphic featuring an airliner headed for the Toronto skyline.

 

Refused to be intimidated, Canada’s Foreign Minister Chrystia Freeland said that “Canada will always stand up for human rights in Canada and around the world, and women’s rights are human rights.” Prime Minister Justin Trudeau’s first public comments on the spat since it erupted – “Canada will always speak strongly and clearly in private and public on questions of human rights.”

 

After frozen trade and investment between Riyadh and Ottawa, now the Financial Times has reported that the Saudi central bank and state pension funds have instructed third party asset managers to sell Canadian bonds, stocks and cash – “no matter the cost”. Fund managers are estimated to invest more than US$100 billion worth of Saudi funds in global market.

Canadian Bonds

Investors, however, are laughing at the Saudi’s fire sale because it would be the Arabs who will lose money as other people are going to scoop Canadian cheap assets disposed by the kingdom. It appears Riyadh, in its haste to teach Ottawa a lesson, has demonstrated again they could seriously do dumb things just to send a message.

 

Rex Brynen, a political science professor at McGill University specializing in Middle East politics, said – “You could snap up a Saudi-owned asset for fifty cents on the dollar. The Saudis are shooting themselves in the foot. They seem perfectly willing to lose money and inconvenience their citizens in order to make a point.”

 

But if one understands who actually run the kingdom, such actions aren’t surprising. The Saudi reaction is consistent with Mohammed bin Salman’s heavy-handed approach to power since the 32-year-old took over as Crown Prince. The favourite son of King Salman has embarked on a coalition airstrike campaign in neighbouring war-torn Yemen – without much success till today.

Canadian Prime Minister Justin Trudeau and Saudi Arabia Crown Prince Mohammed bin Salman

The Crown Prince has led a blockade of Qatar, a plan which has also failed to pressure the tiny kingdom into submission. He has also waged a war of words with regional Shiite rival Iran, not to mention locking up hundreds of Saudi’s business elite, princes and even his own relatives during a so-called “anti-corruption” drive, and used the billions of dollars recovered to ease the pain of austerity.

 

While Mohammed bin Salman has lifted the ban on women driving and opened the first new movie theatre in the country in 35 years, under his instruction, activists are cracked down and arrested to drive a message that the crown prince is not to be challenged. The crown prince is so daring in picking a fight with Canada largely because he is emboldened by Trump administration.

 

As Saudi Arabia continues to fire at Canada, the silence from Canada’s allies has been deafening. Its two closest allies – the U.S. and U.K. – have so far urged restraint from both sides. Using its status as the largest weapons purchaser in the world, countries such as America and Britain are pressured not to support Canada.

President Donald Trump and Crown Prince Mohammed bin Salman - 2

Yes, the two biggest countries that have been foaming at the mouth in championing human rights and democracy are not interested to defend their ally Canada because Saudi has a deeper pocket. Ever since the G7 Summit in Canada in June, the relations between U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau have turned for the worse.

 

Adding insult to the injury, the European Union also refused to get involved for the same reason – money. The only message from the EU was this – “We don’t comment on bilateral relations and that we are in favour of a dialogue.” With friends like the United States, United Kingdom and European Union, who needs enemies?

 

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