The ongoing political row between Canada and Saudi Arabia over Ottawa’s demand that the kingdom release detained women’s rights activists in the country is picking up momentum. Earlier this week, Saudi Arabia ordered the Canadian ambassador to leave Saudi Arabia “within 24 hours” after his country criticized the recent arrest of Saudi women’s rights activists.
However, Saudi Arabia, showing heightened sensitivity into what it perceives as foreign intrusion into its own affairs, upped the ante even more, by saying it would freeze "all new business" between the kingdom and Canada and also in an admittedly knee-jerk response, recalled thousands of Saudi students attending Canadian universities, a move to hurt Canada financially.
Omar Allam, a former Canadian diplomat and head of Allam Advisory Group, said the recall of 12,000 to 15,000 Saudi students from Canada, and accompanying relatives, is going to remove as much as CAD$2 billion in annual investment in the Canadian economy.
"Any further step from the Canadian side in that direction will be considered as acknowledgment of our right to interfere in the Canadian domestic affairs," the Saudi Foreign Ministry said. "Canada and all other nations need to know that they can't claim to be more concerned than the kingdom over its own citizens."
Canada, however, sees the situation differently. "Canada will always stand up for the protection of human rights, very much including women's rights, and freedom of expression around the world," Marie-Pier Baril, a spokeswoman for Canadian Foreign Minister Chrystia Freeland said in a statement. "Our government will never hesitate to promote these values and believes that this dialogue is critical to international diplomacy."
A CBS News report said that the spate began over a serious of tweets by Canadian diplomats calling for the immediate release of women’s rights activists detained by Saudi Arabia. Chrystia Freeland also said in a tweet that she was "very alarmed" by news of the arrest of Samar Badawi, the sister of Raif Badawi, a prominent Saudi activist. Raif Badawi was arrested in 2012 for running a blog that promoted free speech and women's rights in Saudi Arabia.
This geopolitical row could have more implications that it initially appears. Some analysts are claiming that Saudi Crown Prince Mohammed bin Salman could be taking advantage of President Trump’s increased focus on the Iranian situation and his history of foregoing human rights concerns in other countries, a claim that could be true. A similar dynamic has played out in several other countries since Trump became president one-and-a-half years ago.
How the political dispute between Canada and Saudi Arabia plays out is anybody’s guess at this point, however its impact on the oil sector might not be so difficult to predict.
Judith Dwarkin, chief economist with RS Energy Group in Calgary, said Wednesday that Canada could easily replace the oil it imports from Saudi Arabia should relations with the kingdom deteriorate to the point that trade in crude is halted. She said that eastern Canadian refineries import about 75,000 to 80,000 barrels per day (bpd) of Saudi crude, adding that since its only 10 percent of total Canadian oil imports, it represents a “drop in the bucket” compared to that of the U.S. which covers two-thirds of Canadian oil imports and could increase that level if needed.
"The Saudis, if they choose to supply less to Canada, will divert those barrels, possibly to China, and U.S. barrels that would have gone to China, but are uncompetitive under Chinese tariffs, come to Canada," Dwarkin said.
"Basically, the cupboard gets rearranged."
According to the U.S. Energy Information Administration (EIA), Canada is the largest energy trading partner of the U.S. Based on the latest annual data from the U.S. Census Bureau, energy accounted for about 5% percent of the value of all U.S. exports to Canada and more than 19 percent of the value of all U.S. imports from Canada in 2016
Flashing back 45 years ago, Canada was one of the western powers that was targeted by the 1973 Saudi-orchestrated Arab oil embargo. At that time the country was caught flatfooted by the embargo and the subsequent four-fold increase in global oil prices that quickly ensued.
Since that cataclysmic period, however, Ottawa took action. In December 1973, the government created Petro Canada to boost oil production to boost oil and gas exploration in the North and offshore, to assist in the development of the tar sands and to secure reliable oil imports. By the 1980s, Petro Canada had become of the country’s largest oil companies.
Also, in 1980 the Canadian government introduced the National Energy Program (NEP). Its objectives, though controversial at the time, were to increase Canadian ownership of the oil industry, to achieve oil self-sufficiency and gain a greater share of energy revenues.
In the long-term, Canadian oil production is projected to increase to 5.6 million bpd by 2036, a 33 percent increase over 2-17 levels, according to a new industry forecast. Western Canada production is forecast to account for the bulk of the country's total production, about 95 percent.
By Tim Daiss for Oilprice.com
