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Hard to Freeze ‘Frustrating’ Saudi Arms Deal, Trudeau Says

Greg Quinn and Josh Wingrove
Hard to Freeze ‘Frustrating’ Saudi Arms Deal, Trudeau Says

(Bloomberg) -- Justin Trudeau is signaling he has scant leeway to cancel an arms contract with Saudi Arabia -- condemning the death of Jamal Khashoggi while nonetheless saying it’s “very difficult” to cancel a deal and could cost C$1 billion ($760 million) to do so.

Trudeau’s government, locked in a diplomatic spat with Saudi Arabia since August, has waffled on whether to suspend, or somehow intervene in, a deal to sell armored vehicles manufactured by General Dynamics Land Systems Canada to the kingdom.

The Canadian leader said Monday he wouldn’t hesitate to suspend export permits, but on Tuesday went into more detail and said the government’s hands are somewhat tied by the legal agreement.

It’s “very difficult to suspend or leave that contract,” Trudeau said Tuesday in an interview with CBC radio, adding the situation is “incredibly frustrating.”

“We can use export permits and we can make a determination on that,” Trudeau said, “but at the same time, I do not want to leave Canadians holding a billion-dollar bill because we’re trying to move forward on doing the right thing. So we are navigating this very carefully and that’s pretty much all I can say on that.”

Canada exported C$1.37 billion ($1.05 billion) worth of goods to Saudi Arabia last year, mostly tanks and other armored fighting vehicles and their parts, according to Statistics Canada. London, Ontario-based General Dynamics Land Systems, a unit of U.S.-based General Dynamics Corp., manufactures armored vehicles under a contract with Saudi Arabia signed by the Canadian government in 2014. The contract is worth up to $13 billion. A representative at the Canadian unit declined to comment on Trudeau’s remarks late Monday.

Trudeau on Monday had struck a tougher tone on Saudi Arabia, and opened the door to suspending exports after his foreign minister had repeatedly avoided taking a position on that subject. “Our government is committed to a stronger and more rigorous arms export system,” Trudeau told the House of Commons in Ottawa on Monday. “We have frozen export permits before when we had concerns about their potential misuse, and we won’t hesitate to do so again.”

The prime minister said the government is discussing “next steps” with Canada’s allies, adding “we condemn the murder of journalist Jamal Khashoggi.” Freezing export permits would widen a Saudi rift with Canada that began earlier this year after the Trudeau government publicly criticized the arrest of women’s rights activists.

Chancellor Angela Merkel signaled Sunday Germany will suspend exports of military equipment to Saudi Arabia, and U.K. Foreign Secretary Jeremy Hunt promised to take “serious” measures against the kingdom once an investigation is complete. U.S. President Donald Trump said Monday he spoke with Crown Prince Mohammed Bin Salman and isn’t satisfied with the Saudi government’s explanation.

“It is unacceptable and unthinkable that someone could have murdered a journalist on foreign soil like this, that is something that the global community cannot stand for,” Trudeau said Tuesday, in an interview where he referred to the Saudi “regime” and said explanations for Khashoggi’s death lack credibility. “Countries around the world need to know that there are things they simply cannot do, and killing a journalist who disagrees with the regime is right up there at the top of it.”

Foreign Minister Chrystia Freeland told reporters earlier Monday that Saudi Arabia must bring those responsible for the journalist’s killing to justice and that its explanations so far aren’t credible. “There are very important questions about the entire relationship with Saudi Arabia that need to be asked,” she said, while declining to comment on arms contracts.

A diplomatic feud between Canada and the kingdom erupted in August after Freeland and the Canadian government sent a series of tweets about the arrest of human rights activist Samar Badawi. Saudi Arabia fired back, freezing certain commercial ties, expelling Canada’s ambassador and recalling students from Canada. The spat had stabilized somewhat before Khashoggi’s death, but the countries remain at odds. The Saudis have publicly demanded an apology from Canada for the tweets.

(A previous version of this story corrected the amount of USD conversion in the fourth paragraph.)

(Updates with company declining to comment in 4th paragraph.)

To contact the reporters on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net;Josh Wingrove in Ottawa at jwingrove4@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary, Chris Fournier

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