The Effects of a Rift Between Canada and Saudi Arabia on Global Business, Leadership and Corporate Social Responsibility

The diplomatic spat between two nations might appear political at the beginning, but the constant Canada-Saudi Arabia squabble is characterized by not only political but social and economic ramifications. The bilateral diplomacy between countries has severe economic effects on bilateral flows like investment and trade. Consequently, mutual diplomatic associations might have more obvious influences on business than the economic integration between the two countries. As a result, political authority has significantly gained acceptance in economics. Equally, the strained civic associations between states might harm the trade and other enterprises between the two nations. Consequently, the diplomatic tensions among states severely increase the threat of trade and business disruption since the deal must have more profits to compensate for the dangers of disruptions and various irritants in the apolitical association. These risks include credit, legal and political woes that discourage different potential exporters from accessing the foreign markets. However, these dangers can be reduced by establishing a stronger political or diplomatic tie between nations. The adverse diplomatic spat between Saudi Arabia and Canada emerged as a result of a single tween from Canada’s global affairs cabinet minister, Chrystia Freeland. On the tweet, the minister is demanding for the release of the arrested human right activists. However, the tween resulted into severe diplomatic brawls leading to the suspension of trade, investment, and scholars between the two states.

Keywords:

Saudi Arabia, Canada, rift, spat, tensions, war, business, trade, leadership, human rights, activists, foreign affairs, president MBS

Introduction

The severe diplomatic rift between Saudi Arabia and Canada is due to the apparent tweet from Canada’s global affairs cabinet minister, Chrystia Freeland, calling for the releases of the human rights activists, Samar Badawi and Raif Badawi’s sister who has been unnecessarily arrested and imprisoned by Saudi Arabia’s government (Afersorgbor, 2014). As a result, Saudi’s foreign ministry opposed the tweet calling it the attempt by Canada's government to interfere with the nation’s internal affairs. Therefore, Saudi Arabia's government announced the suspension of the future trade and arms deals with Canada.

Consequently, Saudi expelled Canada’s ambassador and recalled her ambassador. The dispute and spat had left Canadian’s trade in oil with Saudi Arabia adversely affected.

In his study, Ulrichsen (2015) outline that the most impacted sectors by the suspensions include tourism as Saudi-Arabian national and international airlines are under suspension. Second, the health sector is affected as hundreds of graduates, and Saudi's medical students in Canada are ordered to return to their country with their grants permanently discontinued. In their study, Khan, Abdullah, and Stanbrook (2018) outline that hospitals depending on these students scramble to control and manage services with reducing staff. Despite a significant tweet, it resulted in a severe diplomatic brawl that led to the suspension of trade, investment and scholars between these two nations.

In his study, Afersorgbor, (2014) outlines that the suspension has increasingly culminated in travel bans as the Saudi administration plans to suspend and terminate international flights of Saudi national airlines from Jeddah and Riyadh to Toronto. Additionally, the rift has resulted in the recall of Saudi’s ambassador, the decline in trade and poor relationships between the two nations. Consequently, constant abuse of human rights in Yemen and the assassination of Saudi Arabia’s journalists continue to strain the association between Canada and Saudi Arabia. Despite the fact that, all these tensions, Canada’s $ 16 million arms deal with the United Kingdom continues to be intact (Afersorgbor, 2014). Consequently, the spat between these nations has severely affected the trade thus it is necessary for international organizations to intervene. Therefore, the research focuses on the effects of a rift between Saudi Arabia and Canada on global business, leadership and corporate social responsibility.

Main Objective

To determine the impacts of a rift between Saudi Arabia and Canada on global business, leadership and corporate social responsibility

Other Goals

I. To determine the primary cause of spat between Canada and Saudi Arabia

II. To evaluate the factors necessary for a productive relationship between Saudi Arabia and Canada

III. To identify the internal and external factors facilitating the rift between these two nations

IV. To assess the impacts of the division on education, international trade, and military

V. To determine the best mechanism to solve the rift between Saudi Arabia and Canada

Research Methodology

The study primarily uses quantitative data. The secondary information is obtained from published articles journals about the previous and recent fissures between Saudi Arabia and Canada. The primary data was collected through interviews after obtaining the consent of the participants. Statistical packages for social sciences (SPSS) is used to analyze the quantitative data. Consequently, thematic analysis is employed on primary information.

Results and Discussions

Global business

Saudi Arabia is among the largest trading partners of Canada. Saudi Arabia is the 17th biggest business partner of Canada. Majority of Canada’s exports to Saudi Arabia mainly includes military products and technology. Consequently, oil constitutes the biggest of Saudi’s exports to Canada. Other products from Canada to Saudi Arabia include tanks and tank parts which accounts for $ 649 million. According to Afersorgbor, (2014), Canada’s major imports from Saudi include gas and oil. The trade volume between Saudi Arabia and Canada exceeds $ 3 billion and is anticipated to decrease with the recent rifts and suspension of trade despite the increase since 2002 as shown in the figure below

Fig 1.0 The Bilateral Trade Floe Between Saudi Arabia and Canada Since 2002-2017 (Afersorgbor, 2014.)

Consistently, trade and business flow between these nations has been increasing even during the peak of adverse global financial crisis. Nonetheless, the consistent rise started to derail with a minor diplomatic rift in 2008-2009 due to the unsuccessful attempt by Saudi Arabia’s administration to publicly behead the Canadian citizen. In his study, Juneau (2016) asserts that the incident resulted in regular trade flows between Saudi and Canada. Subsequently, the rift has been facilitated by wars in Yemen and killings of Saudi’s journalist thus leading to migration of Canadian’s from Saudi Arabia. For instance, Canada's ties with Saudi has been strained further by the killing of Jamal Khashoggi, the journalist who went to seek a visa for his wife in Saudi’s consulate (Zarocostas, 2018). The new crowned prince, MBS is accused of the murder due to criticism from the journalist. There are many items and services that are affected by the rift. Transport and vehicle equipment significantly account for Canada’s major export to Saudi, totaling to more than $ 490 million (Afersorgbor, 2014). Losing the market in transport and vehicle is significant since the United States’ aluminum and steel are negatively impacting the sector in Canada at the moment. Canada’s Agri-food industry is adversely affected since the rift has imposed suspension on its exports.

In his analysis, Afersorgbor, (2014) outlines that Canada’s Agri-food exports to the kingdom account for $ 92 million per year and 9% of total exports to Saudi Arabia. As a result, the rift has reduced the Agri-food exports thus resulting into decline in economic growth. Additionally, Canada’s agriculture exports have received a significant blow as Saudi Arabia’s government have just indicated that it will terminate purchasing the Canadian barley and wheat hence the severe decline in Agri-food exports to Saudi Arabia. The research has determined that Canada has constant trade deficits with Saudi, and Saudi Arabia’s imports are mainly dominated by crude oil and gas. According to Salameh (2017), mineral oils, products and fuels account for 95% of Canada’s total imports from the kingdom. As a hot commodity with high demand, Saudi has gotten new buyers like US to purchase its crude oil if Canada has decided to boycott its oil due to the recent rifts between the two nations.

The rift between these nations has influenced other countries in support of Canada to impose more sanctions against Saudi Arabia's consistent abuse of human rights. For instance, Russia supports Canada’s boycott of Saudi’s crude oil and other services. However, Afersorgbor, (2014) argues that the United States is championing for better diplomatic ties between the two nations to enhance global peace and trade.

Fig 2.0 Saudi Arabia and Canada Export Flows (Afersorgbor, 2014)

Leadership and Corporate Responsibility

Global Trade and Business

Deteriorating impact of diplomatic rifts and tensions are real and without various explicit economic sanctions among states. However, increasing threats of business and trade boycotts by different autocratic regimes might be performed with much more relaxed as compared to democratic nations. Saudi Arabia is one of the authoritarian countries. According to Afersorgbor (2014), Saudi’s government has more authority and higher capacity to enforce the boycotts over private and public enterprises significantly. Therefore, it is necessary for both nations to protect their good diplomatic associations. For instance, they cannot allow a social media tweet to severely derail a cordial relation that has been existing for decades. Stronger diplomatic ties are arguably essential because they facilitate trade relationship and bilateral economic between Saudi Arabia and Canada. Krane (2015) elaborates that maintaining subtle bonds helps in improving human rights situations in different despotic countries like Saudi Arabia, Somalia, and Nigeria. However, using sanctions and force will not only curtail the civil and political rights but increasingly deteriorate the democratic freedom and human rights of the essential civilian population.

The War in Yemen

Yemen war started due to the Arab spring in late 2011 as a result of pro-democracy concerns (Ulrichsen, 2018). The Saudi Arabia led-coalition waging conflict in Yemen has been arming and financing local militias against Canada’s control of human rights in Yemen. In his study, Ulrichsen (2018) outline that wartime decisions made by the kingdom and recently crowned prince MBS (Mohammed bin Salman) are increasingly threatening to fuel the turmoil in Yemen for many years or decades to come. Despite getting rid of dominant Houthis, Saudi Arabia and Canada have started fighting each other thus facilitating tensions and more conflict in Yemen. Saudi Arabia entered the war at a helm of the coalition of the Sunni Muslim nation as a sign of restoring the presidency and eliminating the Houthis.

According to Saudi Arabia arms deal in Yemen, the Trudeau administration supports London with over $ 14 billion arms contract to construct the armored system that could be employed against citizens during the war (Khan, Abdullah, & Stanbrook, 2018). Additionally, over the past decades, the Canadian government has sold Saudi Arabia’s military equipment for the defense against the possible attack by Riyadh’s Shia Muslim rivalries or Islamic state, but the kingdom continues to face criticism from human rights activists and administrations for destroying nation’s shi Muslim small community. According to Simpson (2016), Saudi’s administration faces more criticism as evidence occurred that several Canadian-produced vehicles were being applied in the Saudi proxy conflict in the neighboring Yemen and against Saudi Arabians. The best policy to terminate the war in Yemen is for Saudi Arabia to stop military support and coalitions with militia teams and engage in peaceful negotiations.

Saudi Arabia is backing the forces aligned to the Islamic party commonly known as Islah that is considered critical central to Yemen’s forthcoming. The Islah party controls many powerful military brigades, intelligence, and safety apparatus thus fueling more violence in Yemen. However, according to Canadian’s administration, Islay serves as an extremist party that tends to oppress and exploit those against the policies and laws initiated by prince MBS. According to Pedersen (2018), Saud Arabia-backed forces intimidate and kill local leaders primarily in pursuit of political or financial gain. Subsequently, the authorities are battling the locals to take over control of various lucrative markets and businesses to enhance production and supplies of Saudi’s products and services due to boycotts by Canada's government. The war has severe impacts on the victims. For instance, thousands of civilians have died due to preventable causes such as poor health, adverse disorders, and malnutrition. Over 10 million individuals are adversely food insecure during the war in Yemen thus resulting in more diseases hence high mortality rates.

In his research, Afersorgbor (2014) affirms that over 2 million Yemen children are recently acutely malnourished thus making them more vulnerable to disorders. The international organizations such as United Arabs Emirates and European Union consider terminating and suspending trade with Saudi Arabia If it continues to fuel the war and abuse of human rights. Consequently, Canada should not provide military and technical support to Saudi Arabia thus would significantly reduce the attacks and threats on Canadian citizens. In his study, Bergmann (2018) asserts that the US has been supporting its long-term ally Saudi in Yemen conflict, but the arrest and killing of journalist Khashoggi, turned US legislators against the war.

By defying president Trump, US senators proceeded to vote for the end of American Involvement In the battle of Yemen. The vote shows great dissatisfactions with Saudi Arabia conducts and operations in Yemen. According to Pedersen, (2018), the war has led to large refugee displacement and widespread famine that has resulted into severe humanitarian crisis thus making Yemen the most impoverished nation across the globe. Therefore, it is necessary for Canada and the United States to stop supporting Saudi Arabia to end the conflict and restore peace in Yemen for active development and growth of the country’s economy. Moreover, Saudi Arabia should be banned from conducting illegal businesses and activities that fuel violence among rivalry communities in Yemen. The conflicts in yamen have greatly exacerbated regional tensions and continue to worry the West because of constant risks of attacks from the IS and al-Qaeda affiliates. Consequently, the war is viewed as a power struggle between Canada and Saudi Arabia which is not the case since Canada is after protecting the human rights being violated by Saudi Arabia.

In his research, Juneau (2016), outlines that Canada has dramatically made an important promotion of human rights involving the rights and freedoms of religious minorities and women as the leading priority of its diplomatic and policy initiatives, but Saudi Arabia has failed to observe thus enabling Canada to suspend and boycott the business. Therefore, it is necessary and appropriate to demand that the kingdom release journalists and political prisoners and abide by the established HRS (human rights standards) since the human rights condition in Saudi Arabia is increasingly abysmal and Saudi Arabia is continually accused of causing war crimes and violence in Yemen.

Conclusion

Foreign policy and relations are significantly meant to enhance the national interests. Similarly, bilateral associations among nations is a significant feature for global peace. The spat between Saudi Arabia and Canada has resulted in a poor diplomatic association between the two countries. The economic effects have been limited with the future of multi-billion dollar arms agreement hanging on the balance. The rift has led to the suspension of trade with Canada boycotting importation of crude oil and other products from Saudi Arabia. Consequently, Saudi Arabia’s government has suspended Canada’s medical and graduate students and ordered for their relocation to Canada or other countries. The rift has been facilitated by recent arrest and killings of journalists by Saudi’s government. Moreover, the war in Yemen is considered Saudi’s major contributive factors against the violation of human rights. The war has resulted in a humanitarian crisis such as high mortality rates and severe malnutrition. Therefore, it is necessary for Saudi Arabia leadership under the crowned prince MBS to review its established policies and strategies to uphold human rights for better diplomatic relations with other nations across the globe. Moreover, Canada’s foreign policy initiators could have adopted a better professional mechanism to address the concerns of human rights in Saudi Arabia while maintaining their stronger economic and strategic ties.

References

Afersorgbor, S. k., 2014. Major trade implications of the Canada-Saudi spat. [Online]

Available at: https://theconversation.com/the-major-trade-implications-of-the-canada-saudi-arabia-spat-101306

[Accessed Thurday December 2018].

Bergmann, K., 2018. A murder in Istanbul with global consequences. Asia-Pacific Defence Reporter (2002), 44(9), p.4.

Juneau, T., 2016. Canada and Saudi Arabia: A deeply flawed but necessary partnership. Canadian Global Affairs Institute.

Juneau, T., 2016. Canada and Saudi Arabia: A deeply flawed but necessary partnership. Canadian Global Affairs Institute.

Khan, M.H., Abdullah, N. and Stanbrook, M.B., 2018. Withdrawal of Saudi trainees exposes vulnerability of Canadian health care.

Krane, J., 2015. A refined approach: Saudi Arabia moves beyond crude. Energy Policy, 82, pp.99-104.

Pedersen, J., 2018. “We Will Honour Our Good Name”: The Trudeau Government, Arms Exports, and Human Rights. In Justin Trudeau and Canadian Foreign Policy (pp. 207-232). Palgrave Macmillan, Cham.

Salameh, M.G., 2017. Saudi Arabia's Oil Price Dilemma: Between a Rock & a Hard Place.

Simpson, E., 2016. Canada's Arms Deal with Saudi Arabia. Peace Magazine.

Ulrichsen, K.C., 2015. Gulf Airlines and the Changing Map of Global Aviation.

Ulrichsen, K.C., 2018. Yemen endures: civil war, Saudi adventurism and the future of Arabia.

Zarocostas, J., 2018. Physician alleged to have taken part in Khashoggi murder. The Lancet, 392(10158), p.1613.