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Two Top World Oil Producers Spar Over Human Rights

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Saudi Arabia holds the world’s largest oil deposits, Canada comes in third right behind Venezuela with North America’s largest oil reserves. This week, Saudia Arabia expelled the Canadian Ambassador from Riyadh and recalled its own ambassador immediately. The news caught many off-guard as the dispute escalated quickly following a tweet by Canada’s foreign minister calling of the Saudi’s to release several human rights activists who were themselves calling for the release of imprisoned Saudi dissident and activist Raif Badawi.

The tweet by Canada’s top diplomat appears to have hit a raw nerve with Saudi Arabia, which further escalated its displeasure by moving to withdraw all assets held by its asset managers in Canada “no matter what the cost,” as well as requesting all Saudi nationals in Canadian schools or in hospitals find alternatives in other countries. Canada, in turn, reiterated its condemnation of Saudi human rights abuses but could find no allies in support of its call from any G-7 or G20 countries thus far, including the U.S. and Britain. It’s a repeat of a similar action taken against Germany and Sweden, although papered over quickly.

Call it thin-skinned or checkbook diplomacy but the significance is that Saudi Arabia is shifting gears away from using its oil production to flood or withhold its crude supplies to affect prices, to using its years of asset accumulation though oil sale to flex its financial power, wielding it as a stick or carrot. While the amount of money involved in its Canadian holding is thought to be inconsequential relative to the size and diversity of the Canadian economy, and there is likely no discontinuation of the 100,000 barrels of oil Canada purchases from the Kingdom daily to feed its Irving refinery in New Brunswick, it is likely part of a new strategy undertaken by its new monarch, Crown Prince Mohammed Bin Salman. Formerly the head of the Saudi defense ministry, Bin Salam was responsible for the incursion in Bahrain, Syria and the ongoing war and blockade in neighboring Yemen.

Since assuming power, he has restructured Saudi leadership, rounded up many princes, billionaires and officials into a form of arrest to acquire significant assets and set about reforms in line with strict 19th-century Salafist ideology, which was designed as a response in Egypt to resist European imperialism. Its import today is that Saudi Arabia will not tolerate criticism of its internal affairs without an economic price on any nation that dares.

Canada is, however, an easy target since Saudi trade and assets there are negligible and if Canada could actually get its act together and build pipelines delivering its oil bounty to its east and west coasts, lucrative Saudi oil markets in India and China could easily be upended by cheaper and therefore more valuable Canadian crude. With Canadian heavy oil fetching only $31 a barrel compared to the equivalent Saudi blend today at over $70, the downside risks for the Saudi gambit could become more pronounced once Canada finally pushes aside foreign-funded green activists blocking its already approved and government-owned 560,000 barrel a day TransMountain pipeline expansion.

Its a new twist to geopolitics that no one saw coming, but given U.S. sanctions on Iran and now Saudi Arabia’s donnybrook with Canada, oil continues to drive headlines but with the added feature of new diplomatic realities taking center stage.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded tomorrowsgaspricetoday.com to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.