As Diplomatic Feud Deteriorates, Saudis Stop Buying Canadian Wheat, Barley

Two days after an angry Saudi Arabia broke of diplomatic and trade relations with Canada over "blatant interference" in the country's domestic affairs, after Canada criticized Saudi Arabia’s human rights track records and slammed the arrests of women’s rights activists including Samar Badawi, a Canadian citizen, the feud has escalated and on Tuesday, Saudi Arabia’s main state wheat buying agency has told grains exporters it will no longer buy Canadian wheat and barley in its international tenders.

Traders quoted by Reuters, said they had received an official notice from the Saudi Grains Organization (SAGO) about its decision.

"As of Tuesday August 7, 2018, Saudi Grains Organization (SAGO) can no longer accept milling wheat or feed barley cargoes of Canadian origin to be supplied,” a copy of the notice seen by Reuters said.

One European trader said it was not clear if the decision involved only new purchases or delivery of previously agreed contracts. “But I would not deliver Canadian grains to Saudi Arabia now, even on previous contracts,” the trader added.

Another trader said that "this is to me clearly part of the diplomatic dispute between Saudi Arabia and Canada, there is no other reason."

The SAGO agency usually gives sellers the freedom to select the origin of wheat purchased in its international tenders, generally specifying it must be sourced from the European Union, North America, South America or Australia. And, as Reuters further nores, in SAGO’s last purchase of 625,000 tonnes of wheat in an international tender on July 16, Canada was seen as a possible supplier.

However, one Middle Eastern grain consultant said the decision was not a great loss to Canada.

“Both Canada and the U.S. lost the Middle East market a long time ago ... because they are at a freight disadvantage (with higher ocean shipping costs) to the EU and Black Sea export markets,” the consultant said.

“The only class of wheat that Canada still exports to the region is durum but even that is not that much.”

"So neither Saudi nor Canada are going to be affected much by stopping the wheat and barley trade", the source added. According to Statistics Canada, the Canadian government’s statistics agency, total Canadian wheat sales to Saudi Arabia excluding durum were 66,000 tonnes in 2017 and 68,250 tonnes in 2016.

The bilateral trade relationship between the two nations is worth nearly $4 billion a year. Canadian exports to Saudi Arabia totaled about $1.12 billion in 2017, or 0.2% of the total value of Canadian exports. Much of that was tanks, armored personnel carriers and motor vehicles.

Meanwhile, assuring that the Canada vs Saudi Arabia will persist as the most unlikely diplomatic crisis in the world for the foreseeable future, on Monday Ottawa refused to back down in its defense of human rights after Saudi Arabia froze new trade and investment and expelled the Canadian ambassador in retaliation for Ottawa’s call to free arrested Saudi civil society activists.

And while in this case bilateral trade is a negligible factor in either country's welfare and commerce, it appears that Trump's trade war with the world has opened up a Pandora's box in which nations in conflict immediately resort to shutting off trade relations which is merely the latest confirmation that globalization is now running in reverse.

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