Saudi Arabia Canada relations
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Economic rejuvenation on the horizon as Saudi Arabia restores ties with Canada

(Last Updated On: June 3, 2023)

Saudi Arabia and Canada have agreed to restore full diplomatic relations after nearly five years of strained ties due to Canada‘s criticism of Saudi Arabia’s human rights record. This reconciliation carries significant implications for Saudi Arabia’s economy as the kingdom seeks to bolster its international standing and attract foreign investments.

The decision to mend diplomatic relations comes as Saudi Arabia, under the leadership of Prince Mohammed bin Salman, shifts its focus towards economic reforms and investment attraction. In recent years, the country has embarked on an ambitious reform plan known as Vision 2030, aimed at diversifying its economy and reducing its dependence on oil. By restoring ties with Canada, Saudi Arabia gains access to a potential source of foreign investment, expertise, and trade opportunities.

The diplomatic rift between the two countries was triggered by a critical Twitter post made by Canada’s embassy in Riyadh in 2018, which led to Saudi Arabia freezing trade deals, expelling the Canadian ambassador, and canceling a scholarship program for Saudi students studying in Canada.

However, the joint statement issued by the Saudi and Canadian foreign ministries reflects a mutual desire to rebuild diplomatic relations based on mutual respect and shared interests.

Economic implications

The economic implications for Saudi Arabia are significant. Restoring full diplomatic relations with Canada provides an opportunity for the kingdom to tap into Canada’s advanced industries, technological advancements, and expertise in sectors such as renewable energy, healthcare, and education.

Collaborating with Canada can support Saudi Arabia’s efforts to diversify its economy, create employment opportunities for its citizens, and accelerate its progress towards Vision 2030 goals.

Moreover, the diplomatic reconciliation with Canada is part of a broader strategy by Saudi Arabia to reshape its international image and position itself as an attractive investment destination. The kingdom has actively sought to improve regional relationships, including endeavors to end the war in Yemen, reconcile with Iran, and facilitate peace efforts in Sudan.

These initiatives have received praise from global powers such as the United States and contribute to Saudi Arabia’s aim of becoming a regional hub for trade and investment.

The restoration of full diplomatic relations between Saudi Arabia and Canada holds significant implications for Saudi Arabia’s economy. The reconciliation allows the kingdom to tap into Canada’s expertise, attract foreign investments, and accelerate its economic diversification efforts.

It aligns with Saudi Arabia’s broader strategy to enhance its international reputation and foster economic reforms. By reestablishing ties with Canada, Saudi Arabia positions itself as an attractive investment destination and strengthens its prospects for long-term economic growth.

Dr. Mohamed Abdelhameed has more than 15 years of a leading multi-disciplinary consultancy, academic, and research experience in impact investing, development finance, green banking, and sustainable development as well as the implementation of green lending facilities led by international financial institutions such as the EBRD, EIB, AFD, WBG, etc. He has a proven track record in the management of green credit lines in the Egyptian market.Dr Mohamed has solid experience in climate finance and used to provide advisory support to banks with respect to strategies' incorporation within the internal credit risk appraisal process.