Saudis fall $1.8B behind in payments for arms deal with Canada

NORMAN DE BONO

Saudi Arabia has fallen behind in making payments on its $15-billion arms deal with Canada, a contract that Prime Minister Justin Trudeau has said he's looking for ways to halt.

The Saudi government was short $1.8 billion in payments to the end of September for light-armoured vehicles assembled at General Dynamics Land Systems Canada (GDLS) in London, according to financial statements from the Canadian Commercial Corp., the federal Crown corporation overseeing the controversial contract.

“It is a problem. There is concern, absolutely,” a federal official with knowledge of the agreement told The London Free Press on Wednesday.

The arrears on the deal can be traced to a new regime in Saudi Arabia since the agreement was signed in 2014, and there have been delays in payments since the change, said the official, who declined to be identified.

“That changed the way everything worked, including payments,” he said of the desert kingdom's new leadership.

However, since September the oil-rich country has been making payments and has reduced the amount owed, the official added.

The deal, which the Liberals are under pressure to scuttle amid Saudi human rights abuses, including the slaying of dissident journalist Jamal Khashoggi at the country's consulate in Turkey, affects thousands of workers in the London area and in a supply chain that extends nationwide.

Trudeau, whose government inherited the deal from former prime minister Stephen Harper's Conservatives, said publicly this week for the first time that the Liberals are trying to find a way to stop the sale involving hundreds of light-armoured military vehicles built by the Canadian division of American defence giant General Dynamics.

The report by the Crown corporation handling the sale says “trade receivables” are short $1.86 billion as of quarterly statements ending Sept. 30, and that payments have been sparse over the course of about one year.

“The significant increase in past due trade receivables, is mostly attributable to the ABP contract,” the report says, referring to the armoured brigades program.

“Trade receivables are considered past due when the payor has failed to make the payment by the contractual due date.”

The payment issue hasn't been helped by recent public musings by Trudeau, who on Sunday told CTV's Question Period the government is looking for a way to halt the sale.

“We are engaged with the export permits to try and see if there is a way of no longer exporting these vehicles to Saudi Arabia,” he said, without being specific.

Such a move would devastate GDLS Canada's 1,800-member workforce in London, as well as thousands of jobs with supplier companies, said David Perry, a senior analyst with the Canadian Global Affairs Institute think-tank.

The Saudis may now feel even less inclined to write a cheque, he added.

“It does not give the Saudis a reason to catch up on payments. The government of Canada is responsible for making sure GDLS gets paid for the work it has done,” said Perry.

It also makes even less sense that Ottawa should want out of the deal now, he added. Not only would the federal government incur billions of dollars in penalties, according to GDLS Canada, but the Saudis aren't likely to pay the balance owed.

“It does not make sense. It would leave the government out of pocket,” said Perry.

A review of the quarterly reports suggest payments began slowing about a year ago, he added.

“We are right back to dealing with an unreliable client, and that is a problem,” said London-Fanshawe NDP MP Irene Mathyssen. “Work has been done and they have not seen fit to pay their obligation.”

She also slammed Trudeau for creating uncertainty around the issue. “It is a problem, it creates stress. The PM cannot make up his mind about what to do.”

As for why payments aren't being made, Mathyssen cites reports of financial issues with the Saudi government. Media in May reported soaring debt in Saudi Arabia and economic woes as a result of low oil prices.

“There have been reports they overspent, they do not have the cash they once did,” said Mathyssen. “Saudis are used to dictating to the world because they hold such significant oil reserves. They are used to calling the shots.”

The Canadian Commercial Corp. (CCC) helps businesses sell overseas and works with foreign governments to buy here. It declined comment on the quarterly reports, saying financial matters between the Crown corporation and business are confidential.

“CCC is bound by commercial confidentiality, and, as such, we are not able to disclose the details of our contracts or their management,” the company wrote in an email message.

James Bezan, the Conservative critic for national defence, blamed Global Affairs Minister Chrystia Freeland for the slowing cash flow. Her tweets in May criticizing the Saudi human rights record coincide with fewer payments made, he said.

“It is concerning. It occurred after irresponsible tweets from Freeland rather than working through proper diplomatic channels,” he said.

“The Liberals are prepared to trade away good jobs in London and southern Ontario rather than deal with this at a diplomatic level.”

Bezan encouraged the government to find other ways to pressure the Saudis, such as targeting oil imports here, instead of cancelling a contract that would result in massive job losses.

“GDLS has been on time, and on budget,” and would be the ones punished. “The government has the responsibility to work through the payments in a timely fashion,” he said.

TRUDEAU WEIGHS IN ON SAUDI DEAL

Speaking to reporters at a year-end news conference, Prime Minister Justin Trudeau was asked about whether he'll cancel the Saudi arms deal serviced by a major London defence contractor.

• “Our priority since Day 1 has been thinking about the Canadian jobs, the workers in London, and in the supply chains that have fed into this contract. We know that there are a lot of hard-working families in London who rely on these jobs, and we're going to keep those jobs in mind.”
• Says the contract, signed by the previous Conservative government, includes a confidentiality clause that prevents him from discussing what's in it, or the nature of the penalties for breaking the contract.
• Says Canadians are increasingly questioning whether the country should do business with Saudi Arabia.
• Called it a “complex situation.”
• Says he's been answering questions about the deal since taking office
• Says he'll continue to reflect on the “best path forward for Canada and for Canadians.”

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