Company warns over cancelling Saudi deal

OTTAWA • The Ontariobased company that is selling $15-billion worth of armoured vehicles to Saudi Arabia is warning the Liberal government that cancelling the deal will it cost billions of dollars in penalties.

General Dynamics Land Systems-Canada said in a statement Monday that cancelling the contract would also hurt its workforce in London, Ont.

“We are continuing to execute our valid and binding contract,” General Dynamics said.

“Were Canada to unilaterally terminate the contract, Canada would incur billions of dollars of liability to General Dynamics Land Systems-Canada.

“In addition, terminating the contract would have a significant negative impact on our highly skilled employees, our supply chain across Canada, and the Canadian defence sector broadly.”

The statement comes as the federal government is reviewing the controversial contract reached by the previous Conservative government.

“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,” Prime Minister Justin Trudeau told CTV on Sunday, without elaborating.

He has been under increasing pressure to scrap the sale since October, when Saudi journalist Jamal Khashoggi was killed after he entered a Saudi consulate in Turkey. The murder has sparked international condemnation against Riyadh.

Foreign Affairs Minister has said Saudi Arabia’s explanations for Khashoggi’s death are not credible and there needs to be an independent investigation.

“In the past Canada has suspended existing export permits and that has always been something that we’re prepared to do again as the situation merits,” Freeland said in an interview on Monday.

But until Sunday cancelling the deal did not appear to be a viable option. Trudeau has always maintained that the penalty for doing so would be “in the billions of dollars.”

He often stresses the importance of human rights, and continuing to sell arms to the Saudis could leave him open to accusations of double standards.

But abandoning the deal could kill thousands of jobs in the struggling city of London, Ont., where his Liberals will need to do well in a federal election next October.

“We are in constant contact with the company, and are committed to the workers at the London facility as well as the suppliers in London and across Canada,” said Adam Austen, a spokesman for Freeland.

David Perry, defence analyst at the Canadian Global Affairs Institute, said it’s unusual for General Dynamics to issue a public warning about a contract.

“I can’t imagine they are anything other than extremely worried,” he said in a phone interview with Reuters.