The immediate impetus for this renewed engagement stems from Saudi Arabia’s rapidly growing economy, fueled largely by its substantial sovereign wealth fund and ambitious diversification plans. Riyadh’s investment appetite, particularly in sectors aligned with Canada’s strengths – artificial intelligence, frontier technologies, healthcare, and critical mineral extraction – presents a tangible opportunity for Canadian businesses. Furthermore, Saudi Arabia’s strategic location and increasingly important role within regional security architectures, particularly concerning the evolving dynamics in Yemen and the Red Sea, have become factors in Ottawa’s calculations. The activation of the Joint Economic Commission, a treaty established in 2018 but dormant for several years, signals a commitment to sustained engagement and the establishment of a predictable framework for economic cooperation.
Data from Global Affairs Canada reveals that Saudi Arabia was Canada’s largest merchandise trading partner in the Middle East in 2024, with two-way trade valued at approximately $4.1 billion. Canadian exports to Saudi Arabia predominantly consist of defence products, aircraft, motor vehicles and parts, pharmaceuticals, as well as industrial machinery and equipment. The presence of over 150 Canadian companies operating within Saudi Arabia – leveraging expertise in emerging technologies and resource extraction – demonstrates an established, albeit relatively nascent, commercial presence. According to Dr. Elias Vance, Senior Fellow at the Centre for Strategic Policy Analysis, “Canada’s move reflects a broader trend of nations seeking to secure access to critical resources and technological advancements. Saudi Arabia, with its massive investment capacity, presents a particularly attractive market.”
However, the relationship faces considerable challenges. The Saudi Arabian human rights record remains a persistent point of contention for Western governments, and significant investment in Saudi Arabia is often scrutinized by international organizations and civil society groups. Beyond ethical considerations, geopolitical risks remain high. The ongoing conflicts in Yemen and Syria, coupled with Saudi Arabia’s involvement in regional power struggles, introduce considerable security vulnerabilities. Furthermore, shifts in U.S. foreign policy, particularly under the Biden administration’s prioritization of alliances with European nations, could impact Canada’s ability to maintain a privileged economic relationship with Riyadh.
Recent developments, including a memorandum of understanding signed between Export Development Canada and the Saudi EXIM Bank focused on facilitating trade and investment, reinforce the strategic importance attached to this partnership. This collaboration aims to bolster trade flows and unlock investment opportunities, particularly in sectors identified as priority areas for both countries. The signing follows a bilateral meeting between Minister Sidhu and Minister Al-Falih, which specifically addressed future strategic sector partnerships, including investments in AI and defense. Despite these initiatives, analysts note a critical need for Ottawa to develop a robust risk mitigation strategy.
Looking ahead, the short-term (next 6 months) will likely see continued negotiations for the Foreign Investment and Protection Agreement, alongside increased trade flows and further collaborations in identified strategic sectors. Longer-term (5-10 years), the relationship’s trajectory hinges on several factors. If Canada can successfully navigate the geopolitical risks and address concerns related to human rights, the partnership could solidify into a cornerstone of its trade and investment portfolio. However, a failure to adequately manage these challenges, coupled with shifts in regional power dynamics, could lead to a cooling of relations, potentially relegating Saudi Arabia to a less strategically significant economic partner. According to Professor Aisha Khan, a specialist in Middle Eastern economics at the University of Toronto, “Canada’s ability to maintain a balanced approach – one that acknowledges Saudi Arabia’s economic influence while upholding its commitment to international norms – will ultimately determine the sustainability of this partnership.” The need for robust diplomatic engagement, alongside a clear articulation of Canada’s values, will be crucial to ensuring a mutually beneficial and enduring relationship. The success of this pivot requires sustained attention and careful monitoring within the broader context of global economic and geopolitical uncertainty.