Should Canada tilt away from Saudi Arabia and towards Iran?

The culmination of decades of shifting alliances, proxy confrontations, and disastrous external interventions has seen the division of the Middle East into two major camps. On one side: the Sunni regional hegemon of Saudi Arabia which is the driving force of the Gulf Co-operation Council (GCC), with differing levels of support from the rest of the Sunni world. On the other side: Iran, with the allied regimes and paramilitary organizations in Iraq, Syria, and Lebanon. The rivalries are not only about religion, but also about political structures, tribal feuds, and pure economics. The question for Canadian politicians during this election campaign and beyond is which side better represents an opportunity for Canadian interests in terms of practicality and ideals.

The current Canadian government has strengthened its ties with the GCC in the past decade. A major agreement to sell C$15 billion worth of military equipment was recently signed by General Dynamics, a London, Ontario based company. The government estimated that 3,000 jobs will be created by this deal. Fifteen thousand Saudi students study in Canadian universities, representing the fourth source country of foreign students to the country.[1] Canada imports C$2.6 billion and exports C$1.2 billion to the country, with Canadian investment in Saudi Arabia standing at a mere C$4 million.[2] The Saudi economy is dependent on oil exports, with little diversification over the years.[3]

According to Human Rights Watch, Saudi Arabia is known to be a major human rights violator from lashings and beheadings to strict curtailment of the rights of women and minorities.[4] During the Arab Spring, it violently repressed a peaceful demonstration of the Shia majority in Bahrain against its Sunni ruling monarchy. The sight of Saudi tanks intervening in the neighboring country was an indication of how the military equipment Canada sells to the country will be used. The rise of Wahhabism, the violent interpretation of Islam, is largely attributed to the funding of Madrassas that preach it by the Saudi government and Saudi individuals around the world.[5] Wahhabism is the ideological cornerstone of groups such as ISIS.

Iran’s economy has stagnated due to the devastating effect of western sanctions. Stagnant economic growth, alongside high inflation has lowered living standards, while trade sanctions in the financial and shipping sectors make investing in the country cumbersome, if not impossible, for western companies. Iran however, is one of the major economies in the Middle East. The country boasts a young educated populace with some of the best universities in the world, along with supporting the second biggest economy in the region, standing at a GDP of $400 billion.[6] Market forces have adapted, and during the self-imposed exile of western companies, interest groups from a diverse set of players were taking advantage of the vacuum by increasing investment and market share. Turkey signed a deal to lower trade barriers, Iraqi cities are being rebuilt with Iranian steel and cement, and appliances and electronics pour in from East Asia.[7]

Now, there is a new wind blowing in Tehran. The nuclear deal has opened the floodgates of western business delegations eager to help the Iranian economy make up the ground it lost due to the devastating effect of the sanctions some experts say that the Iranian economy would be 15% to 20% larger without the sanctions.[8] At a recent trade fair in Austria it was estimated almost 185 billion of investments are needed in the oil sector on top of the estimated C$20 billion required in the mining sector. The new Iranian government is promising better terms for investors. Iran was in the “Next 11” star economies according to Goldman Sachs before the sanctions,[9] and now that they will be lifted, the Canadian government needs to pave the way for Canadian interests to reap the benefits of the reintegration of Iran to the world economy. Canadian companies could make a huge profit by using their expertise in mining and oil extraction with the help of the vibrant Iranian-Canadian community to help Iran make use of its vast resources and improve the fortunes of its 81 million citizens.

Kinzer, a former New York Times Istanbul bureau chief, argues in his book Reset that Iran may present a better overall ally for the west in the region. The human rights record and imperfect political system of Iran needs to be placed in context. Iran is not a perfect democracy by any measure, but it is not an absolute monarchy like Saudi Arabia. It supports Shia paramilitaries that have been accused of grave human rights violations, but these are the same paramilitaries that stopped ISIS from entering Baghdad. The human rights record of the Iranian regime is atrocious, but the rise in power of moderates with the election of Rouhani is a new chapter and engagement and investment from the west can be a catalyst that will allow the moderate factions in Iran marginalize the hardliners by increasing living standards. Canadian politicians need to answer not which side is perfect but which side presents a better opportunity for Canadian businesses, and for the creation of stability and peace in the region.

References

[1] Dehaas, Josh, “4 Things to Know About Canada’s Relationship with Saudi Arabia,” CTV News, accessed August 31st, 2015, http://www.ctvnews.ca/canada/4-things-to-know-about-canada-s-relationship-with-saudi-arabia-1.2201849

[2] “Fact Sheet: Saudi Arabia – Canada’s Priority Market, ” Ministry of Foreign Affairs, Trade and Development Canada, accessed August 31, 2015, http://international.gc.ca/global-markets-marches-mondiaux/markets-marches/saudi-saoudite.aspx?lang=eng

[3] Gauthier, Alexandre, “Canadian Trade and Investment Activity: Canada-Saudi Arabia,” Parliament of Canada, accessed August 31, 2015, http://www.parl.gc.ca/Content/LOP/ResearchPublications/2011-147-e.htm>

[4] “Saudi Arabia,” Human Rights Watch, accessed August 31, 2015, https://www.hrw.org/middle-east/n-africa/saudi-arabia.

[5] Blair, David, “Qatar and Saudi Arabia ‘have ignited time bomb by funding global spread of radical Islam,” The Telegraph, accessed August 31, 2015, http://www.telegraph.co.uk/news/worldnews/middleeast/iraq/11140860/Qatar-and-Saudi-Arabia-have-ignited-time-bomb-by-funding-global-spread-of-radical-Islam.html

[6] Newsweek, “Surprising Success of Iran’s Universities,” Newsweek, accessed August 31, 2015, http://www.newsweek.com/surprising-success-irans-universities-87853

[7] Harris, Kevan, “Iran’s Political Economy Under and After the Sanctions,” The Washington Post, accessed August 31, 2015, http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/04/23/irans-political-economy-under-and-after-the-sanctions/

[8] Mark Glassman, “What Sanctions have done to Iran’s Economy,” Bloomberg business, accessed August 30, http://www.bloomberg.com/news/articles/2015-03-02/what-sanctions-have-done-to-iran-s-economy

[9] “Beyond the BRICs: A Look at the ‘Next 11’,” Goldman Sachs, accessed August 31, 2015, http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/brics-book/brics-chap-13.pdf