Here’s a subject that Elon Musk might think twice before tweeting about.

Resource-rich Saudi Arabia, which in recent months amassed a $2 billion stake in the Twitter-mad billionaire’s electric-car company Tesla Inc., has declared economic war on Canada. The cause was a tweet by Canadian Foreign Minister Chrystia Freeland, whose call for the release of social activists arrested by the Gulf monarchy earned a stunningly disproportionate response this week.

Riyadh has halted new investments in Ottawa, expelled Canada’s ambassador, stopped the state airline flying there, suspended a student exchange program, pulled medical patients from Canadian hospitals, and started selling off Canadian assets (according to the Financial Times.) It’s out to punish the Canadians “no matter the cost,” a source close to the situation told the FT.

Musk should have reason to care. He’s half-Canadian, and studied in Canada. Had he built his cash-guzzling automaker north of the International Boundary, the Saudis would doubtless take a different view on that backing for Tesla – and the possibility of helping him take the company private again.

Indeed, it’s this apparent Saudi willingness to “weaponize” its overseas investments that should give western governments and business leaders pause for thought everywhere – and might explain in part why Canada’s allies have been slow to offer backing to Freeland and her prime minister, Justin Trudeau.

We’ve seen this style of economic warfare before – in the 1970s, Arab states wielded the “oil weapon” –  but this latest attack comes after a dramatic increase in Riyadh’s foreign investments.


The Public Investment Fund, Saudi Arabia’s wealth fund, owns stakes in Uber Technologies Inc., German transport firm Hapag-Lloyd AG, Richard Branson’s Virgin Group, an infrastructure partnership with Blackstone Group and the biggest-ever technology investment vehicle with SoftBank Group Corp. Turning Saudi’s state investment arm into a $2 trillion powerhouse is core to Crown Prince Mohammed bin Salman’s strategy of diversifying the economy away from oil.

Few have seen fit to turn down this money. Yet we’ve already witnessed the collateral business damage the Saudis can inflict if another country displeases them. In September, a Riyadh-led economic blockade of Qatar forced that country’s wealth fund to sell shares in far-flung companies like Tiffany & Co. and Credit Suisse Group AG to prop up its domestic economy. 

The latest geopolitical spat is small in terms of absolute economic impact. Canada-Saudi trade is tiny, and Saudi doesn’t own many assets in the country. But it shouldn’t be dismissed lightly.

Canada’s western allies want to encourage “MBS” because they believe he offers the best chance of bringing the kingdom into the rich-country mainstream. Yet there’s a risk in handing too much economic leverage to a government that’s clearly ready to use it to halt even the most anodyne criticism of its human rights situation. As Donald Trump’s trade rhetoric shows, we’re moving into an era where these bi-lateral fights are becoming the norm. 

Those Saudi billions may come in handy – just ask Musk. But there are serious conditions attached. 


To contact the author of this story: Lionel Laurent at llaurent2@bloomberg.net

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering finance and markets. He previously worked at Reuters and Forbes.

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