Ottawa’s lifeline to Saudi LAV maker raises questions


In 2019, parent company General Dynamics Corp.- a plant in London, Ontario, seen here in August 2019 – has publicly revealed that the Saudis have been slow to make payments on the LAV agreement.

Geoff Robins/The Canadian Press

Last fall, the federal government used a rarely used report to Ottawa’s export finance agency to provide $650 million in support to the defence contractor who was building combat vehicles for Saudi Arabia, an aid that came as Riyadh lagged behind on the payment of these machines.

The support, in the form of a repayable loan, was provided to General Dynamics Land Systems Canada last September through the Canada Account, according to Export Development Canada (EDC).

The government made a brief mention of the loan in an August 2019 press release that was also devoted to a separate announcement on the purchase of new light armoured vehicles for the Canadian Army from General Dynamics, based in London, Ontario. The press release did not disclose what prompted Ottawa to make the loan or that the government was using the Special Account of Canada to do so.

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The Canada Account is used to authorize transactions deemed riskier than EDC cannot support, but which are considered by the Canadian government to be in the “national interest” of the country, according to the federal export credit agency’s website. EDC also makes regular commercial loans through its corporate account.

Transactions through the Canada Account are retomated by the federal treasury rather than EDC itself and require approval from the Minister of International Trade with the approval of the Minister of Finance; those over $50 million or “sensitive” must be approved by Cabinet, according to the agency.

Ottawa has already used the Canada Account to bail out the auto industry, help a Quebec shipbuilder, boost exports of civil aircraft by aerospace companies and purchase the Trans Mountain pipeline. Over the past 20 years, governments have used it to assist 16 companies, the state-owned Atomic Energy Canada Agency and, in one case, an unspecified number of softwood lumber companies.

The loan to General Dynamics is the first to this Canada Account defense contractor in the past two decades. EDC does not make transaction information public from the years prior to 2001.

General Dynamics Land Systems Canada (GDLS-C), the Canadian subsidiary of the major U.S. defense company General Dynamics Corp., is building light armoured vehicles (LAVs) for Saudi Arabia through a controversial $14 billion agreement negotiated and approved for export by Ottawa. Earlier this spring, the Canadian government said it had resumed approval of new military export permits to Saudi Arabia.

Thomas Juneau, an assistant professor at the University of Ottawa’s Graduate School of Public and International Affairs and an expert in Middle East affairs, said he assumes the fall 2019 loan was intended to help General Dynamics deal with cash flow problems caused by the Saudis who have repeatedly failed to make payments on the LAV contract.

In 2019, parent company General Dynamics Corp. publicly revealed that the Saudis had been slow to make payments on the DEV agreement. In an October 2019 call with investors, the company said the missed payments at the time totaled US$1.5 billion.

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Professor Juneau said he understood why the Canadian government would have wanted to minimize this loan to the defence contractor.

“Lending money to an arms dealer to support an agreement with Saudi Arabia when Saudi Arabia doesn’t pay its bills before due dates, politically, is like six strikes against you,” said Professor Juneau.

Cesar Jaramillo, executive director of Project Ploughshares, an arms control group, asked why it was necessary for the Canadian government to intervene to help the company’s parent company, General Dynamics Corp., which last year reported revenues of more than US$39 billion and a profit of more than US$3.4 billion.

General Dynamics Land Systems Canada did not respond to any questions about the loan, including why it was necessary. “We will decline to comment,” spokesman Doug Wilson-Hodge said in an email.

A EDC spokesperson referred all questions about General Dynamics Land Systems Canada’s loan to the Department of Global Affairs.

Global Affairs declined to say exactly why the loan was needed, but noted that it was made while “the company was navigating a challenging and dynamic international defence market.”

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Department spokesman Sylvain Leclerc said the loan was necessary to “maintain and support thousands of jobs not only in Southwestern Ontario, but throughout the defence industry supply chain, and to ensure that GDLS-C can maintain and continue operating its London, Ontario plant and support its employees and suppliers.”

When asked whether General Dynamics had repaid the loan, Mr. Leclerc declined to comment, saying that due to the need to maintain “commercial confidentiality,” the Canadian government “cannot disclose specific terms of the status of Canada Account transactions.”

New Democrat foreign affairs critic Jack Harris said the federal government owes Canadians an explanation.

“It’s not very transparent. Obviously, they will make extraordinary efforts to support this project,” Harris said. “It is extraordinary that this is done without any public information or explanation.”

The NEW Democrat MP said his party did not support the sale of armoured vehicles to Saudi Arabia, which human rights groups say are used by the Saudis in its war in Yemen.

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“It is not necessary to lean backwards to support this effort,” he said.

Conservative MP Peter Kent has denounced the lack of candour to lend $650 million to a major U.S. arms manufacturer.

“This is a classic example of the Liberals’ inability to meet their consistent demand for transparency in government,” Kent said.

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