By Allison Martell
LONDON, Ontario (Reuters) - Canadian Prime Minister Justin Trudeau is faced with a dilemma as an election approaches - how to credibly clamp down on Riyadh over its human rights record while sparing a $13 billion arms deal with Saudi Arabia.
Trudeau, who has promised "consequences" for the murder of Saudi journalist Jamal Khashoggi, is under pressure to freeze an already unpopular $13 billion contract for armoured vehicles built in Canada by U.S.-based General Dynamics.
The problem is that the deal underpins 3,000 jobs in the small city of London, Ontario, a recovering manufacturing centre and a likely battleground in next year's federal vote.
The debate over the deal is worrying to members of Trudeau's ruling Liberal party, including Peter Fragiskatos, the lawmaker from the London North Centre parliamentary constituency.
"A lot of jobs depend on this contract," Fragiskatos said in an interview, noting Trudeau has visited the city several times and "understands very well the challenges that London has faced. I am advocating very strongly for my community."
A source directly familiar with official thinking said "we don't want to lose those jobs", but added it was also important for Canada to take a stand when human rights are violated.
"Canada is committed to upholding human rights, freedom of expression and the protection of journalists around the world," Trudeau said last week, and that Ottawa would review its export permits to Saudi Arabia in response to the death of Khashoggi, whose murder in the Saudi consulate in Istanbul last month has sparked an international outcry.
As for further penalties, a government official said on Monday that Canada is carrying out a "comprehensive review of our relationship with Saudi Arabia," while trying to "establish a credible narrative" for the murder and coordinate a response with allies.
In recent years, Trudeau has cast himself and his government as standard-bearers for progressive values at a time when the United States is withdrawing from the global stage under President Donald Trump.
Canada is particularly sensitive to Khashoggi's murder after Riyadh abruptly severed diplomatic ties following Foreign Minister Chrystia Freeland's tweet in August demanding the release of jailed activists.
Trudeau backed Freeland after the tweet and the two have been generally aligned on the murder of Khashoggi. But asked last week why Ottawa would go ahead with the arms deal, Freeland replied it was "a very good question" and declined to be more specific.
Trudeau has said scrapping the deal would cost "billions" in penalties.
Opposition critics and human rights groups say that if Trudeau is serious about standing up for human rights, he should cancel the deal.
Other nations are also grappling with how to send a strong message to the Gulf oil producer about its need to respect human rights while limiting the economic impact.
Germany halted new weapons sales to Riyadh, and Chancellor Angela Merkel is pushing for the rest of the European Union to adopt a similar position. Berlin is also reviewing sales that have already been approved, including contracts for patrol boats that are under construction.
But in Britain, the second-largest exporter of arms to Saudi Arabia after the United States, Prime Minister Theresa May's government has repeatedly rejected calls from opposition Labour Party leader Jeremy Corbyn to end arms sales to Riyadh.
"There are jobs in the UK ... at stake so when it comes to the issue of arms sales we have our procedures," Foreign Secretary Jeremy Hunt told lawmakers on Wednesday.
CRUCIAL TO LIBERALS
London's newly elected mayor Ed Holder, a former Conservative minister who helped found the Canada Saudi Business Council and led a trade delegation to the kingdom in 2016, said the contract should not be cancelled.
"I've been in contact with the federal government about that and I'm advised that they don't intend to cancel the contract," he said in a radio interview after his Oct. 22 election.
The political fallout of scrapping the deal could be significant. The Liberals control two of London's four seats and have a narrow, 12-seat parliamentary majority heading into a re-election campaign for a vote due by Oct. 21, 2019.
"Places like London, Ontario, will be crucial to the Liberals," said Darrell Bricker, head of Ipsos Public Affairs polling company.
The Liberals, at 36 percent, are just one point ahead of the Conservatives, with the left-leaning New Democrats, who say the Saudi military contract should be scrapped, are at 20 percent, according to the latest Ipsos poll.
While Trudeau has announced a review of export permits, those already issued are being respected, the government official said. That should spare General Dynamics any immediate impact.
A 2016 document from the foreign ministry posted online shows General Dynamics had already received approval for C$11 billion worth of exports as part of the deal. Canada shipped C$166.9 million worth of armoured vehicles and parts to Saudi Arabia in July, trade statistics show.
"We are continuing to build that vehicle on schedule, and we see no indication that contract has changed," General Dynamics Chief Executive Phebe Novakovic said on a conference call last week. "Steady as she goes."
(With additional reporting by Steve Scherer and David Ljunggren in Ottawa and Guy Faulconbridge in London; Editing by Susan Thomas)