As tensions between the Canadian government and Saudi Arabia continue to escalate over a human rights standoff, the risk of ending a US$10-billion arms deal would be “catastrophic” to London, Ont.’s economy, the city’s chamber of commerce warns.

The Canadian division of Virginia-based General Dynamics Corp. signed a deal in 2014 to supply light armoured vehicles for the Saudi Arabian government and maintain them for at least 14 years. The contract has generated roughly 3,000 jobs at General Dynamics and its 500 suppliers across the country, the company said.

But the deal could potentially be at risk as Saudi Arabia responds aggressively to an Aug. 2 tweet by Foreign Affairs Minister Chrystia Freeland calling for the release of Saudi women’s rights activist Samar Badawi.

The kingdom responded with unprecedented moves, suspending all new trade agreements with Canada, recalling its ambassador, instructing Canada’s own ambassador to leave the country, and cancelling flights by its state airline to Canada.

“If this does go south, this will be catastrophic for London,” said Gerry Macartney, CEO of London’s Chamber of Commerce, in an interview with BNN Bloomberg. “That’s way too much economy to be playing around with.”

Macartney added that the contract will affect 13,500 direct and indirect jobs throughout the city, which could be an insurmountable loss if Saudi Arabian officials decide to scuttle the contract.

"This is going to cost our economy billions of dollars and thousands of jobs. Is it worth that?" Macartney said.

General Dynamics spokesperson Doug Wilson-Hodge declined to comment on the situation in an interview with BNN Bloomberg.

The deal between General Dynamics and Saudi Arabia was initially brokered by the former Conservative government despite being mired in concerns over the kingdom’s human rights record. Prime Minister Justin Trudeau’s Liberal government eventually gave the deal a green light when it signed export permits that allowed the sale to proceed in early 2016.

Macartney said he's been in frequent contact with General Dynamics officials but hasn't received any clarity on the status of the company's contract with Saudi Arabia. "They’re not stonewalling. I just don’t think they know [what’s going on]," he said.

Jim Reid, president of Unifor Local 27, which represents about 470 employees at General Dynamics, said in an interview with BNN Bloomberg that the union supports the federal government’s defense of human rights but encourages a diplomatic solution to the situation.

"Whether we like it or not, this is a totally different country we're dealing with. We need to encourage diplomatic dialogue between the two countries and these workers are going to be caught in the middle of this," Reid said.

"If the contract gets pulled, the question begins to whether the London facility is viable given the limited other business they've got going on there. Unless past customers that General Dynamics has supplied to, like Australia, makes any future orders, it's unclear what could happen there. "

Meanwhile, London's Western University said 131 students from Saudi Arabia, including 90 Saudi-sponsored medical trainees from the Schulich School of Medicine and Dentistry, are impacted by the country's order for thousands of its students to leave Canada immediately.

"Western University continues to monitor the situation concerning Canada and Saudi Arabia. The university's primary focus is how this situation may affect the students involved and our campus community," the university said in a statement on its website.