Canadian Prime Minister Justin Trudeau, speaking in an interview that aired on Sunday, said for the first time that his Liberal government was looking for a way out of a multibillion-dollar arms deal with Saudi Arabia.
Trudeau had earlier said that it would be "extremely difficult" to withdraw from the contract, signed by the previous conservative administration, "without Canadians paying exorbitant penalties."
But as evidence emerged of direct Saudi involvement in Khashoggi's murder on October 2, Canada in late November announced sanctions against 17 Saudi nationals linked to killing.
"The murder of a journalist is absolutely unacceptable and that's why Canada from the very beginning had been demanding answers and solutions on that," Trudeau said Sunday in an interview with CTV.
"We inherited actually a CA$15 billion contract signed by (former prime minister) Stephen Harper to export light-armored vehicles to Saudi Arabia," he said.
"We are engaged with the export permits to try and see if there is a way of no longer exporting these vehicles to Saudi Arabia," he added.
The penalty for breaking the contract could exceed CA$1 billion, Trudeau said in an interview with CBC Radio in October.
Trudeau has been criticized by political opponents and Human Rights activists for failing to cancel the contract.
London, Ontario-based manufacturer General Dynamic Land Systems Canada inked the deal in 2014 to supply 928 LAV 6 armored personnel carriers to Saudi Arabia.
The deal, worth $11.5 billion, was the largest arms deal in Canadian history.
But the contract was scaled back earlier this year, amid protests, to 742, dropping heavy assault versions equipped with cannons that activists and opposition politicians warned could be used against civilians and to help Riyadh wage war in Yemen.
Khashoggi, a U.S. resident who wrote for The Washington Post and had been a critic of Crown Prince Mohammed bin Salman, was lured to the Saudi consulate in Istanbul, killed and dismembered, according to Turkish officials.
After lengthy denials, Saudi authorities admitted responsibility for the murder and said 21 people had been taken into custody. However, a CIA analysis leaked to the U.S. media went further, pointing the finger at the crown prince, Saudi Arabia's de facto ruler.
In October, German Chancellor Angela Merkel said her country would suspend arms sales to Saudi Arabia over the murder.
Relations between Canada and the Saudi kingdom have been in crisis in recent months.
Riyadh expelled Ottawa's ambassador and severed all trade and investment ties in August to protest Canada's rigorous demands that jailed human rights activists be released.