Foreign Affairs Committee on April 7th, 2014

[The Chair, Conservative, Dean Allison]

No, no other questions, but that was a good try, though.

Mr. Volker, I'll give you a chance to answer the question quickly.

[Kurt Volker]

Thank you. I'll be very brief.

I agree with what David Kramer said, but I would stress one particular point, and that is while western European governments are naturally sensitive to the economic pressures because their democracies and their publics would feel them, Russia is willing to play games with this because it is run as a top-down authoritarian state.

That being said, Europe has more options when it comes to diversifying gas supply and should it pursue that aggressively, I think it could weather a standoff with Russia on energy. Russia has many fewer options, so while, yes, it would be painful, I think Europe also comes out of that ahead.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Garneau.

We're going to start our second round with five minutes for each MP. We'll start with Ms. Grewal, for five minutes please.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Mr. Volker and Mr. Kramer, thank you very much for your presentations.

Mr. Volker, there are currently several kinds of situations of extreme political unrest in the world that demand our attention, such as Syria and of course Ukraine. To what extent do you believe that Canada and her allies should respond to this situation in Ukraine? What kinds of short-term and long-term consequences do you see resulting from various levels of intervention?

[Kurt Volker]

If I may, I want to give that a very broad context, because I agree with you that it's around the world, and I'm glad you mentioned Syria, because that is fundamentally important as well.

What we have done over the last 60 years—Canada, the United States, western Europe—is we have built a global, democratic, market economic and secure community of nations. It's not universal, although it'd be great if it were, but certainly substantial and one that has provided great benefit, great value to hundreds and hundreds and hundreds of millions of people around the world.

What we are seeing today is the deliberate rolling back of the edges of that system; whether it is Russia seeking to reassert authoritarian rule inside Russia, dominate its neighbours, and acquire territory by use of force, or whether it is by religious extremists, in the case of al-Qaeda and what we see in the Sahel, or whether it is petty dictators such as we have in Assad, who is fighting to control his territory and actually stimulating some of the religious blowback that we're getting.

All of these are assaults on the kind of human development that we have all been sponsoring and have been beneficiaries of for so many years. I don't think any of us can sit idly by as these challenges to this way of life, this order that has developed in the world, are being played out. We can throw into this mixture authoritarian capitalism coming from China, or even democratic nationalist economies such as we see in the case of Brazil with, for example, a neo-mercantilist approach to some industries. So I think we have to invest in this world order and promote it.

That all being said, the most acute crisis today, because it is live, it involves substantial numbers of military forces potentially, and it involves all of our allies in Europe, is the crisis in Ukraine, because it can expand, as we talked about earlier, with Putin's ambitions.

The second most important one is Syria. I think it is on a humanitarian level far graver, far worse: over 140,000 people killed, a third of the country now refugees, spilling into a regional conflict, and fueling ideological hatred that's going to be with us for a generation. That also is something we need to deal with. From day to day, I'm more worried about what's going to happen in Ukraine tomorrow, whereas Syria is at a low burn, but we can't ignore Syria either.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Mr. Kramer, as our global society is becoming increasingly interconnected, we know that political decisions made in distant parts of the world can still have a profound impact on us here in Canada. In what ways do you see Russia's aggression towards Ukraine impacting its various neighbours, including Canada?

[David Kramer]

If I'm not mistaken, Canada has the largest ethnic Ukrainian population outside of Ukraine itself, so what's happening in Ukraine is obviously of enormous interest to your people and your constituents, as it is to many people here in the United States and to Europe.

It represents an assault not only against Ukraine's sovereignty and territorial integrity, but it's also an assault against freedom, against human rights, and against universal values. Putin is trying to redraw the map of Europe that was accepted with the collapse of the Soviet Union, the fall of the Warsaw Pact, and this is essentially in the heart of Europe. For the vision that was laid out several decades ago of a Europe whole, free, and at peace, what Putin is doing to Ukraine right now matters tremendously.

I think it's critically important for Canada, the U.S., and Europe to join forces. I think weighing in with the German chancellor, as your Prime Minister has done, was very helpful, given that there had been some tensions, as you may know, between the U.S. and Germany over the past few months. I think this is a test of the G-7, of the democratic community of nations, to see how we're going to respond to this threat, and it is a threat. What we now can at least stop doing is pretending that we have the possibility of a strategic partnership with Russia, that we can really work together, and that we have common values. Nothing could be further from the truth.

Under Putin, Russia has gone down the road where we have the worst crackdown in human rights since the collapse of the Soviet Union, and it's getting worse. It's not getting better. As long as that's the case.... How a regime treats its own people is often indicative of how it will act in foreign policy, and since Putin shows no respect for the human rights of his own people, we shouldn't assume that he's going to show any interest in the human rights of others. It's why, for example, Putin has not only blocked resolutions in the UN Security Council on Syria, but he's been arming, aiding, and abetting Assad's slaughter of the Syrian people.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to turn it back to Mr. Dewar, for five minutes.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you again to our guests.

I wanted to touch on the energy issues for a second. It was interesting that just a week ago I had someone contact my office with a very serious proposal around having Canada and others help invest in energy efficiencies in Ukraine. It's interesting to hear you comment about the importance of energy because—well, the obvious link to Russia—of that disparity between Germany and Ukraine. We're looking at recommendations. Does it make sense to you to have some key investments in energy efficiencies, as well as, obviously, looking at alternative supply? Is that something that's been raised in the U.S. in terms of how you can help support Ukraine?

[David Kramer]

Back when Kurt and I were in the state department, the U.S. put a lot of emphasis on advising the orange government at that time, Yushchenko and Tymoshenko, on energy reform, and we didn't get anywhere, I'm sorry to say. I do think investment in Ukraine can be very helpful and positive, but it has to be accompanied by genuine reform in the energy sector, which is the most corrupt sector in Ukraine's economy.

Now, it's influenced by Russia. There's a middleman company, RosUkrEnergo, that has played a role in Russian exports to Ukraine. One of the heads of it, Mr. Firtash, was recently arrested in Austria. Ukraine has to really clean out the huge corruption in the energy sector so that Canadian, American, and European companies can actually do business there. It's not lack of interest; it's frustration of trying to do business in Ukraine that I would argue has been the biggest problem.

[Kurt Volker]

I completely agree with David on that. As he said, we worked a little bit on this together. A word that he did not mention that I want to stress is transparency. I don't believe that Ukraine can have a functioning good government without transparency in the energy sector, because this has been where all of the Ukrainian elites who have governed Ukraine since its independence have gone awry. They have found it too compelling to get rents out of the energy industry, which has compromised their integrity and tied them to Russia, and has kept Ukraine from really developing in a way that Poland has, for example. I think that both efficiency, as you say, and transparency in the energy sector is going to be key.

I'm going to throw something on the table, which is not popular in liberal western economies: it may be that the sector needs to be re-nationalized and reorganized in order to create confidence and transparency, and to help free Ukraine.

[Paul Dewar, NDP, Ottawa Centre, ON]

My last question is on Russia. Gauging the comments about Putin wanting to control the population, and duly noted, he's certainly put my name on a list and the Chair and I are no longer welcome in Russia. I've been critical about the anti-gay laws before, so I guess it's not a surprise.

The issue around the population and civil society, there have been some reports of Russians going into the streets in opposition to Putin's actions in Ukraine. Can you inform us at all about what you're hearing from civil society in Russia? We're obviously not hearing much and it would be appreciative if you had any information around civil society and protest against Putin in Russia.

[David Kramer]

First of all, congratulations. It's a badge of honour to be on that list, I would say.

On civil society, roughly two or maybe it was three weeks ago, there was a sizable protest in Moscow opposing the Russian moves into Crimea. And if you think about the risks that Russians face if they engage in what is deemed to be illegal protest—arrest, getting beaten up—that's an impressive turnout. I think it surprised Putin as well as many others.

The level of support for Putin has risen to about 80%, so people are saying what he's done is very popular. I would argue the reason for that is what he did in Crimea was quite easy. Had it been bloody, I'm not sure Putin's numbers would have gone up. I also think that boost in his support is rather ephemeral. I don't think it's long lasting. I think what Putin is trying to do is to distract people's attention from what had been a stagnating economy that is now likely going into recession. So the people don't focus on the problems at home, he deflects their attention and focuses on the threats that come from the outside world.

Just today by the way, he made references to non-governmental organizations and the threats that they can pose inside Russia. That suggests to me we're going to see what has already been a bad situation get worse in civil society, and that's going to be bad news for all of us.

[The Chair, Conservative, Dean Allison]

Thank you.

Thank you very much, Mr. Dewar.

We're going to finish off with Ms. Brown. I believe you're going to share your time with Mr. Goldring.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

I am, Mr. Chair.

I don't have very much time, gentlemen, and I wish I had more time to pursue that whole issue of Syria, because Mr. Putin has been absolutely truculent, I think is the word to use, in that situation and is I think one of the ones who's standing in the way of seeing anything move forward on that.

Gentlemen, I wonder if you could just comment further on the economic situation. I can't believe that Mr. Putin, who is a very calculating man has not calculated the sanctions into his go-forward plan. Where does he see his market? He has to sell his gas and his oil in order to maintain the economy in Russia. Where does he see his market if he can't sell it to Europe? Is he going to look east? Is it going to go to China? They're developing their own resources so they may not need it, but where will the market be for him?

[Kurt Volker]

I'll just say quickly, he doesn't believe that western Europe will really apply very tough sanctions against Russia. So he thinks that his market is Europe, but that they are so dependent upon Russia and so cowardly or so lacking in political will that they won't take the steps necessary to really push hard, and if they do, then he can negotiate them back while still keeping Crimea and whatever else he's taken up to that point. I think he is calculating this, as you say, but very aggressively.

[David Kramer]

I agree that he is counting on a lack of resolve on the part of the west, that he feels he has us over a barrel. We need to disabuse him of that notion very, very quickly.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Mr. Goldring, I'll pass it to you.

[Peter Goldring, Conservative, Edmonton East, AB]

Thank you very much.

Thank you for appearing here today, gentlemen.

I'd also like to touch on the gas and oil, and particularly the shale gas reserves. I understand Ukraine has a considerable amount of reserves and possibly some of the other European countries do too. But given that they can find a way to clean up and bring transparency to the industry, should that not be a priority to develop as quickly as possible?

When I was visiting Africa once, Ghana, I could see what they're doing on it. They virtually mortgaged their reserves for building infrastructure now on the expectation that this...because the reserves...I would think it's money in the ground and there are ways to ascertain the value of that money.

I have two questions. Can it not be used and mortgaged for funding now, and how quickly can that be brought on stream? Also, is there enough reserve there to cause Russia concern? In other words, they would no longer need to bring gas from Russia, they could produce their own.

[David Kramer]

There has been a theory that the possibilities of Ukraine and potential shale gas were part of Putin's thinking in terms of moving into Ukraine. I'm not sure that's the case. I think it had more to do with Yanukovych's fall from power than anything else, and concern that it might reverberate into Russia.

Development of shale gas in Ukraine and Poland, there's tremendous potential there, and other countries in Europe. As you indicated, sir, I do think it has serious potential and could do some harm to the Russian economy. I don't want to cause harm to the Russian economy unless the Russian economy threatens the west. Right now under Putin, I would say that's the case.

[Kurt Volker]

I'll just jump in quickly. I think in order for Europe.... Europe has not been joining the global gas revolution. Prices here in North America have gone down substantially. We're benefiting from that. We're switching more to natural gas. We have LNG import and export, as do other parts of the world. Europe has not really taken advantage of this. That would require the construction of LNG terminals for import, and the development of gas reserves inside Europe, as you're suggesting, through fracking.

The LNG side could be done fairly quickly. I think we're looking at, within a couple of years potentially, two or three new LNG terminals in Europe coming online. That then requires the interconnectivity of gas pipelines across Europe to link eastern Europe, central Europe, and western Europe better than they now do. This is an area that has been thwarted by Russia over the past several years because they've been able to manipulate investor confidence to prevent the investment in those pipelines. So the second thing is to get the pipelines there.

The third, which would probably take the longest, is in fact the development of the shale gas that's in Ukraine. Poland has already had a head start, but on that I think you're probably looking five years down the road and after reforming the energy sector, as David already talked about.

[The Chair, Conservative, Dean Allison]

Thank you very much, gentlemen, for your time. We enjoyed you as witnesses today.

This concludes the meeting for today.

With that, the meeting is adjourned.