Foreign Affairs Committee on Oct. 26th, 2016

[Peter Kent, Conservative, Thornhill, ON]

Thank you very much, Mr. Chair.

I'd like to come back to the sanctions applied abroad, specifically, Mr. Boscariol, to the Iran example that you spoke to earlier.

You said the system is broken. You reminded us that Global Affairs will not share advice of any sort. Very often it is suggested that you get a lawyer and then the lawyer—and I assume you've been in this situation—inquires of Global Affairs and is told that advice is not available, and that it's up to the lawyer to advise you to the best of the lawyer's knowledge of the situation. Is that pretty much it?

Before you begin your answer, when we asked the minister earlier this year what companies had been delisted from our sanctions list, the answers weren't provided by Global Affairs. Many individuals like yourself had to compare...had to go to the U.S. list to find out which companies were on the list, almost company by company. Could you describe how you managed your way through that period with your clients?

[John Boscariol]

Yes.

To address your first question, that's right. Companies will sometimes come to us after they've already attempted to get that advice from Global Affairs, although often it's before. Frankly, as legal counsel, we still have a role, regardless of whether we're getting direction from the government, to advise our clients as best we can on moving forward with a transaction, for example, that involves Iran. Often, it means that we can't give them a clear legal opinion that there's no issue under Canadian law. We have to identify the risks with moving forward.

As I was mentioning earlier, it often means that when a company sees those risks, and those risks often arise because there's no guidance from the Canadian government, the company feels that they're better off simply not proceeding with the transaction. It's not worth the cost. Or, if they want to proceed, and they have to continue to retain legal counsel to help them through the steps and all of that, that's costly for companies. For them it becomes a big headache to proceed, and it's easier for them just to say they are not going to engage in trade with that region for the time being until there's more clarity.

I'm less familiar with the situation you mentioned in the second part of your question, Mr. Kent, in terms of who is on and off the list. I can tell you from a Canadian point of view that is not as readily available, and hasn't been in the past, as it has been from other countries like the United States. We've had situations where orders in council have been passed adding parties, but those orders were not published for a day or two, which is a problem sometimes, especially for banks that need to be right on top of it as soon as that comes into force. We've had to struggle with that. In the past, sometimes we've seen it on the PMO website, and sometimes it's on the Global Affairs website. Sometimes when it's on the Global Affairs website, that list is called an unofficial list. There's still a lot of uncertainty around that listing process and identifying those parties quickly for Canadian companies and banks to respond quickly.

[Peter Kent, Conservative, Thornhill, ON]

Thank you.

[The Chair, Liberal, Bob Nault]

Thank you very much.

We're going to Mr. Fragiskatos and then to Mr. Wrzesnewskyj.

Try to keep it tight, and we'll get through everyone here today.

[Peter Fragiskatos, Liberal, London North Centre, ON]

No problem.

I want to ask Mr. Biersteker a very basic question but one which I think is very fundamental.

How do we know that sanctions work? What measures are in place to monitor that? I know it's a very simplistic question, but I ask it with this in mind. If the aim of sanctions is fundamentally to encourage a change in behaviour, to take one example, there are many factors that precipitate a change in behaviour that might not have anything to do with sanctions. I'm thinking of changes in the organizational structure of a particular regime. I'm thinking of greater access to financial resources, for example, among the opposition that can then, once they have those resources, put pressure on the governing powers and bring about change that way.

How do we know that sanctions actually work when there is a change and that there weren't other factors that brought about that change?

[The Chair, Liberal, Bob Nault]

Mr. Biersteker.

[Dr. Thomas Biersteker]

Thank you so much for asking a methodological question, if I may.

I'll tell you how we do it. We try to be as systematic as possible, recognizing that it's very difficult to know exactly when these measures are effective. I've already mentioned that we differentiate by purpose. We look at coercion, constraint, and signalling separately. Within each, what we do is we first look at statements, either European Council statements or UN Security Council documents. In the case of Russia, we looked at statements made by leading officials to identify the core purposes of the sanctions. Sometimes sanctions aren't intended to change behaviour. For example, the sanctions of the counterterrorism regime were largely focused on constraining al Qaeda, and today ISIL, rather than persuading them to change their behaviour. In most cases, sanctions have simultaneously tried to coerce—

[Peter Fragiskatos, Liberal, London North Centre, ON]

I'm going to have to interject there. I'm sorry, but I only have five minutes.

Even when the aim is to constrain and that goal is achieved, the containment of a particular entity, let's say al Qaeda, could be coming through a multitude of other factors. Think of the disputes between bin Laden and Zarqawi about al Qaeda's structure, and there are many other examples. That's a leadership dispute and it's one reason al Qaeda was contained. Even then I wonder how we know which measures are in place to ensure that sanctions are effective. I'm thinking metrics here. Yes, it is very methodological, but I think it's fundamental and to the point.

[Dr. Thomas Biersteker]

I appreciate that and I'm sorry if I was going too much on purposes. We tried to say coerce X to do Y, constrain X from doing Y, signal X about the violation of the norm. That's only the first step. The second step is to ask what happened. There may be evidence that al Qaeda was constrained. We can determine that on a five-point scale, from no effect whatsoever to strong evidence of constraint being number five.

A separate question altogether is what the effects of sanctions are on that outcome. What we do is we first look at all the other policy instruments, just as you've identified them. Was there a threat of force? Was there the use of force? Were there covert actions? Were there other sanctions in place? Most important, were there acts of mediation or negotiations under way? We look at everything else going on before we try to assess whether sanctions made a modest, major, or significant contribution to the outcome. That's how we evaluate.

We also ask ourselves what we call a counterfactual question which is a simple “what if”: what if there had been no sanctions? We try to go through an exercise systematically. We do that for every single episode, all three purposes, and we publish the rationale. We don't just give a number, we actually say why we gave it that number. So we're trying to be transparent. That's how we do it.

[The Chair, Liberal, Bob Nault]

Thank you.

Now we'll go to Mr. Wrzesnewskyj now please.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Mr. Biersteker, I'd like to continue where Mr. Levitt finished off.

It was referenced earlier that at one point UN sanctions appeared to be quite effective. Unfortunately, they're being blocked by Russia currently. We also see that Russia is using other methods of blocking sanctions and new sanction regimes within the European Union. In many ways, there's been a corrupting of political elites. A former German chancellor is an employee of Gazprom these days. So holding out hope for multilateral sanctions with our European allies might not be realistic. We do care about human rights, and we do care about human rights violations. Perhaps we should be looking to our American allies, our Australian allies, to find a multilateral way that is perhaps a narrower multilateralism than what we've been used to in the past. I would like your thoughts on that particular point.

[Dr. Thomas Biersteker]

It's been suggested to me that I missed the beginning part. Is the question addressed to me?

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Yes, it is, Mr. Biersteker.

[Dr. Thomas Biersteker]

I just missed the beginning. It didn't come through, sorry.

I think we'll see. As you know, the current European sanctions are scheduled to expire at the end of January 2017. The council met last week, and there are some indications that the sanctions are likely to be continued. I'd be happy to send you and members of the committee a report we just wrote for Rasmussen Global, where we looked at the economic impact of Russia's countermeasures on all 28 members of the European Union.

One of the things we discovered is that the burden is quite disproportionate on different countries. The Baltic republics, Poland, and Germany had the greatest reductions in trade as a result of primarily both the European measures as well as the Russian countermeasures. At the same time, businesses have been quite quick to adapt. What we found is that in many cases business is not waiting for the European Union to decide whether to continue sanctions, because they've already diversified their trade. Many companies and many firms have found new markets. They acted very quickly as soon as the markets were closed.

One of the interesting points that we discovered is that some of the countries that are the most strongly opposed to sanctions are the least affected in material terms. Greece, although it makes statements opposing the sanctions, has found its trade with Russia has increased in the past year and a half. That has something to do with the situation in Greece, as well, but it's an interesting dynamic. We wrote this report primarily to inform the debate in Europe, and we were applying the methods I just described to the previous questioner.

I was surprised. I did not expect there would be very much in the way of evidence of constraint on Russia, or restraint being exercised, and we've found quite a number of instances where Russia could have done more and did not. Sanctions were not the only factor by any means, but they do appear to be important in some cases. We'll see. I think we'll know in a month or so. We're currently presenting this report in various capitals—Berlin, Paris, London—in the next couple of weeks, so we'll see what reactions we get.

Thanks.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thanks.

[The Chair, Liberal, Bob Nault]

Thank you very much, Mr. Wrzesnewskyj.

I appreciate the patience of our witnesses. I want to, on behalf of the committee, thank all three of you very much. This was a very good start for us, and a better start than some of the earlier discussions we have had.

One of the issues that I'd like you to consider and get back to us in writing if you could is the idea that if the European Union has a timeline on sanctions and then does a review, would it make some sense for Parliament to have a structure where it's allowed to do a review, other than just allowing the government through its order in council process to make decisions as to when they want to remove sanctions? Then it would be more robust and allow the ability for us, as members of Parliament, whether it's necessary to be in camera or not...but the reality of it is that it is left up to others, and there's no.... It so happens that there was a five-year review; otherwise we probably wouldn't be having this discussion today. I would be very interested in your sense of how that might work if we were to expand the structure of SEMA beyond what it is today to human rights violations, as an example. How would we deal with those individuals who might be put on a list unnecessarily, and that had a huge impact on their business or opportunities, and then it gave us the undesired result, if I can put it in those terms?

On behalf of the committee, we look forward to your giving us more information on some reports. Mr. Biersteker commented that there are some reports out there that we've not had a chance to look at which would be very useful to our discussions.

On behalf of the committee, Mr. Biersteker, Mr. Boscariol, and Ms. Lilly, thank you very much for your time. We very much appreciate it.

I think the committee realized that I was not seeing the clock when it came to individual members, but I think it had a better effect as far as the flow of the discussion goes. I was not intending to cut off the witnesses when they're giving us very valuable information. Again, thank you very much.

Colleagues, I will see you on Monday.

The meeting is adjourned.