Foreign Affairs Committee on Sept. 7th, 2022

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you, Mr. Chair.

This is really high quality testimony we're receiving from all three of you. Given your thoughtful and biting critique, I now find it no surprise that the Liberal chair made a last-minute change to the agenda that limits the time we have with you, though it is unfortunate.

Mr. Kolga, you mentioned the ability of committees to be able to nominate people for sanctions.

I want to note, for your information and for the record, that Bill C-281, tabled by my colleague, Philip Lawrence, the international human rights act, contains some of those provisions. We will be debating that bill in Parliament this fall. Hopefully it will be coming to us here at this committee soon.

It's been reported recently, as well, by CBC that the value of frozen sanctions in Canada has dropped in recent months to suggest the possibility that some people have been allowed to sell off assets.

Do you have any reflections or information about how it is that the value of frozen assets under sanction would somehow be dropping?

[Marcus Kolga]

That's a very good question. I saw that same report.

According to that report, by August 9 the RCMP had initially reported that $289-million worth of Russian assets had been frozen. They then revised that number to $122.3 million. I'm not sure what would account for that sort of drop. It could be the shares in stocks. Certainly, there's one rather large steel company that is owned by a prominent Putin-linked oligarch and that has found itself in quite a bit of hot water since the war started. It's entirely possible that the value of that company, because of the sanctions, because of the war, has dropped. It could be that other assets may have fallen in value because of that war as well. It could be because of that.

I'm not sure how to account for that.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Okay. It's something that maybe the committee should seek further information on.

This question is for all of the witnesses. The Canadian Press reported recently that the Government of Canada was considering the domestic economy, jobs and inflation in making their decision on granting the sanctions waiver. The fact that they were considering domestic economic factors was a big surprise, given that it was discordant with the explanations previously given. We know that the government was lobbied recently by Siemens, but we don't know on which subjects. It seems that the minister has waived sanctions on Russia, rejecting concerns raised by Ukraine, in part to protect the interests of a large company that operates fairly close to her riding.

I wonder what kind of precedent is set when the government is saying that they are granting an exemption like this not because of geopolitical factors but because of domestic economic factors.

[Balkan Devlen]

Philosophers call that a moral hazard. That is, it creates conditions under which your actions with a narrow definition of interest led further down to unintended consequences that actually harm both your own interests and others'. As I said in my opening remarks, once you start carving out exemptions for domestic political reasons, everyone else starts asking the same, and therefore you create a Swiss cheese of sanctions. Everyone starts jumping from one part to another. It thus undermines the sanctions.

Sanctions work in the long term when they are united and they are consistently applied. You're not going to be accused of hypocrisy when you're asking other countries in, say, the global south to sanction or to join the sanctions against Russia at the same time that you're providing carve-outs for your domestic political or economic interests.

So it significantly undermines credibility as well as the sanctions regime.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you.

Are there any other...?

[A voice]

If I may, I'd like to—

[The Chair, Liberal, Ali Ehsassi]

Mr. Genuis, I'm afraid you're way over time. We will have to go to the next member.

Mr. Zuberi, you have four minutes.

[Sameer Zuberi, Liberal, Pierrefonds—Dollard, QC]

Thank you to all the witnesses for being here.

I'd like to start off with Dr. Schmitt.

In terms of weaponizing energy, you mentioned that Russia has been doing that for years, well before this current conflict in Ukraine. Could you share what other conflicts Russia has done this in? Was it done during the wars in Chechnya from 1994 to 1996 and 1999 to 2009; in Georgia in 2008; the war in the Donbass in 2017; and in Syria in 2015?

Can you comment on that, please?

[Benjamin Schmitt]

Thanks so much. That's an excellent question.

The bottom line is that Russia has been weaponizing energy for many years. This has a wide definition. First of all, there are the overt gas cuts that we can see have happened dozens of times over the years. I can supply the committee with a list of every one that I am aware of, but I know it's long, with at least 20 or 30 of these sorts of instances.

This doesn't necessarily mirror military conflicts that the Russian Federation has been in, because the Russian Federation under Vladimir Putin has been in a hybrid war at the same time during many of the conflicts you mentioned, at least since the mid-2000s through now, with the west, and has been using energy in one way or another to either create market uncertainty and energy insecurity by actual energy cuts or by doing what I'm really concerned about as well, which is using energy as a means of strategic corruption, to enact energy deals and things like this and then allow for elite capture around this.

We saw this in 2005-06 when former German chancellor Gerhard Schroeder stepped out of office. At the end of his tenure in office, he was supporting Nord Stream 1 and was basically pushing that project forward. He stepped down and was chairman of Nord Stream AG. We saw this go on with Nord Stream 2 and things around Nord Stream 2. Former Austrian economy minister Hans Jörg Schelling became Nord Stream AG's senior adviser after stepping out of office. Former Austrian foreign minister Karin Kneissl stepped out of office. Of course, she was famously covered in the press for having Putin at her wedding and dancing with Putin at her wedding. She stepped out of office after supporting Nord Stream 2 and other pro-Russian policies while in office, and was appointed a board member of Russian state-owned oil company Rosneft. Former French prime minister François Fillon was nominated to not one but two Russian state-owned oil and gas trading companies.

So this really is a concern, and this is what I'm constantly calling for in the United States, which is to start this norm-setting process. The United States should pass an act called the “stop helping America's maligned enemies, SHAME, act”. When small-case shame doesn't work, you need large-case shame. It doesn't have to be called that here in Canada, but Canada can join in this effort. There should be a Magnitsky-level anti-elite capture and anti-strategic corruption effort legislatively throughout global democracies to make sure that former officials cannot leave the public trust and then work for authoritarian state-owned enterprises.

It shouldn't be controversial. This is something that this Parliament can do today, if it would like to, or at least put out a statement saying that it's the sense of Parliament that this sort of practice can no longer happen, because it's still legal in too many jurisdictions.

[Sameer Zuberi, Liberal, Pierrefonds—Dollard, QC]

Just to conclude, you said that in the conflicts I mentioned, Russia has been using this same sort of approach of weaponizing energy.

[Benjamin Schmitt]

Yes.

[Sameer Zuberi, Liberal, Pierrefonds—Dollard, QC]

Thank you.

[The Chair, Liberal, Ali Ehsassi]

We now go to Mr. Bergeron.

Mr. Bergeron, you have four minutes.

[Stéphane Bergeron, Bloc, Montarville, QC]

I have four minutes?

[The Chair, Liberal, Ali Ehsassi]

Yes.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you, Mr. Chair.

First, I'd like to quote the German ambassador. When she appeared before this committee, she said, “I think our point of view was that we would have lost significantly in the disinformation war if that turbine had not been able to be delivered.”

My question is for Mr. Kolga.

In your view, what would we have lost in the disinformation war had it not been possible to deliver the turbine?

[Marcus Kolga]

That information war would have simply continued. Now that we have returned that turbine, we see it continue. The Russian government has continuously made excuses to reduce the flow of gas through Nord Stream 1. Now that it's stopped that flow completely, it has continuously blamed various different types of paperwork and insufficient repairs. It is continuing to blame Canadian sanctions, not just for.... Again, it's energy warfare right now, but even for the food crisis it is causing, it is continuing to blame us.

So I'm not sure that maintaining those sanctions would have made the information warfare any more intense, or whether it's reduced it. I think Vladimir Putin will continue using disinformation to spread lies and create conspiracies in order to undermine our geopolitical position, and use the same issues that I mentioned in my opening remarks to try to destabilize and polarize Canadian society and societies in other western democracies.

[Stéphane Bergeron, Bloc, Montarville, QC]

We see that the sanctions are having negative effects on the economies of the countries that have imposed them, so much so that a certain fatigue, even hostility, is setting in with regard to the sanctions. Politicians in Europe, particularly in France, are denouncing the sanctions and claiming that they are not effective and Russia has never made so much money from oil and gas sales to support its war effort in Ukraine.

However, doesn't Mr. Peskov stating that they are going to turn off the tap until sanctions are lifted contradict these claims and show that the sanctions are indeed having an impact on the Russian economy?

[Marcus Kolga]

Well, yes, I think it demonstrates that Vladimir Putin is very much in a bit of a panic mode about the sanctions. Dr. Schmitt mentioned earlier that Russia is no longer able to repair any of its military equipment. It's using parts from household appliances to patch up various different weapons. There have been reports that Aeroflot is cannibalizing its own aircraft for parts in order to carry out repairs.

A majority of Russians polled recently said that they are deeply concerned about the effect of sanctions. A recently leaked Russian cabinet document report suggests that there is deep concern about brain drain caused by the sanctions. It's been estimated by the Russian government itself that by 2025, 200,000 IT professionals will leave Russia; that there will be an 8% to 11% contraction of the Russia economy within the next 24 months; and that it will take a decade for Russia to recover its economy to pre-war levels.

So sanctions are working. Sanctions aren't the silver bullet. Like medicine, they take time to work. They need to be sustained. Carving out exceptions for various different Russian entities doesn't work. We need to sustain them in order for them to work. I think Vladimir Putin with his reaction and Dmitry Peskov's reaction demonstrate exactly that: Western sanctions, when unified, are indeed working.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you, Mr. Kolga.

[The Chair, Liberal, Ali Ehsassi]

Thank you, Mr. Bergeron.

We'll go now to Ms. McPherson.

You have two minutes, Ms. McPherson.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

I'm sorry, Mr. Chair. I have two minutes and Mr. Bergeron had four?

[The Chair, Liberal, Ali Ehsassi]

Yes. That was an oversight on my part. I miscalculated insofar as Mr. Bergeron was concerned. My apologies for that.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

It would be all right with me if you miscalculated again; just a heads-up.

[Voices]

Oh, oh!