National Defence Committee on Nov. 3rd, 2022

[Dr. David Perry]

We absolutely can if we want to. We're a rich country. If we would like to make the investments across a wide range of areas, then we could absolutely make very significant contributions in a number of those areas, and we already do today.

The difficulty we face right now is that our resource commitments and the ability to execute the resources that have been committed don't align with a broad array of those pressures, from the domestic responses you touched on to the continental ones and ones abroad. If we want to try to keep pace and keep a commensurate level of engagement to what we have had historically even, we need to be looking to increase our ability to commit and spend more resources across a broad array of fronts. Fundamentally, though, if we can't commit and spend those resources, then I think we're going to be making choices, either by default or by design, picking and choosing which of those areas we're going to focus efforts on.

[Bryan May, Liberal, Cambridge, ON]

Given the amount of time I have, I would simply ask this again: In that regard, when it comes to balancing those priorities, what should be the focus? What need to be the priorities for Canada moving forward?

[Dr. David Perry]

If we're in a situation in which we need to make a decision, then we need to concentrate on our own country and our own backyard. We need to concentrate more on continental defence and North American defence specifically. Then we look abroad beyond that.

That's not how we've tended to approach those issues historically.

[Bryan May, Liberal, Cambridge, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, John McKay]

Thank you, Mr. May.

Madame Normandin, you have six minutes, please.

[Christine Normandin, Bloc, Saint-Jean, QC]

Thank you very much, Mr. Chair.

I'd also like to thank the two witnesses.

I'll take advantage of Professor Lajeunesse's presence, as his viewpoint clashes to some extent with what we sometimes hear in committee.

You mentioned that Russia considers itself to be at risk in the north. I'm curious about why Russia believes it is at risk.

What is the threat to Russia?

I just want to understand what's going on in a potential adversary's mind.

[Dr. Adam Lajeunesse]

Yes, absolutely. Russia has considered itself to be at risk in the north since the 1960s. This is nothing particularly new.

At first blush, it would make very little sense, I think, to most westerners. The notion that there may be a NATO attack on Russia in the Arctic or elsewhere seems preposterous—and I would argue it is preposterous—but that is not always the way it is viewed in Russia.

You don't need to take my word for that or the word of any academic expert. You can simply look at what Russia is deploying in the north. It's billions of dollars of high-end anti-shipping and anti-air defence weapons, most of which have a fairly limited range. These are not weapons that can reach out into the Arctic Ocean much beyond the Russian coasts. By definition, these are defensive weapons.

It makes sense that Russia would feel slightly insecure about its Arctic. This is a region that produces a very good chunk of the Russian GDP. Most of Russia's hard currency earnings come from oil and gas, and a lot of that comes from the Arctic.

Looking forward 20 or 30 years, we can see that the future of Russian oil and gas production is going to be predominantly in the Arctic.

[Christine Normandin, Bloc, Saint-Jean, QC]

Does Russia consider China to be a threat?

[Dr. Adam Lajeunesse]

The Russian-Chinese relationship in the Arctic, and very generally, is extremely complex.

The short answer is no, Russia does not see China as a threat—or at least publicly it does not see China as a threat.

Predating Ukraine, and even more so following the invasion of Ukraine 2022, China has become Russia's only major consumer of oil and gas, and the only customer for a lot of Russian goods. This is, of course, developing as western sanctions continue to be applied.

Looking forward, Russia recognizes that it needs China in many different ways—as a source of technology, as a customer and as a source of hard currency.

China's role in Russian foreign policy is only going to increase. China's role in the Russian Arctic is also going to increase, because many of these investments that we talked about, which are tens of billions of dollars, are required to build these oil and gas projects. It's not coming from the west anymore. It can really only come from China.

Looking forward, the linchpin of the Russian-Chinese relationship in the Arctic is going to be the investment in developing all those new resource projects.

[Christine Normandin, Bloc, Saint-Jean, QC]

Thank you very much.

I'll continue with you, Mr. Perry.

My colleague Mr. Kelly spoke about allocated funds that remain unspent, and that end up accomplishing nothing.

As part of its commitment to NATO, Canada spends 2% of its GDP on defence. Is this percentage calculated on the basis of funds that are allocated or funds that are actually spent?

[Dr. David Perry]

My understanding is that it's calculated based on what we actually spend, not on what's committed.

[Christine Normandin, Bloc, Saint-Jean, QC]

Thank you very much.

The procurement issue is something you're familiar with. On this committee, we tend to misunderstand how things work in procurement, which is often dealt with by another committee.

I'd like to hear what you have to say about how the committee ought to have a better understanding of how procurement works, and in particular its long-term repercussions. Recently, the Parliamentary Budget Officer mentioned that the costs of the Davie contract were going to explode because it has been dragging on.

I'd like you to tell us a little more about why it's important for the committee to have a better understanding of this area.

[Dr. David Perry]

I'd say a couple of things.

I would situate it within a wider program of public administration. The Department of National Defence and the Canadian Armed Forces have a range of very serious personnel issues right now, in terms of not only all the culture issues but also the massive quantitative problem they have right now, a huge recruiting and retention issue that needs urgent action. I would situate procurement within another kind of broader framework of public administration and implementation. We basically don't have a system that moves nearly as fast as we want it to and as fast we we've committed money. There's a range of different reasons for that, but I think systematically there hasn't been enough attention focused on calibrating the system to buy things as fast as we think we need them. There hasn't been a lot of improvement evident in that over the last 15 or 20 years.

I first started observing that the department was lapsing significant amounts of money on capital spending back in 2007-08. That went away for a very brief period of time a few years ago, but there is now another problem. As I was suggesting earlier, more money has been allocated under the new accounting rules that's over and above what gets thrown into the estimates, which still isn't going out the door.

There are various different ways that's manifested, from an accounting point of view, but the bottom line is we can't move money nearly as fast as we should. Given the current situation with inflation, that's becoming an increasingly severe problem. Defence inflation has always run 6% to 7% higher than inflation in the civil sector. Now that inflation in the civil sector is at a multidecade high, the Department of National Defence, I would imagine, is losing several tens of billions of dollars' worth of purchasing power with the various delays in purchasing things on time.

[The Chair, Liberal, John McKay]

Thank you, Ms. Normandin.

David, as I recollect, you wrote your Ph.D. on lapsed funding.

Can you just move up a little closer to the mike? Apparently your voice is trailing off.

Ms. Mathyssen, you have six minutes.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Thank you to both witnesses today.

Dr. Lajeunesse, I'd like to ask you something.

You wrote a policy paper entitled “Arctic Perils: Emerging Threats in the Arctic Maritime Environment”, which I'm hoping you can submit to this committee as well, if that's okay.

[Dr. Adam Lajeunesse]

Yes, I'm happy to.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Great. Thank you.

In it you talk about much of what you've said today in terms of the Arctic presenting “an enticing opportunity for China to feign strategic interest and bait Arctic states to over-invest in or over-commit capabilities to that region rather than elsewhere in the world.”

You said this is misguided and isn't what Canada should be focusing on. My concern, of course—and I've expressed it before in this committee—is that this would further escalate tensions in the region.

Can you speak to that or expand on that?

[Dr. Adam Lajeunesse]

I apologize. There's a bit of echo here. Could you repeat the very last part of that question?

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Certainly.

It's just in terms of that misguided idea of putting far more emphasis on the heavy investment in missile defence, and how that would escalate tensions in the Arctic.

[Dr. Adam Lajeunesse]

What I have long argued is that we need to look at Arctic defence in a much more nuanced way. I think it's a bit of a misunderstanding to say that David Perry and I have a very different opinion on this. In fact, Arctic security and defence are very important, and we need to make serious investments, but we need to zero in on what exactly the threat environment is. What I have argued is that we are not seeing, and are not likely to see, a great power threat to the Arctic. Through the Arctic, yes, perhaps there may be a threat, and that is why we have NORAD modernization and the requirement for those investments. I'm arguing that it would be a waste of money and an inefficient use of our resources to build the Arctic defences in such a way as to gear them towards Russia or China. It would be simply an inefficient use of very scarce resources.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

A lot of the folks from the military we heard from, and General Eyre as well, spoke in those terms: staying the course, going along those modernization lines but not expanding greatly, looking at Russia as a longer-term issue. In the shorter term, we focus on what we can do to ensure we're not—and I think you spoke a little to this, so expand on this maybe as well—pushing the isolation of Russia further into, maybe, China's wheelhouse of financing and so on. That was more where that conversation was leading. Could you expand on that as well?

[Dr. Adam Lajeunesse]

I hope so. That is a problem that has certainly been identified. The more isolated Russia becomes from the west politically and financially, the further it is pushed into Chinese arms, and we risk a scenario in which Russia, if it becomes weak enough, actually becomes something of a satellite of China.

It's difficult to see a way around that, however. The west is not going to open up financing again to Russia, barring some significant break and a change in Russian behaviour. The west is not going to re-engage with Russia politically to the point where Russia will disengage more with China.

That is a problem we acknowledge. That is recognized. We do not want to drive Russia and China closer together, but there's not an obvious avenue of approach to prevent that from happening.

Over the long run, what might prevent Russia from falling too deeply into the Chinese camp is the persistent and remaining suspicion within Russia itself of China. Russia does not want to become a satellite of China. Both the Russian government and the Russian people, I suspect, are going to think very poorly of the relationship developing in that way, but that's conjecture at this point.

I'm afraid I have no obvious answer.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Okay.

In a previous meeting we heard from Professor Lackenbauer and he was specifically talking about our need to think about the Arctic in, through and to, and the threats in that set.

You spoke about the through, but in terms of the threats in the Arctic, a lot of our conversations have been around climate change, the lack of infrastructure.

Are you able to expand in terms of whether Canada would even have, in an infrastructure sense, the capacity to expand on this idea of weaponry versus going along that status quo of modernization, and the difference?

[Dr. Adam Lajeunesse]

Yes. Canada does face serious threats in the Arctic, predominantly non-conventional threats. What we're talking about is illegal fishing, pollution prevention, trespassing. Some of those may be non-state actors, and some of them may be state actors. Chinese scientific research, for instance, is a serious concern developing dual-use technologies.

For those threats, we are developing the right capabilities, such as the Arctic offshore patrol ships, surveillance and, as Dr. Perry mentioned, we need that increased situational awareness as well.

[The Chair, Liberal, John McKay]

Thank you, Ms. Mathyssen.

Colleagues, we again are in the situation where we have 25 minutes' worth of questions and a lot less time.

I'm proposing that we do a full round of questions in this hour, because the next hour we will have only one witness and we may be a little more efficient. We will go to full five-minute rounds, and that will probably take us past the 12 o'clock point, if that's all right with everyone.

Ms. Gallant, you have five minutes.