Postcards from Canada

canadapostcard013108.jpgOver the past week I have been on a brief tour of my home country Canada, for a series of meetings, interviews, and speaking engagements (in fact I will be appearing before the Economic Club of Toronto in just a few short hours). Meanwhile back in Russia, many are aware of the media reports of the dramatic announcement of my client, Mikhail Khodorkovsky, to express his support and solidarity with his former lawyer Vasily Alexanyan by initiating a hunger strike in protest of his treatment. So far, I think that Mikhail has been successful in raising international awareness of the particular cruelty of the Russian prosecutors with regard to the treatment of Alexanyan – which in my opinion is an extraordinarily clear example of exactly how far the Kremlin is willing to go in order to obtain false testimony against my client, and justify the theft of Yukos. Undoubtedly, many of the key officials involved in this criminal affair should begin to consider how they could be held personally liable for this prisoner’s death.

Nevertheless, the question I am hearing most often this week is the following: What does Canada have to do with all these tragic events in Russia? What are the roles of both Ottawa and Bay Street in slowing Russia’s backslide into authoritarianism? Predictably, my argument is that Canada has an enormous amount of interests at stake in its relations with Russia, and should be especially concerned with how domestic political developments will impact them.From the corporate and financial perspective, private Canadian firms are doing more and more business in Russia, and Russian companies (some state-owned and some private) are looking to invest heavily in Canada. In most cases, this is a very positive development which can lead to mutually rewarding economic integration. However, in other cases, Canadians need to bring more skepticism to bear upon business relations with the Russian government.The image of Russia as “an island of stability” among the global market turmoil, as it was pitched by Finance Minister Alexei Kudrin at Davos, most certainly cannot be taken at face value. Russia’s RTS market tanked to record lows last week along with everyone else, and it is particularly ironic to talk about stability when Kudrin’s #2 man, Deputy Minister Sergei Storchak, is currently undergoing a political trial for corruption and money laundering. If Russia is “decoupled” from the global economy, it certainly isn’t behaving like it.But Bay Street’s money continues to flow toward the grasp of the Kremlin. The most high-profile case is of course Magna’s arrangement with Kremlin loyalist Oleg Deripaska’s company Basic Element – a venture that was vigorously opposed by some shareholders. In the brief distributed to shareholders, it was acknowledged that the Russian government could at any moment seize control of Deripaska’s company, and thus become a significant minority shareholder in the company overnight. In fact, just this week it appeared as though Deripaska’s relations with the state were deteriorating slightly when the company was slapped with a small back tax bill (perhaps as punishment for the news breaking that Deripaska spent time with anti-Russia hardliner U.S. Sen. John McCain?).Regarding Deripaska’s latest scuffle with elements in the Kremlin, analyst Yevgeny Volk told the Moscow Times: “No [Russian] tax case is purely a tax case — there is always a political background. (…) For some time, there have certainly been signs that [Deripaska] has fallen out with the team favored by the Kremlin.“At this current juncture these speculations mean very little, and the most likely short-term outcome will be uneventful for Magna and Canadian investors. However the lesson is clear: when we do business with an authoritarian government in an environment lacking rule of law, all bets are off – decisions will begin to be made according to political motivations, rather than commercial, which will distort markets. The woeful lack of rule of law in Russia is something that needs to be addressed at both a corporate and political level by Canada – and as we have seen, Mikhail Khodorkovsky and Yukos will not be the only victims of this lawlessness.arcticflag013108.jpgRussia’s flag planting stunt on the Arctic seabed has challenged Canada’s “see no evil, hear no evil” approach to deteriorating rule of law under Vladimir PutinFrom Ottawa’s perspective, much can be done. We have seen Prime Minister Stephen Harper take a principled stand on human rights with regard to relations with China, and there are reasons for optimism that is Canada were to stand up for democracy and human rights in Russia, we could make a significant and positive impact. Both the New York Times and the Washington Post ran important editorials yesterday lambasting the Kremlin for “kicking democracy’s corpse” and holding “potemkin elections” after the only viable opposition candidate, Mikhail Kasyanov, was disqualified from participating on a technicality.However Canada’s more skillful diplomatic approach could be much more effective in obtaining a pragmatic outcome, as Ottawa is unburdened by comparable historical hangovers from the Cold War, and less prone to dramatize what is happening in Russia as some sort of Soviet redux, as the American hawks see it. Canada has a proud tradition dating back to Lester Pearson as the international peacemaker – the beacon of sanity in world affairs. It is Ottawa’s turn to live up to that legacy, and show that they understand that expressing support for civil society, pro-democracy groups, and political prisoners like Vasily Alexanyan and Mikhail Khodorkovsky is not the same as sacrificing diplomatic or business relations with Moscow.Lastly, of course, Canada has enormous security interests at stake in its relations with Russia following the contentious dispute over Arctic sovereignty. The flag-planting stunt on the Arctic seabed has seriously challenged Canada’s current relationship with Russia, and represents only the latest in a long string of aggressive foreign policy actions by the Kremlin (yesterday two key officials even complained that hard-line foreign policy is costing Russia millions in investment).This situation has been brewing for some time, as revealed in a new book by journalist Pete Early, which has yet to be published in Canada because of controversial legal issues. This book features an extensive exposé from former SVR agent Sergei Tretyakov, who was a key spy in Ottawa for many years in the post-Cold War 1990s. Tretyakov identifies for the first time ever five trusted contacts in the Canadian government who provided him with key intelligence information about military activities in the Arctic – and not one of these officials has been arrested.Although only identified by codename, Tretyakov places special emphasis on one important Canadian official known as “KIRILL” (and later referred to as “KABAN”), who worked at the Canadian Centre for Disarmament and Arms Control. KIRILL formerly worked for Prime Minister Pierre Trudeau, and became embroiled in the Op Watch scandal which sought to collect damaging information against Conservative leader Brian Mulroney. When Mulroney came into power, he fired KIRILL as punishment for the Trudeau smear – which lead him into the hands of the Russian spies, who exploited his important Liberal contacts.I find it very surprising that the revelations from Sergei Tretyakov have not raised more commotion in Canada, or inspired any calls for probes into who these informers were and what espionage activities the Russian government may currently be carrying out related to the Arctic claim.Cumulatively, from corporate, political, and security perspectives, I believe that Canada has a considerable role to play in helping build the necessary incentives to successfully integrate Russia into the international community, and help return rule of law to the country. For many people, time is running out.