RCBC Symposium on Canada-Russia Commercial Relations

John Harrison

On December the 6th, at the Russian Union of Industrialists & Entrepreneurs in Moscow about 200 delegates gathered for a very interesting symposium celebrating 150 years of Canadian Confederation and 75 years of Canada-Russia diplomatic relations.

In his opening remarks, Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RSPP) expressed the hope that relations between Russia and Canada would at least remain on the present level and even improve. He offered some grounds for hope: “Total trade turnover between Canada and Russia increased by 55.5% this year in comparison to the same period last year; and is now equal to about $1.6billion. We see a gradual regeneration of trade between our countries but not, unfortunately, in traditional areas. There are a whole range of Canadian companies which nevertheless have kept their positions in the Russian energy section, in transport and a number of other sectors. Mr Shokhin named a number of the leading Canadian and Russian firms which are taking an active part in the rebuilding of commercial relations, many of these companies are members of RCBC and CERBA. Mr Shokhin made an interesting comment that “we cannot wait for politicians to take the lead,” a comment which was appreciated by the audience.

In his speech, Andrey Varichev, the general Director of OOO ‘Metallinvest’ also expressed the hope that international relations will improve. Using the words of one Japanese wise man, he said: “he who lasts the longest wins.” He recommended that everyone should have patience and “bear the present difficult period out, after all, it was not for nothing that diplomatic relations were founded between Russia and Canada 75 years ago, and they are stronger than any attempt to separate our two countries.”

Gilles Breton, the new Chairman of the National Board of Directors of CERBA and its new co-chair, added to the good news that Mr Shokhin broke and said that the Canadian embassy has reported that more Canadian business people are visiting Russia than before. Gilles said that the Canadian economy is doing well, with low unemployment and reasonable growth, however this strength is reflected in the growth of the new economy, and this is also a new strength which Canada has to offer its Russian partners.

Gilles made it clear that it is not only trade agreements with Russia that are problematic at the moment, so are bilateral relations with China and then there is Brexit. Trade internationally is going through a difficult time, not just Russia-Canada relations. “However new trade possibilities are also opening up, such as in Eurasia, and we have to be aware of this.”

Valdislav Tretiak, President of the Society of Friends of Canada, President of the Ice Hockey Federation of Russia, Member of the State Duma of the Russian Federation, spoke about the deep ties of friendship that unite our two countries. “I am sure that these ties are as strong today as they ever were, despite any political tensions. One of these ties is hockey. Our young people know about Canada through hockey, and as President of the Ice Hockey Federation, I can say that we have good relations with Canada on all fronts. “We are trying to do everything we can to make sure that cooperation grows between our countries.”

The Keynote presentation: ‘Perspectives on Canada-Russia Business Relations since the 1980s: Where Do We Go From Here?’ was given by Lou Naumovski, CERBA National Chair 2013-2017, Consultant and International Business Advisor.

Lou described some of the highlights of his extraordinary career which has lasted over four decades, which started starting with his work in the Canadian embassy in Moscow. “…In August of 1982 I came to the Canadian embassy here in Moscow as the Third secretary. For me it was a realisation of a life-long dream. …I was designated to be the agricultural specialist at the embassy. In 1982, exports of grain from Canada to the USSR approached nearly 9 million tons per year, but Canadians still did not perhaps show due respect to the country they were exporting to.”

Lou gave a fascinating account of how Canadians made the first inroads into the Soviet agricultural market. “In that instance they were selling genetic materials which were supposed to improve the quality of livestock. These Canadian companies recorded record sales in those years, and it was interesting to note the difference in business culture. The sellers were mostly representatives of individual farms whereas the buyers were vast State farms. This was against a backcloth of a real decline in the numbers of cows. Those of us who live in Russia now are well aware of the real advances in Russian agriculture. We have to concede that they are partly spurred on by sanctions against food imports from Europe and North America, and also because of the advent of private farming in Russia and increased efficiency overall. …I left Russia in 1984, and I have to say that I noticed that most Canadian business people were not prepared to make return visits to the USSR, to get to know their customers better and understand the Soviet trading system. At that time we felt that the Soviet system was unlikely to change.”

After a few months working as the Consular General in Atlanta, which he “could not stand after Moscow, it was boring”, Lou left and was sent to Baghdad during the height of the Iran-Iraq war. “Whilst sitting in Baghdad in 1987, I read with great interest about Mr Gorbachev’s decision to allow cooperatives to start up. I decided to return to Ottawa in 1978 to be immersed once again in Soviet affairs. The two years I spent there were really quite interesting. I was on the front line, dealing with the explosion of public and business interest in Canada and what was happening in the Soviet Union under General Secretary Gorbachev.”

“In 1989 the largest ever Canadian trade mission ever was organised by the government – 250 people came to Russia in November 1989 to meet General Secretary Gorbachev.” Lou described the creation of the Canada-USSR Business Council, which he headed heading for two years, and which attracted 200 Canadian companies. “Our partner in Russia was the Chamber of Commerce of the USSR. There were 52 Canada-Russia joint ventures in 1991, and they were involved in a huge range of business areas including commercial printing, oil well servicing, food services, all kinds of manufacturing. It was a very positive time. But 5 years later, most of the joint ventures had folded. Why, I don’t know, but I have my suspicions. But that was a blow to doing business in the now sovereign Russia. Some Canadian companies stayed and became legends, they didn’t give up, but others felt uncomfortable and left.”

By that time, Lou had left the Canadian administration and was working for EBRD. “When working for the EBRD, I had a front seat to watch the development of Canadian technical assistance programmes in Russia. Some of these were very effective. For example, Canadian assistance to Russia for its accession to the WTO. Unfortunately it took 18 years for Russia to join, through no fault of Canada. Also the very first property Cadastra that was established in Russia was as result of Canadian legal advice.” Lou described the beginning of the Foreign Investment Advisory Council, and added that being involved with that “gave me the understanding of what Russian needed to increase investment and what Canadian businesses should know about.” Lou also talked about his years spent at Kinross Gold Corporation and Visa in Moscow.

Lou finished his speech by describing his activities in CERBA. “In the current political crisis, CERBA was the only organisation in Canada and in Russia that recommended restraint in relation to bilateral sanctions, and campaigned to protect matters of mutual interest, such as the Arctic Council. We remain true to our central mandate which is to enhance and support trade, investment and good relations between the countries of Canada, Eurasia and Russia. … It has been CERBA which has continued with making contacts and in supporting the exchange of information between Canadian companies and agents of the Russian government. The last session of the joint economic commission was held in 2010. Since then relations faulted significantly even before the events of 2014. And this is despite of the fact that Russia was included in a very short list of priority markets by the [Canadian] Department of Foreign Affairs. …Since 2015 we of course have had a change in the Federal Government and at first we were very encouraged by the initial indications that the new government wished to improve relations with Russia. Partly due to changes in the cabinet since October 2015, this engagement was quite limited and restricted. The position of sanctions and counter sanctions and the tendency of many Canadian companies to self-sanction, and stay away from the Russian market hurt business confidence and encouraged many business people in both countries to question whether they could or should do business with each other. My answer to this question is – of course they should and of course they should. We cannot give up….”

A Q&A session followed.

To a question about sanctions against Russia, Lou said that they have always been good for Russian agriculture, but that they have not had any political effect. As far as Canadian businesses go, Lou said that CERBA’s message is that you can do business here, you have to respect the law, but in general “the sanctions are not good for business.”

In reply to a question about what can we learn from what happened from 1980 to 1990, Lou said: “I think as Canadians we need to indulge in some introspection. Why is it that world class companies, companies that had global presence, that had dynamic senior executives, gave up so easily? For me, this was extremely frustrating. They would come to Moscow once, for some ridiculous reason they thought that if they met Mr Gorbachev they would get some business, that attitude hasn’t changed. A lot of companies come and they continue to make the same mistakes.  They presume that they are so wonderful that nobody in this country could resist buying from them or help in a co-investment of some kind. That’s not the case. You have to be persistent, well educated. Our country is defined by trade, but we are incredibly slow about things. China makes foreign policy changes faster than we do, and they have a much longer history than we do.

The final session of the Symposium was made up of a round table discussion on the state of affairs between Russia and Canada and what can be done to improve the situation.