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Harper warns of ‘pain’ from sanctions on Russia

Prime Minister Stephen Harper speaks during a closing press conference following the Nuclear Security Summit in The Hague.


Stephen Harper says Canada must begin to "assess the pain" of increasing pressure on the Putin government over Russia's seizure of the Crimean peninsula, after the Group of Seven said it is prepared to impose economic sanctions if Moscow escalates the crisis further.

The Prime Minister has singled out the prospect of sanctions against Russia's energy industry, which would likely entail curtailing the ability of Canadians – and those in other G7 countries – from doing petroleum-related business with Russians.

And Mr. Harper is warning that if this happens there could be repercussions for Canadians who trade in or do business with Russia – retaliation that could go beyond trade in energy-related goods and services.

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"We all believe that in the short run this is going to cause us all … some pain as well. So that is really what we're assessing," Mr. Harper told reporters in The Hague on Tuesday. He spoke the day after a G7 meeting that voted to cut Russia from meetings of the influential international coalition until the country changes course on Crimea, and that threatened co-ordinated sanctions.

Sanctions against Russia to date have largely been limited to Russians in Vladimir Putin's inner circle and Ukrainians whom the West considers responsible for the annexation of Crimea and the destabilization of Ukraine.

Punitive measures against Russia's energy sector could have a crippling effect on Moscow, which counts on sales revenue for its government treasury, but they could also hurt customers and business partners of Russia's.

"Some particular sanctions would hurt some countries more than others," U.S. President Barack Obama said Tuesday. "But all of us recognize that we have to stand up for a core principle that lies at the heart of the international order."

Mr. Harper said G7 members are not convinced Moscow's territorial grabs are finished. "We are very concerned that they have not necessarily stopped [in Crimea] … The fact that they explicitly said they have stopped here gives us no confidence. They assured us they wouldn't do this kind of thing in the first place."

The Prime Minister has twice in two days devoted part of his remarks on the European crisis to preparing Canadian business for the possibility of economic sanctions and retaliation from Moscow.

Canada's annual bilateral trade with Russia for the most recent years available totalled $2.8-billion in goods and $650-million in services according to the Foreign Affairs department's website.

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On Monday, in a speech to a Dutch business forum, Mr. Harper told a crowd including Canadian business leaders that the government would "not shape our foreign policy to commercial interests" when it comes to Russia. "Business people have to be aware there may be risks to them, and the government will take those risks because at those points in time the government's foreign and security policy priorities become paramount," he said.

Canadian businesses are watching carefully for what comes next. Calgary-based Calfrac Well Services Ltd., which has moved aggressively into Russia, said it is closely monitoring developments. It has six crews and equipment in Siberia working on oil and gas drilling.

"We're not commenting on it at this point in time," said Ian Gillies, manager of investor relations. "The situation is just so fluid right now that providing any point-to-time commentary is challenging, just given what's going on."

There is a sizable amount of investment at stake. Canada's export credit agency, Export Development Canada, has $1.4-billion in exposure to Russia on its books, including more than $1-billion in loans and loan guarantees to Russian companies that purchase Canadian goods and services. Since 2008, EDC has supported $7-billion in exports and investments. Business ranges from infrastructure, including transportation, to oil and gas, and mining investments.

Todd Winterhalt, vice-president of international business development at EDC, said he would counsel clients to be "extremely prudent in terms of the risks they face" and to "take a short-term pause to better understand the risk and allow the situation to stabilize, hopefully, over the coming weeks."

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About the Authors
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More


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