BUSINESS WATCH

Power’s new Siberian connection

Peter C. Newman June 1 1987
BUSINESS WATCH

Power’s new Siberian connection

Peter C. Newman June 1 1987

Power’s new Siberian connection

BUSINESS WATCH

Peter C. Newman

If Canada is ever to become a sophisticated exporter, rather than just another Manchuria selling off its resources, we must evolve a new breed of corporate cats who can prowl the business jungles out there, free of the hidebound timidity that has traditionally held us back from becoming world-class traders.

The prototype for that brave new strain of Canadian capitalists is Paul Desmarais, the quietly classy Montrealer who has made one fortune at home and has now gone international, competing successfully against hard-edged multinational buccaneers, who have nothing to do with being quietly classy and everything to do with the ethics of Genghis Khan. The chairman of Power Corp. is in the process of significantly expanding the presence of his many subsidiaries in Europe and the United States. But his most interesting current initiative is in the Soviet Union.

As the result of a recent Soviet tour he took, accompanied by his friends Pierre Trudeau, Senator Leo Kolber and Bernard Lamarre, head of giant Montreal engineering firm Lavalin Inc., Desmarais is proceeding with plans to construct a major pulp operation in Eastern Siberia, which, as is his style, will shatter all kinds of precedents.

Bill Turner, CEO of the Desmaraiscontrolled Consolidated-Bathurst Inc., is in the Soviet Union now, along with five of his technical experts, to study local wood qualities and other start-up problems. “We’re going to build a mill and see what happens,” Desmarais told me. “I’m sure we can export the output, but it will be a question of how productive the Russians really are. Is it true that they’re sloppy and don’t live up to their commitments? The only way we can find out is to go there and do something with them.”

Desmarais’ Moscow sojourn was no ordinary tourist package. He and his cohorts not only met with Soviet leader Mikhail Gorbachev and his wife but they also did some serious negotiating with Foreign Minister Eduard Shevardnadze and President Andrei Gromyko. “Look,” says Desmarais, “I hope I’m not being naïve, but I really believe that if Gorbachev is trying to bring up his country’s standard of living, he’s got to concentrate more on economic growth, and that means bringing in technology and investment.”

From Moscow, the Desmarais party went by train across Siberia (“everything is rusted and grey—there is nothing much moving, no hustle and bustle like you see in our cities”) to the Pacific port of Vladivostok. The final details have yet to be worked out, but Desmarais is determined to build a major pulp mill in the area, using Consolidated-Bathurst as his operating arm.

For Desmarais, it is more than just

another business deal. “We’re either going to live together or have a nuclear holocaust,” he says, “so we have to start making some moves and not wait around for Gorbachev to do something so overwhelming that it convinces everybody. I am sure that if I can do this successfully, the Russians would want me to do other things with them. That might be exciting and very profitable, not only for me but for Canada. Also, they might finally find out that we’re not such bastards in the West and that

we’re not only interested in exploiting people.”

What Desmarais really has in mind is a complicated deal involving China. He was one of the first Canadian businessmen into mainland China a decade ago and has since expanded his contacts and influence there. Last year he negotiated a unique partnership with the Chinese to purchase a half interest in a pulp mill at Castlegar, B.C., and helped arrange for the Royal Bank to lend Beijing the necessary $62 million.

“The Chinese,” he says, “happen to import 1.3 million tons of pulp per year, mainly for newsprint, because they don’t have enough forests of their own. So I told them I would build a paper mill in China, but only if they first invested in Canada. Then I thought, well, the Russians on the Asian side have lots of trees, so if I could build a pulp mill jointly with them near Vladivostok, we could easily export to China, where I’d have this large newsprint mill. Then I could make a deal with South Korea for the necessary machinery, because they need a lot of paper, and they would buy it from my Chinese mill.”

That verges on a combination of ridiculous and sublime, but when I asked Desmarais whether the political tensions between the Soviet Union and China might not spoil such a cozy arrangement, he told me what he presumably told the Russians: “We’ll build the mill, you give me the pulp, and I’ll come and get it in my boats. So you just keep making the pulp.”

That may all sound a little too clever by half, but many a member of the Canadian Establishment has lived to regret not taking the Power Corp. chairman’s intentions seriously enough.

At age 60, Paul Desmarais is working as hard as ever, although he has turned over the daily management of Power to his sons. “I have cooled down a little bit,” he says, “but I am trying to do a lot in a hurry because, unfortunately, my enemy now is time.”

In fact, Desmarais leaves in August to inspect a site near Shanghai that the Chinese are already recommending for his new paper mill. “Actually, ” he says, “they’re opening up three sites for us so I’m going with a bunch of technical guys to look and make up our minds.” If that kind of chutzpah doesn’t become part of the Canadian future, we won’t have one.