SPECIAL REPORT

COZYING UP TO THE KREMLIN

ROSS LAVER November 27 1989
SPECIAL REPORT

COZYING UP TO THE KREMLIN

ROSS LAVER November 27 1989

COZYING UP TO THE KREMLIN

SPECIAL REPORT

CRITICS SAY THAT MULRONEY’S FIRST OFFICIAL VISIT TO MOSCOW IS POORLY TIMED

Right from the start, the main purpose of the trip had been to promote closer economic ties between Canada and the Soviet Union. But as Prime Minister Brian Mulroney prepared to leave Ottawa last Saturday on the first leg of his longawaited visit to Moscow, Leningrad and Kiev, a small circle of senior advisers scrambled to keep up with developments in Europe—and anticipate future tremors. Both in the Prime Minister’s Office and the department of external affairs, officials were frantically revising Mulroney’s briefing notes and rewriting his speeches to take account of the astonishing wave of reforms now rolling across Sovietdominated Eastern Europe—including the sudden crumbling of the Berlin Wall and last week’s lifting of travel restrictions on citizens of Czechoslovakia. “People here are freaking out—there is still so much to do,” one External staffer complained late last week. Another adviser stressed that planning for the trip was being revised daily: “Every time you write a brief on the Eastern Bloc these days, it is out of date 12 hours later.”

The extraordinary events in the Communist world threatened to overshadow the decidedly more modest objectives of Mulroney’s five-day visit to the Soviet Union. Indeed, those involved in organizing the trip insisted that Mulroney’s visit is not intended to signal a major

shift in Canadian policy towards the Kremlin. “We are part of NATO,” said one official, explaining the cautious approach adopted by Canada so far in responding to recent changes in Eastern Europe. “We cannot act alone.” To avoid appearing out of step with Canada’s allies at a time when East-West relations are evolving rapidly, Mulroney will likely try to keep the primary focus of his trip on bilateral issues such as trade and Arctic co-operation.

Crisis: In fact, some experts have argued that Canada’s cautious diplomacy towards the Soviet Union is justified—given the current economic and political crisis facing Soviet President Mikhail Gorbachev (page 21).

Others point out that, in spite of Soviet declarations to the contrary, Canada is not at the top of Moscow’s list of diplomatic priorities. But, to some observers,

Canada has missed out on a chance to influence the remarkable changes in the Soviet Union by not adopting a more activist diplomatic role. “Canada has more or less sat by and watched everything happen,” said Timothy Colton, a Canadian specialist in Soviet affairs who now teaches at Harvard University. Added Colton: “Most of the changes that are taking place in the Soviet Union have been under way for some time. It is hard to see Mulroney’s visit as breaking any new ground.”

Still, Canadian officials maintain that this week’s visit will mark a significant warming in relations between the two countries. The highlight of the trip was expected to be a meeting between Mulroney and Gorbachev within the walls of the Kremlin on Nov. 21, the Prime Minister’s first full day in the Soviet Union. Those talks, which will follow an earlier meet-

ing with Soviet Prime Minister Nikolai Ryzhkov, were scheduled to last three hours, although Canadian officials said last week they were hopeful that the two leaders would agree to prolong their discussions.

Hosts: In all, Mulroney will sign as many as 15 separate agreements with his Soviet hosts. One of the most important and far-reaching will be an Arctic co-operation agreement to formal-

ize and expand relations between the two countries in such areas as science, education and technology (page 24). Mulroney will also preside at the inaugural meeting in Moscow of the Canada-U.S.S.R. Business Council, a joint effort of Canadian entrepreneurs and Soviet state officials to encourage bilateral trade and investment. And to help Canadian firms obtain private funding for Soviet ventures, Mulroney will sign a foreign-investment protection agreement similar to those that Canada has with several Western countries. In Ottawa, officials said last week that the agreement is designed to prevent future Soviet governments from attempting to nationalize Canadian investments in that country. It would also offer loan guarantees to banks that lend money to Canadian-Soviet joint ventures.

In addition, Canadian officials said that, while

in the Soviet Union, Mulroney will likely announce that Canada intends to open a second legation in that country—in the Ukrainian capital of Kiev. The Prime Minister and Gorbachev are also expected to sign a treaty committing the two countries to work together to combat the international drug trade. The

agreement is designed to deal with the growing number of cases in which drugs destined for Canada are routed from Asia through the Soviet Union. Other treaties will commit the two sides to improving measures to protect the environment and to exchanging information on space research and nuclear-reactor safety. And the range of issues likely to be covered is evidence, Canadian officials say, of the rapidly improving relationship between the two countries. “Who would have believed five years ago that Canadian and Soviet policemen would be co-operating to fight the spread of drugs?” one federal bureaucrat remarked last week.

Despite those efforts, however, some Canadian and Soviet analysts have accused Mulroney’s government of being slow to recognize the impact of Gorbachev’s policies on Soviet society. Ottawa’s approach to Canadian-Soviet relations is symbolized for many by the fact that Mulroney is one of the last Western leaders to pay an official visit to Moscow since the death of Gorbachev’s predecessor, Konstantin Chernenko, in 1985. “I worry that your government and your people are late in recognizing what is taking place here,” Sergei Molotchkov, head of the Moscow-based Canada section at the Soviet Institute for U.S. and Canadian Studies, told Maclean ’s.

Warning: In spite of the trade agreements to be signed next week and the presence of some 150 Canadian businessmen in Moscow to take part in the CanadaU.S.S.R. Business Council inauguration, Molotchkov warned that a failure by Ottawa to exploit the opportunities that have arisen as a result of the new Soviet openness could have longterm economic consequences. “If it is not Canadians investing here, it will be someone else,” he said. “And those who get in on the ground floor now will be the ones to profit.” In fact, of a total of about 1,000 joint ventures approved by the Soviet authorities in the past two years, only 23 involve Canadian partners. That number does not include two much larger projects that are not yet approved: a $250-million, 60-storey office tower in downtown Moscow proposed by Toronto’s Reichmann family, and a possible $1-billion urban-renewal scheme in central Leningrad involving a group of highprofile Canadian entrepreneurs.

On the other hand, some experts say that Canadians should be cautious about investing in

the Soviet Union. For one thing, the political turmoil in the Soviet Union—especially in the restive republics—and the continual warnings of top-level Soviet officials that the Soviet economy is on the verge of collapse have not encouraged foreign investment. “The economic situation is disastrous,” observed Peter Potichnyj, a political science professor at Hamilton, Ont.’s, McMaster University and a native Ukrainian who came to Canada in 1964. “Capitalism is not a charity.” McDonald’s Restaurants of Canada president George Cohon, whose firm plans to open a giant burger outlet in Moscow in January, acknowledged the uncertainty that surrounds investments in the Soviet Union. “Going in is a risk,” Cohon added, “but so is waiting too long.”

Signals: Soviet spokesmen acknowledge that their economy faces tremendous problems. But Molotchkov, for one, complained that Ottawa has given off “mixed signals” about its willingness to do business with the Soviet Union. Many Soviet analysts still bristle at the memory of a speech delivered in Calgary last January by External Affairs Minister Joe Clark. In it, Clark preached caution in Western policy towards the Soviet Union and said that Canada should not be lulled into relaxing its defences by Soviet changes.

Canadian analysts who track foreign policy say that there are signs of a rift in Clark’s own department between those who favor an extensive rethinking of relations with Moscow and those who want Ottawa to take a more cautious approach. Shortly after his Calgary speech, Clark convened a meeting of senior External bureaucrats in Jasper, Alta., to review a wide range of foreign-policy issues. Among the items on the agenda was an internal report that called for a thorough review of Canada’s relations with the Soviet Union.

Privately, some department officials said that the session produced a perceptible shift in Clark’s approach to East-West issues. In May, he delivered a markedly more optimistic speech in Toronto in which he urged Western nations to recognize “the new reality in EastWest relations.” The minister added that the new Soviet attitude was “one of the most significant, intriguing and hopeful signs in the world today.” Observed Laurence Black, director of the School of Soviet and East European Studies at Carleton University in Ottawa: “The change in approach between the two speeches was clear. The first one seemed to be saying, ‘Don’t trust those guys, you never know what they will be up to next.’ But the second speech was all sweetness and light.”

Interest: Other observers remain perturbed by what they regard as Ottawa’s failure to exploit the opportunities created by Gorbachev’s revolution. As an example, Franklyn Griffiths, a professor of Soviet studies at the University of Toronto, cited longstanding Soviet interest in Canada’s experiences with federalism. Soviet curiosity about Canada’s constitutional struggles is not merely theoretical: under changes

proposed by Gorbachev, the Soviet republics have been promised economic

autonomy and greater political independence.

Last month, Alberta deputy Premier James Horsman returned from a weeklong visit to Moscow and Ukraine during which he discussed the current state of federal-provincial relations with Alexander Yakovlev, a former Soviet ambassador to Canada and now one of Gorbachev’s most influential advisers.

Horsman concluded by inviting leading Soviet politicians and academics to attend a University of Alberta conference next October on the problems of federalism. But Griffiths, who served as Clark’s senior policy adviser in 1986-1987, said that Canada should have acted sooner to offer advice to Moscow on constitutional questions. “It is the kind of thing we should have been doing years ago,” he added. “We have an enormous amount of experience in managing a federal system with a diverse population and linguistic minorities.”

Era: One sign of Ottawa’s adopting a more active approach to the Soviet Union may be the announcement, expected from Mulroney this week, that Canada will soon open a second official post in the Soviet Union. A Kiev consulate would address the fact that Canada’s diplomatic representation in Moscow has not increased during the Gorbachev era. The Canadian Embassy in the Soviet capital houses a staff of about 40, including guards and other support staff. Despite a steady increase in contacts between the countries, that number has not changed significantly since 1984. External spokesmen blame budget restraints for their failure to increase the number of Canadian diplomats in Moscow.

But it is equally clear that, for most of the past five years, the department’s attention has been focused elsewhere. In large measure, that is a result of the government’s emphasis on enhanced trade as a vital component of Canadian foreign policy—and what has clearly been Ottawa’s view of the Soviet Union as infertile ground for investment. Said one External official: “At a time when we are implementing the Free Trade Agreement with the United States, trying to protect our trading interests in the Pacific region and preparing for the economic integration of Europe in 1992, the competition for scarce resources is fierce.”

The new emphasis on Ca-

nadian-Soviet trade reflected in the agreements to be signed this week may allay one of the Soviets’ immediate concerns: Canada’s huge trade surplus with the Soviet Union. In 1988, Canada imported $156 million worth of Soviet products, of which $109 million repre-

sented shipments of platinum. But, in the same year, Canadian exports to the Soviet Union totalled $1.14 billion, including $973 million worth of wheat. For their part, the Soviets acknowledge that the shoddy quality of many Soviet goods is partly to blame for their poor export performance. Said Viacheslav Bogdanov, an editor with the Novosti Press Agency who specializes in Canadian and U.S. affairs: “We need to start discussing a more appropriate balance in our economic relationship.”

On the Soviet side, it is clear that Moscow does not place its highest priority on Canadian-Soviet relations. Indeed, many analysts say that the importance of Canada’s political ties to the Soviet Union has declined under Gorbachev. As recently as 1986, a special parliamentary committee on foreign policy concluded that Canada’s geographic proximity to the United States and the U.S.S.R. made it natural for Canada “to try to serve as a 9 bridge and to diminish East| West tensions.” Since then, I however, relations between z Moscow and Washington § have improved so much that

few observers see a need any longer for an intermediary. “Canadians have always tended to exaggerate our significance in East-West relations,” said Mitchell Sharp, a former Liberal external affairs minister. “The fact is that we are not a major player.” Added Carleton’s

Black: “The superpower relationship seems to be taking care of itself right now.”

Issues: In reality, most Soviet citizens appear relatively indifferent towards Canada. Although the number of Soviet visitors to Canada is likely to exceed 12,000 this year—10 times the pre-Gorbachev level—Soviet media coverage of Canadian issues still tends to be brief and factual. Said Alexander Bogomolv, a journalist with the Moscow-based daily newspaper Sovetskaya Rossiya: “Russian people like Canadians, but Canada is often brushed aside in our thinking because we pay so much attention to the United States.”

That situation is not going to change overnight, but officials in both countries said last week they were hopeful that Mulroney’s visit would help to forge stronger and closer ties. Said Yevgeny Shkurenkov, a senior externalaffairs official of the Russian Republic: “Now, many people on both sides will become acquainted with each other for the first time, and who knows what good tilings that may lead to?” And at a time when physical and commercial barriers throughout the Eastern Bloc are rapidly disappearing, Canada may be in a position to take advantage of the opportunities that Gorbachev’s revolution has created.

ROSS LAVER with ANTHONY WILSON-SMITH in Moscow and MARC CLARK in Ottawa