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CHAPTER 9 - STRENGTHENING BILATERAL COOPERATION WITH ARCTIC NEIGHBOURS

BILATERAL RELATIONS IN THE CIRCUMPOLAR ARCTIC

While Canada has been a leader in developing cooperation among the Arctic states, it also has specific bilateral interests of its own in terms of Arctic cooperation with other countries (See Chart 1 for a comparative profile of the Arctic Eight). Though multilateralism remains a hallmark of Canadian foreign policy, it is not well-suited to all international issues, some of which are better addressed through bilateral foreign policy channels. Asked about the utility of the Arctic Council for addressing specific bilateral issues, Oran Young responded that, "I'm very sceptical about that. When it comes to things that are more substantive projects or are issue-specific like that, I think there is a very real danger that a process of politicisation will take place if you move these things into the arena of the Arctic Council, and that is not constructive" [40:21].

A. CANADA-U.S. ARCTIC RELATIONS

The Canada-U.S. relationship is one of the closest and most complex in the world. As Ambassador Raymond Chrétien told the Committee: "There are 230 agreements, from the one on the co-management of the caribou herds between the Yukon and Alaska to NAFTA, and everything in between" [35:19]. While Arctic issues are a small part of the much larger relationship, they are increasingly important and, as we have seen, sometimes high-profile and controversial. In the case of sovereignty over the Northwest Passage, the 1969 voyage of the U.S. tanker Manhattan resulted in Canada's adoption of its Arctic Waters Pollution Prevention Act, while the 1985 voyage of the U.S. Coast Guard vessel Polar Sea resulted in a number of Canadian actions, culminating in the 1988 Canada-U.S. "Icebreaker Agreement." As we saw in Chapter Four, defence cooperation in the North has continued between the two countries for decades. Outstanding bilateral Arctic issues, such as the continued protection of the Porcupine Caribou herd and its critical calving grounds in the Arctic National Wildlife Refuge (ANWR) in Alaska, and sovereignty questions will require continued attention. The broader question for the Arctic region, however, and the one to which Canada may be uniquely able to contribute, is how to deepen the American commitment to circumpolar cooperation.

CHART 1 - COMPARATIVE PROFILE OF THE ARCTIC EIGHT


COUNTRY
%
TERRITORY ABOVE 60_
NORTHERN
INDIGENOUS PEOPLES (est.)
MERCHANDISE TRADE WITH CANADA

($C millions)
SENIOR ARCTIC

OFFICIALS

Canada


30


52,000/
30,000,000


-


Ambassador Mary Simon

Denmark/

Greenland

100
(Greenland)

45,000/

55,000

(Greenland)

Cdn. exports to:

117.5 (1996)

143.8 (1995)

imports from:

354.2 (1996)

335 (1995)

Denmark: Ole Peterson

Greenland: Marianne Lykke Thomsen

Finland

99

4,000/

5,120,000

Cdn. exports to:

200.2 (1996)

221.5 (1995)

imports from:

417.6 (1996)

455 (1995)

Ambassador Heikki Puurunen

Iceland

100

0/

265,000

Cdn. exports to:

21.4 (1996)

17.1 (1995)

imports from:

129.8 (1996)

59.9 (1995)

Ambassador

Ólafur Egilsson

Norway

82

40,000/

4,250,000

Cdn. exports to:

842.6 (1996)

773.7 (1995)

imports from:

2,777 (1996)

2,314 (1995)

Ambassador Jon Bech

Russian

Federation

45

1,000,000/

12,000,000

(Northern pop.)

Cdn. exports to:

319.1 (1996)

208.5 (1995)

imports from:

448.7 (1996)

498.1 (1995)

Ambassador Nikolai Uspensky

Sweden

70

15,000/

8,820,000

Cdn. exports to:

274.5 (1996)

343.2 (1995)

imports from:

1,201 (1996)

1,305 (1995)

Ambassador Wanja Tornberg

United States

(Alaska)

15 (Alaska)

85,000/

550,000 (Alaska)

Cdn. exports to:

224,438 (1996)

209,888 (1995)

imports from:

157,344 (1996)

150,873 (1995)

Robert Senseney

Polar Affairs Chief

U.S. State Department

During World War II and after, the U.S. proposed some international cooperative arrangements in the Arctic which were not accepted by the other Arctic states. In recent years, however, it has been the most hesitant to participate in such circumpolar mechanisms as the International Arctic Science Committee, the Arctic Environmental Protection Strategy and the Arctic Council. A joint statement by President Clinton and Prime Minister Chrétien during their Ottawa summit in February 1995 endorsed the establishment of the Council as soon as possible and allowed the initiative to proceed, but the depth of the American commitment to circumpolar cooperation remains open to question. Substantial differences remain between the U.S. and Canada and other Arctic states over such issues as sustainable development and the utilization of the living resources of the Arctic. This is not surprising, and indeed it is the precise function of the Arctic Council to allow the states and peoples of the region to discuss such issues of common interest and arrive at common understandings. First, however, Arctic issues must achieve and maintain a higher profile in all the states, but particularly in the U.S., where, lacking domestic political interest or high-level attention, they receive low priority.

The U.S. as an Arctic State

From a global perspective, perhaps the most unknown and interesting challenge of the Arctic is that it is basically collective and must be managed for the total. This concept is foreign to the American mind, but in Alaska we address collective ownership and collective responsibility on a daily basis. Government, either state or federal, owns nearly all the lands and resources. So the challenge to the government of Alaska, as it is in most of the Arctic, is how to work for the total. It's the time-honored way of the Eskimo. Commitment to community is the key to survival. When hunters kill a moose, a caribou, a walrus or a whale, it is distributed to the families in the village. And when oil is developed on our North Slope, the benefits are distributed to all Alaskans.
Former Governor of Alaska Walter Hickel249

As Terry Fenge has noted, "The United States became an Arctic nation with the purchase of Alaska from Russia in 1867 and has viewed its Arctic region as strategically important first for economic reasons, later for national security reasons, and more recently, for global environmental reasons."250 Thus the U.S. has been an Arctic state for as long as Canada, but the Arctic has not been a major element of either U.S. policy or national psyche. As Elizabeth Leighton, a former U.S. State Department Arctic policy specialist, noted in 1994:

Despite renewed interest in Arctic research and increased involvement and awareness of indigenous peoples and environmental groups, the Arctic tends to fall behind other major international initiatives and the pressing concerns of the `lower 48'. Americans generally do not feel a historical or cultural attachment to the Arctic, and thus there is little domestic pressure to promote programs in the North.251
Alaska represents approximately 15% of the total area of the United States, and, while it is much smaller than the Arctic territory of either Russia or Canada, Oran Young has pointed out that "the United States is generally treated as one of the big three Arctic states by virtue of its superpower status in global terms."252 Prompted by the likelihood of oil development in Alaska's North Slope, the first U.S. presidential statement on Arctic policy appeared in 1971. The Reagan administration reaffirmed and updated that statement in its 1983 Arctic policy, which focussed on four pillars: the protection of essential security interests; the support of rational development; the promotion of scientific research; and the promotion of international cooperation.253 Responsibility for Arctic matters, except those that were strictly domestic, was given to a federal interagency working group chaired by the State Department.

Following his election, President Clinton ordered a broad review of international environmental policy. As U.S. Under Secretary for Global Affairs Timothy Wirth told delegates at the inauguration of the Arctic Council, "One of the top items on our agenda at the time was Arctic policy." The new "comprehensive" policy made public in September 1994 included significant changes in the U.S. approach to Arctic issues. Most notably, "meeting post-Cold War national security and defense needs" was the last of its six principal objectives, following protecting the Arctic environment and conserving its biological resources; assuring that natural resource management and economic development in the region are environmentally sustainable; strengthening institutions for cooperation among the eight Arctic nations; involving the Arctic's indigenous people in decisions that affect them; and enhancing scientific monitoring and research on local, regional, and global environmental issues. As Terry Fenge told the Committee, "The new Arctic policy is only six pages in length, but its probably the best little policy paper I've read on the North. It builds a variety of policy themes around the central core of sustainability and aboriginal peoples"[10:8].254 U.S. Under Secretary Wirth explained in Ottawa in September 1996 that:

In our view, the Arctic Council we are establishing today is not only consistent with these objectives, but in fact a reflection of that policy and a major new opportunity for pursuing these goals. As an Arctic nation, we welcome this declaration, and we pledge in partnership with the other nations of the region to continue according the Arctic the attention that it merits.255
While the Arctic Council will help engage the U.S. more fully in the broader issue of circumpolar cooperation, a number of long-standing Arctic issues remain on the bilateral agenda, and will continue to demand attention.

The Case of the Arctic National Wildlife Refuge

The cross-pressures in the U.S. with respect to Arctic environmental and other issues are perhaps best illustrated in the case of the Arctic National Wildlife Refuge (ANWR) in Alaska, which contains the principal calving grounds (the so-called "1002 lands") of the Porcupine Caribou herd. As we saw in Chapter Five, the herd migrates annually between northern Canada and Alaska, with its critical calving grounds located in the "1002 lands" of Alaska's Arctic National Wildlife Refuge.

Alaska remained a territory until the passage of the Alaska Statehood Act in 1958, but, unlike most northern territories in the world, it has not been financially dependent on the South since the discovery of oil. Alaska now accounts for about 25% of U.S. oil production; royalties and taxes have given the state a $20-billion Permanent Fund, which distributes annual dividend cheques to state residents. Former Governor of Alaska Stephen Cowper explained to the Committee that the federal Government owns 60% of the land in Alaska, including the Arctic National Wildlife Refuge. He added, "It stands to reason that the Alaskan congressional delegation seeks to have a major voice in those decisions. Nevertheless, they are made in Washington" [58:13].

Attempts to open up sections of ANWR to oil and gas development have been rebuffed by subsequent U.S. administrations, thanks largely to a vocal environmental constituency in the country, and a powerful environmental lobby in Washington, which has referred to ANWR as "America's Serengeti." President Clinton campaigned against opening up ANWR in 1992, and his administration (with its strongly pro-environment Vice-President) has been strong in its protection of the Refuge, vetoing in December 1995 legislation that would have allowed development. Yet the fact that Alaska's congressional delegation is disproportionately powerful means that the administration must keep expending political capital to veto their efforts to open ANWR to development. As well, Alaska's Democratic Governor has now joined the Republicans in a bipartisan consensus on the issue, which means that the protection afforded ANWR is always subject to domestic political pressure. As Governor Tony Knowles told a gathering of oil company executives in November 1995, "There's no issue facing Alaska into which I've placed more energy than trying to convince Congress to open the Alaska Refuge. . . Unfortunately, ANWR has become a national symbol, an environmental Custer's last stand."256

Proponents of opening ANWR to development argue that such development will not necessarily have a negative impact on the Porcupine Caribou herd, largely because development will take place only in a small part of the Refuge and be carried out with new less intrusive technology. As Stephen Cowper told the Committee, while as Governor he favoured opening ANWR to development, he was criticized by the Alaskan congressional delegation for his "soft-line" position on the issue, which included "strong governmental oversight of any exploration and development in that area. I also said that I believe there ought to be a part of that - I won't call it delicate, that's not right - critical calving area that ought to be off-limits, but not the whole coastal plain. I think that's overkill" [58:6-7]. He continued:

My view is that exploration and development of that area can be done in a way that doesn't disturb the calving of the caribou herd. The caribou herd is an enormously important resource. It was there on the surface long before the oil companies arrived. There is technology available today that makes it possible to explore and develop that particular area without having much of an impact on the herd itself. [58:6]
Seen from an American perspective, the ANWR debate is mainly an environmental one. While Canada agrees with the need to protect the herd and its habitat for environmental reasons, its strong position on the issue also reflects the fact that the Porcupine Caribou herd is of critical importance to aboriginal peoples, whose culture and livelihood are based on the herd. As one Canadian expert has pointed out, the area should in fact be thought of as a "bio-cultural zone."257 While in Whitehorse, the Committee met with Joe Tetlichi, the Chair of the Porcupine Caribou Management Board, established by Canadian indigenous groups and governments to jointly manage the herd. He told members that the Porcupine Caribou herd is the foundation of the culture of the Inuvialuit, Gwich'in and Inupiat (of Alaska) peoples. Canada has a standing offer to twin ANWR with protected areas in Canada, and Mr. Tetlichi believes the only sure way to protect the herd is for the U.S. congress to grant full wilderness designation to the `1002 lands' of ANWR. Education is key to this issue, and Canada should continue to press for the protection of the Refuge at all levels and opportunities, including indigenous peoples' continued lobbying in the U.S. (Aboriginal peoples have been very successful in lobbying on fur and other issues over the years. Stephen Cowper told the Committee that he once saw a Canadian aboriginal activist call British Prime Minister Margaret Thatcher from a telephone booth in Arctic Village, Alaska, and successfully enlist her support on the fur issue [58:11].)

According to former Yukon Premier Tony Penikett, local input remains of critical importance in resolving these types of issues, and the case of the Porcupine Caribou herd is one where indigenous peoples and governments at all levels in Canada have worked well together toward a common goal. As he put it,

Often these issues have been handled directly between Ottawa and Washington without much local knowledge. I think that has changed a bit on this issue for the better in the last few years because External Affairs has facilitated heavy involvement by aboriginal and regional politicians in the debate, particularly in the lobby in Washington. [10:23-24]
While there was some development there in 1970s, the less-critical Canadian side of the herd's range is now protected in two national parks. Canada's position on ANWR has been consistent over the years, with Canadian parliamentary committees having looked at the issue of the Porcupine Caribou herd several times. On the last occasion, the House of Commons Standing Committee on Aboriginal Affairs and Northern Development concluded in 1994 that, "In order to truly protect the herd, legislative action is needed in the United States to ensure that restrictions on oil and gas exploration in the `1002 lands' are not merely temporary measures. Protection of such a vital resource should no longer be subject to the discretion of a particular administration."258 In response to the recommendations of this Committee, Cabinet reaffirmed the Canadian policy of protection of the calving grounds of the Porcupine Caribou herd on the coastal plain of ANWR in Alaska.

While Canada and the Clinton administration have been strong in their defence of ANWR and the Porcupine Caribou herd, the administration is under continued political pressure. This raises fears that ANWR development may eventually be "bundled" with other issues in a larger deal, such as an omnibus budget agreement. As Tony Penikett explained, this fear that northern issues might be summarily dealt with in southern capitals is not limited to ANWR:

From a northern point of view, I think there has always been some fear that someday the big people in Washington and Ottawa would get together and bundle some of these issues, and there would be trade-offs that would not be done with much sensitivity to northern concerns. Evidence of this might be the case of the Pacific Salmon Treaty . . . I doubt there's any solution, though, to that particular issue, the caribou herd issue, that would not involve, first, the aboriginal people; second, the regional governments in Alaska, the Yukon and the Northwest Territories; and third, the nations. [10:24]
In addition to continuing lobbying efforts in the U.S., both Terry Fenge and Nigel Bankes suggested as a complementary strategy attempting to have this area protected under the UNESCO World Heritage Convention. As Terry Fenge explained:

The Canadian Government has been very forthright on this issue and I think has done a good job in the last year. So we are not criticising Canadian policy on this. However, we would suggest a longer-term objective would be to apply an international designation, perhaps under the World Heritage Convention, to this transboundary area to give it another layer of protection and management, and indeed to have this area recognized as the international resource it is. [10:9-10]
This proposal is consistent with our suggestion in Chapter Five that existing international conventions be employed in ways that are most useful for the Arctic region. Given the overwhelming support expressed during our travels and hearings for the further protection of this critical resource, we think this step would be of great value. Accordingly:

While Canada's interests seem directly in conflict with those of Alaska on the ANWR issue, the Committee learned in Whitehorse that cooperation between the Yukon and Alaska is very close in a number of other areas. As Tony Penikett explained:

It's not well known in Ottawa, but for example the Yukon has with its closest neighbour, Alaska, probably more intergovernmental agreements than it has with any other jurisdiction except with Ottawa . . . I would point out that none of these agreements have been sanctioned or blessed by Foreign Affairs. In fact, I suspect most of them are not even known about here. I don't think anybody in Juneau or Whitehorse ever thought to inquire for permission of either Ottawa or Washington. [10:11]
For example, Alaska agrees with Canadian positions on such issues as the fur trade and the need to revise the U.S. Marine Mammal Protection Act (MMPA). In fact, as Milton Freeman pointed out to the Committee in a submission written before the U.S. elections in November 1996, "The current congress appears sympathetic to such sustainable use initiatives (due in large part to the resources committee leadership of Congressman Don Young of Alaska.) . . . Extremism in respect to animal protectionist lobbying, appears to have waned significantly."259

Marine Mammals

First passed in 1972 and amended on several occasions, the Marine Mammal Protection Act places a moratorium on the taking and importation of marine mammals and marine mammal products into the United States. The legislation exempts aboriginal citizens of Alaska, who may take marine mammals for subsistence and handicrafts. Canada contends that certain provisions of the Act are an unfair and unwarranted restriction on Canadian exports, particularly since the exemption applies to Alaskan aboriginals but not Canadian. Canada also argues that the prohibitions cannot be justified on conservation grounds, since the Act applies to species that are not endangered, while the U.S. is already a party to international agreements for the management of endangered species. Lobbying by U.S. interest groups and Canada resulted in some liberalization of the MMPA in 1994, but the issue remains.

As Milton Freeman pointed out in a submission to the Committee, given the success in 1994, "The best approach at this time may arguably be through congressional action . . . " On the other hand, Congress could always tighten the Act again. Moreover, as Milton Freeman added, the U.S. has been found in violation of international law in relation to similar MMPA activities, and "under NAFTA, WTO/GATT there should be avenues to seek redress concerning the unfair trade-restrictive aspects of MMPA (as it relates to import bans of northern Canadian products)."260 Stephen Cowper agreed that the Alaska congressional delegation supported the liberalization of the MMPA, as did the Northern Forum. As he told the Committee:

I know that the Northern Forum would support you on that. It is, by the way, a subject that has been brought up in Northern Forum meetings . . . I think it's a subject that the Alaska congressional delegation intends to bring rather forcefully to the attention of the current administration. We understand that difficulty, and we'd like to do what we can to ameliorate it, at least to the extent of being able to trade back and forth among Arctic territories and Arctic regions.[58:11]
Accordingly:

A related issue that has become very controversial in the past year is whaling. Oran Young has pointed out that political pressure on environmental issues is most often generated in the urbanized metropoles of the Arctic states, "which are generally insensitive to the concerns of Arctic communities."261 As he put it, "A striking example is the international regime for whales and whaling during the period since the shift from conservationism to preservationism in the late 1970s, a development that has forced Arctic residents to expend much time and energy protecting their right to continue the harvesting of whales."262 While multilateral channels exist for addressing these issues, Oran Young points out that these channels too are often dominated by non-Arctic interests (the International Whaling Commission has some 40 member states), and northerners often see it as preferable for them to be addressed bilaterally.

Canadian aboriginal peoples have a constitutional right to take whales at subsistence levels; in 1996 Canada issued permits to allow aboriginal peoples in the Eastern and Western Arctic to harvest one bowhead whale each, which they did. Claiming that even this minimal harvest diminished the effectiveness of the International Whaling Commission (IWC), the U.S. government "certified" Canada under the "Pelly Amendment" in late 1996 and threatened to restrict Canadian imports in retaliation. In fact, the Inupiat of Alaska are permitted to harvest 204 bowheads over four years; thus, the question is not one of numbers, but the fact that the U.S. is a member of the IWC, while Canada is not. The IWC was created to ensure the orderly development of commercial whaling, which Canada banned in 1972. Canada continues to attend IWC meetings as a formal observer and to contribute to the work of its Scientific Committee, but it concluded there was no further reason to remain a member and left the IWC in 1982.

According to press reports, the U.S. is concerned that unless Canada rejoins the IWC the organization may collapse; in return for Canada's rejoining, the U.S. has offered to help amend IWC rules to allow the subsistence taking of bowhead in Canada to continue.263 In February 1997, President Clinton announced that he would not ban Canadian imports over the issue, but added that the U.S. would not discuss the issue of marine mammals or trade in marine mammal products in the Arctic Council, and that Canada could not apply to waive the existing moratorium on the importation of seals or related products into the U.S. Canada's position has long been that it will not rejoin the IWC, but, as we shall see in the next section, an alternative is the possibility of joining the North Atlantic Marine Mammal Commission (NAMMCO).

A final set of bilateral issues in the Arctic - perhaps the most intractable - are those related to sovereignty. Canada and the United States continue to dispute the sovereignty of the Northwest Passage but, as we saw in Chapter Four, Donald McRae argues that Canada has done all it can to strengthen its position, short of installing a Sub-surface Surveillance System. Tony Penikett described the other long-standing issue as "the disputed area in oil-rich seas offshore between Yukon and Alaska" [10:24]. Canada maintains that the international boundary on both land and sea was established along the 141st meridian by the treaty of 1825 between Great Britain and Russia, by which both Canada and the United States are bound. The U.S. argues that the boundary line should be drawn perpendicular to the coastline at the point where the boundary meets the sea.264 While somewhat simpler than the Northwest Passage dispute, this issue is also unlikely to be resolved quickly.

Deepening Circumpolar Cooperation

I think one of the virtues of the Arctic Council . . . might be not that the Arctic Council would be resolving these bilateral issues but that the level of knowledge and sensitivity and awareness and understanding of these issues which would develop institutionally . . . by participation in these fora, or this kind of body, would be very helpful in making the diplomats who are dealing with them sensitive to the changes and expectations and aspirations of people in the region. [10:24]
Tony Penikett

President Clinton's State of the Union Address in February 1997 placed renewed emphasis on foreign policy, calling the United States the "indispensable nation." Unfortunately, while U.S. agreement is necessary in a forum like the Arctic Council, which will work by consensus, the U.S. perception that it is indispensable in the Arctic context as well has ruffled some feathers among the Arctic states. U.S. hesitation in joining the International Arctic Science Committee and its grudging support of the AEPS were capped by its reluctance to support an Arctic Council on grounds of duplication and cost. As Garrett Brass explained to the Committee:

I can tell you there was some reluctance on the U.S. side for two reasons. First, it was not entirely clear, when the decision was made to join the Council, what was wrong with the AEPS that we needed the Council to fix. Second, we had already been doing what, in our own self-criticism, we considered to be a rather inferior job in AEPS because of the budget reductions we're all going through. We didn't want to do a worse job in the Council than we had already been doing in the AEPS if its responsibilities were larger. I think the latter is still a concern. [62:13]
Even after the political decision to participate in the Council had been taken in early 1995, negotiating the details took time. As Leif Halonen of the Saami Council told Committee members in Tromsø, the other Arctic states "gave in" to U.S. pressure in order to inaugurate the Arctic Council in 1996. Representatives of the Inuit Circumpolar Conference, involved in the negotiations as Permanent Participants, described the "extraordinary turn of events" in the final stage of the negotiations:

By April 1996, all eight Arctic governments, ICC, the Saami Council and the association representing aboriginal peoples in Russia had agreed to a draft declaration with minor reservations. In June 1996, the United States sent a new head of delegation to the Arctic Council negotiations, who was armed with a position at odds with key provisions of the April draft declaration. Changes sought - and there were many - focussed in particular on the status of aboriginal peoples in the Council . . . In negotiations over the summer, the American view, supported to varying degrees by other states, was incorporated in the final version of the declaration.265
David Scrivener agreed, telling Committee members at Cambridge University that, faced with a U.S. position of "take it or leave it," Canada and the other states had decided to go ahead and try to shape the agenda later. Even after the signing of the declaration, the United States seems opposed to the other Arctic states in terms of the broad outlines of the Council's work. It favours a model focussed on a ministerial meeting every two years, while the other states favour an AEPS-type model whereby substantial work would continue between ministerial meetings. It may be that the U.S., now committed to the Council, simply wants to ensure that the organizational details are handled properly at the beginning; however, critics suggest that in fact the U.S. is simply attempting to delay the work of the Council until 1998, when it hopes to take the chair.

Another possibility is that the traditionally low U.S. priority on Arctic matters and lack of public or high-level policy interest are leading circumpolar cooperation in general and the Arctic Council in particular to be defined in an ever more minimalist way by its mid-level foreign policy bureaucracy. This situation may be reinforced by a lack of resources. Responding to a question about the resources devoted by the various Arctic states to circumpolar issues, Mary Simon told the Committee that, "In terms of the United States, the representatives we deal with are from the State Department. It seems to us they don't have a lot of resources to put into their Arctic work in relation to the Arctic Council. When you look at the pattern in which they funded the AEPS . . . It depends on what they're really interested in" [15:29-30].

George Newton agreed that Arctic issues have traditionally had a low profile in the United States, suggesting that, without an overwhelming threat from the Arctic backed by media attention, the U.S. public and politicians simply see no reason to focus on such issues. As he put it:

My feeling is that we apply our interest in the country where people feel there is a real concern. The Soviet Union is no longer a threat because it doesn't exist anymore. I am telling it the way it is, or the way it is perceived. Therefore, because there is not the concern that something in the Arctic is going to be of grave and immediate danger to our country or the world, and because we have constrained resources, we must apply those resources where there is indeed a very real concern. [62:19]
On the Arctic Council, he added that "I think it's a mechanism that's there. It will work if the people who are participating in it want it to work, and the same goes for sustainable development. I think we have to expand the understanding - certainly in the United States - of the participating organizations" [62:21].

Stephen Cowper agreed that the Arctic Council could have a major role in improving cooperation in the region, and expressed the hope that even the Alaskan congressional delegation will support it. In his words:

Alaska, as you might imagine, seldom speaks with one voice. We're about as contentious as most northern people are. But I think there was a feeling in Alaska - and certainly among the three members of the congressional delegation - that they basically didn't want the national governments negotiating away matters that they thought should be properly in the purview of the state government here. To put it a little more bluntly, they were kind of suspicious of the State Department.
In any event, they now understand that there is an Arctic Council - that it will be ongoing, and that the United States has an appropriate role in those proceedings. I think we now have a situation that will lead to cooperation from the Alaskan congressional delegation. By the way, all three are major committee chairmen, so people have to pay attention to them. [58:11-12]
Even with the support of the Alaskan congressional delegation, the Arctic Council will not resolve all outstanding issues, for example, the utilization of marine mammals. Yet it can still help advance the process of reaching solutions. As Oran Young told the Committee:

Sometimes international institutions succeed not just because they've taken specific actions, but because they've helped to put issues or issue areas on the public agenda. This increases the visibility in the policy community of a set of issues that had not been well defined or visible before, and maybe provides a way of talking about these issues - a way of framing not so much the answers to the questions nut the way of articulating what some of the principal policy concerns are, could be or should be. [40:10]
Canada played a key role in convincing the United States to accept the creation of an Arctic Council; it can perhaps play a more important one in attempting to ensure that Arctic issues achieve and retain a higher profile at both the political and policy levels in the U.S. At the political level, joint declarations from Summit meetings, such as that issued in 1995, are very helpful, as are the annual meetings of the Canada-United States Interparliamentary Group. Political attention is spread over many issues, however, and mechanisms must be created to ensure that Arctic issues remain a priority at the bureaucratic level as well. Rather than simply leaving such issues to be handled within the context of either the broad circumpolar or general bilateral levels, we now have the opportunity to initiate an additional mechanism for ongoing consultations between the two countries to discuss broad Arctic issues.

While the Arctic Council must not degenerate into regional blocs, the Nordic states have already developed mechanisms for consultation on Arctic issues outside the Council, and a similar Canada-U.S. mechanism for discussing North American Arctic issues would be valuable. By ensuring that Arctic issues remained the object of attention in the bureaucracy and forcing each side to prepare continually for regular meetings, this mechanism could also help the development of common understandings and perhaps even solutions to long-standing disputes. Although Denmark is already represented in the Nordic Council, consideration could also be given to including representatives of Greenland, which is part of the North American Arctic, in these meetings.

Since the Committee has already recommended the strengthening of the capacity of the Department of Foreign Affairs and International Trade to deal with circumpolar issues, these regular bilateral meetings would best be handled through the office of the Circumpolar Ambassador and the proposed Circumpolar Affairs Division. Co-responsibility for bilateral Arctic issues will also ensure continued recognition of their importance. Accordingly:

B. CANADA-NORDIC ARCTIC RELATIONS

If we make the geopolitical choice of putting the Arctic in a central position - not the only region of concern, but in a central position - in our thinking on our foreign policy, that will mean that we will concentrate a whole series of problems that we are dealing with separately, such as, to begin with, the management of our relations with all of the countries of the circumpolar region.

I am very surprised to note, in analysing Canada's foreign policy, that countries such as Scandinavian countries, that were what we used to call like-minded countries, have not received much attention in our foreign policy even though we have affinities and considerable similarities with them. [47:7]

Paul Painchaud

Canada enjoys excellent relations with all of the Nordic states: Denmark (Greenland), Finland, Norway, Sweden and Iceland. As Marianne Stenbaek of McGill University told the Committee, "Canada is an Arctic country and a northern country - and, one could be tempted to add, a Nordic country, for the similarities between the six countries far outweigh the differences" [18:30-31]. There are very few serious bilateral disputes between countries; consequently, as the participants at the 1994 conference A Northern Foreign Policy for Canada warned, perhaps the main danger is that the countries may tend to take their relations for granted. The Committee's meetings in four of the five Nordic countries (it was unable to visit Iceland) played a key role in forming its opinions on the Arctic Council and circumpolar cooperation, but also convinced it that bilateral relations between the states must not be taken for granted or ignored.

Marianne Stenbaek pointed out to the Committee the extensive similarities between Canada and the Nordic countries:

Canada/Greenland/Faroe Islands/Denmark, Iceland, Norway, Sweden, Finland have the same geography, to a large extent, and in many places a similar Arctic/subArctic climate; therefore many of the key economic activities and the environmental concerns are the same. On a more subjective level, it can be said that the population in these six countries seem to share a similar mentality/temperament and attitude/value system characterised by tolerance, hard work and fundamental respect for others.

The six countries also share a system of parliamentary democracies and political philosophies which, in general terms, may be described as a unique northern mixture of capitalism, social democracy and some versions of the welfare state. All six countries have a well developed social security system including universal health care, affordable or free higher/university education as well as systems of old age pensions . . . Many of the main industries and businesses in Canada and the Nordic countries are quite similar: fisheries, agriculture, oil and gas development, mining industries, high-skill manufacturing and tourism. . . .So in other words, there are solid and extensive common grounds on which to build future cooperation.266

The states face many of the same challenges, from environmental and economic problems, such as the collapse of important fish stocks to the difficulties of existing as smaller states next to more dominant ones and dealing with the emergence of large trading blocs. Canada and the Nordic states share a belief in the centrality of environmental protection and sustainable development and, as Marianne Stenbaek argued before the Committee, many of these issues can be addressed by a comprehensive sustainable development focus under the Arctic Council, supplemented by cooperation in such areas as Arctic science and the development and use of new information technologies.267 As we saw in Chapter Eight, Peter Burpee and Brenda Wilson of McGill University suggested that the increased use of such technologies and the sharing of related experiences could do much to advance cooperation in areas such as distance education, where Canada and the Nordic states have different expertise.

As we saw in earlier chapters, witnesses argued that to have a viable foreign policy for the Arctic, Canada must first develop its domestic approach to the region. We were struck in Scandinavia by the degree to which the Nordic states have identified and consistently pursued their objectives in the Arctic. Particularly impressive from the international point of view is the cooperation the states have developed over the decades through such mechanisms as the Nordic Council, about which the Committee learned in detail in Copenhagen and Helsinki.

As former Yukon premier Tony Penikett pointed out to the Committee, "it is not heavily populated anywhere in the circumpolar North. There is emerging a kind of international northern community, a northern community consciousness" [10:13]. As a result of this, " . . . as long as ten years ago both the Yukon and the Northwest Territories were doing sustainable development trade missions to Scandinavia" [10:11]. Links across national boundaries are not always formal, however, and, according to Mr. Penikett, the Department of Foreign Affairs has sometimes been slow to recognize this. As he told the Committee:

Some years ago I was in Scandinavia for negotiations with mining and smelter companies. Before I left I called External Affairs to see if it would be possible for me to arrange a courtesy call with an old friend of mine, with whom I'd worked on a committee on behalf of my party and his in Europe for a number of years. This old friend had now become a foreign minister in a Scandinavian country, and I thought I might pay a courtesy call. My staff was told by External Affairs that someone from a territorial government really wasn't important enough to pay a visit to a foreign minister from a real country, so we shouldn't even try.
However, when I got to the capital of this nation I thought, what the hell, I'll make a phone call. I picked up the phone and called and the foreign minister answered. He asked what I was doing there and why I hadn't called? I told him I had tried to call. He told me parliament was in a crisis and the government might fall that night, but could I come around for breakfast in the morning. I agreed, he gave me a couple of messages to pass on to our Minister of External Affairs about matters that were irritating them, and we had breakfast. [10:11-12]
In the international arena, Canada and the Nordic countries share similar perspectives on such important matters as human rights, development assistance and peacekeeping. They have also been strong supporters of the United Nations, and have worked together on its reform. Being on different continents, Canada and the Nordic states have naturally entered into trading arrangements with their neighbours; even so, Canada's combined trade with the Nordic states in 1995 ($6 billion) was still about 90% of that with Mexico ($6.5 billion). The broader question is whether the membership of four of the Nordic states in the European Union and Canada's membership in NAFTA will reduce Canadian-Nordic cooperation.

While economic links are important, the establishment of the Arctic Council will focus attention on circumpolar cooperation. This can only benefit Canada-Nordic relations, particularly if, as we have recommended, special attention is given to increasing the parliamentary element in the Council. As we learned during our travel in Scandinavia, while supporting the concept of an Arctic Council, the Nordic countries were generally worried that the Arctic Environmental Protection Strategy might be weakened within the Council's broader mandate. The Committee also accepted the advice that stressing the circumpolar nature of the Arctic Council is the way to ensure that it does not become the subject of national or regional rivalries.

Canada-Norway Relations

The Committee's meetings in Oslo and Tromsø in Norway were highlights of its study, giving members an opportunity to learn about key issues of Norwegian concern such as the nuclear situation in the Russian North, the evaluation and continuation of the AEPS process and the successful attempt by the Saami people of northern Norway to create at the University of Tromsø a Centre for Saami Studies that will help them both to retain their identity and prosper in the modern world.

Both David Scrivener at Cambridge University and Richard Langlais in Stockholm noted that Canada and Norway are in a sense natural rivals for the leadership of the Arctic states. Both advised the Committee to ensure that Canada was not heavy-handed in its work in the Arctic Council and other areas of circumpolar cooperation. Canada and Norway have a long history of cooperation in the region. The link between the two countries can be said to have begun one thousand years ago as Vikings attempted to settle in what is now Newfoundland. Norwegian explorers were among the earliest to explore the Canadian Arctic; a special pleasure during the Committee's visit to Oslo was an exhibition at the Maritime Museum commemorating the centuries of Norwegian and other exploration of the Northwest Passage. This shared history should be commemorated whenever possible. For example, in the proposed Otto Sverdrup Centennial Expedition in June 1998, a small Canadian-Norwegian party will recreate Sverdrup's 1898 voyage from Norway to chart, explore and study the Canadian North.268

Norway is Canada's largest trading partner among the Nordic states, accounting for half of all Canada-Nordic trade, and is a significant investor in such projects as the Terra Nova and Hibernia oil field, off Newfoundland. As Canadian Ambassador François Mathys admitted to the Committee in Oslo, however, the bilateral relationship is excellent, but underdeveloped. Norway's Arctic focus in recent years has been on its relations with Russia and Russia's nuclear problems. Norway led the formation of the Barents Euro-Arctic Region process in 1992, and, as we saw in Chapter Four, has been instrumental in placing the issue of nuclear pollution in the Russian North on the international agenda. We have already recommended that Canada participate in the new Arctic Military Environmental Cooperation (AMEC) agreement Norway initiated with Russia and the United States; we feel that this will both help address one of the most serious issues facing the region and increase cooperation between Canada and Norway.

Another serious issue faced by both Canada and Norway is the management and utilization of marine mammals. Despite loud criticism and pressure from the EU, the U.S. Congress and the International Whaling Commission, Norway resumed whaling in 1993 after a five-year moratorium, arguing that harvesting 425 of the 110,000 Minke whales estimated to exist in 1996 would not endanger the species. Since the whaling industry in Norway is not particularly important economically, observers have speculated that Oslo's willingness to expend such significant political capital on this battle is for sovereignty and regional reasons. The reluctance to give up full control of fisheries policy was one of the major reasons why Norwegians voted against EU membership in 1994; the government wishes to exercise complete sovereignty over the resources in its coastal waters. As well, Norway's regional policy is to work against the centralization of its population and the government wishes to ensure the basis for livelihood, which includes fishing and whaling, in even the most remote communities.

As a result of its whaling activities, Norway, too, has been certified by the United States government as diminishing the effectiveness of the International Whaling Commission. While Canada's minimal aboriginal whale hunt is not comparable to the scope of Norway's activities, the broader question, what is the most appropriate mechanism for addressing these issues remaining. As we saw in the previous section, despite American pressure, Canada has traditionally refused to rejoin the IWC. While in Oslo, the Committee was briefed on the activities of the North Atlantic Marine Mammal Commission (NAMMCO), created in 1992 by Norway, Greenland, Iceland and the Faroe Islands to "contribute through regional consultation and cooperation to the conservation, rational management and study of marine mammals in the North Atlantic."269 Oran Young explained, "The creation of the North Atlantic Marine Mammal Commission, which joins together Greenland, the Faroe Islands, Iceland, and Norway and appeals to the concept of sustainable use, owes much to the sense that the International Whaling Commission is a lost cause as far as the interests of consumptive users are concerned."270

Canada and the Nordic states have supported a strong sustainable use component in the Arctic Council; from this perspective, for Canada to rejoin the IWC seems doubly inappropriate. In Oslo, Halvard Johansen, the Chairman of NAMMCO, explained to the Committee the work of the organization, which, he and other Norwegian officials argued, would benefit from having Canada as a full member. Milton Freeman agreed, arguing in his submission to the Committee that:

Canadian scientists at the present time contribute significantly to the work of NAMMCO, and Canadian Inuit regularly attend NAMMCO meetings as observers and have urged that Canada join this Nordic body. Canada is presently an observer nation (together with Russia). It would be a very positive step for Canada to become a full member, an action that would be especially welcome by each of the NAMMCO members, and especially by Greenland (our nearest Nordic neighbour and a nation feeling very strong affinity with Canada, with whom it shares Inuit culture and identity).

If Canada believes there is a need for science-based management of marine mammals and fin-fisheries, including the rehabilitation of depleted fish stocks in northern waters, then it should provide support and leadership in a responsible and credible regional resource management body that an important group of Canadian stakeholders (i.e. Canadian Inuit) are urging it to do.271

Canada has been hesitant to join NAMMCO, probably because it has not wanted to become more deeply involved in the whaling controversy, and because northern indigenous groups - who have a right to formal consultation on such decisions under land claims agreements - have not been unanimous on the question. The U.S. decision to certify Canada under the Pelly Amendment makes academic the question of avoiding controversy. We recommended in the last section that Canada consider taking stronger measures in response to unilateral U.S. actions, and, as Milton Freeman has pointed out, Norway already has done so in the case of whaling:

I suggest that one important reason that the Clinton administration has ignored Commerce Department certification of Norway (calling for Presidential imposition of import bans under the Pelly Amendment) is because Norway has made it very clear they will bring the U.S. before the appropriate WTO panel (where, in relation to similar MMPA actions, the U.S. has been found in violation of international law).272

Overall, the arguments for joining NAMMCO, both in terms of the management of marine mammals and the benefits to our relations with the NAMMCO member states, seem to outweigh those against.

Accordingly:

Canada-Denmark/Greenland Relations

Since joining the European Union in 1973, Denmark has become the most Europe-oriented of the Nordic countries, although it has obtained exemptions from EU policy in a number of areas. Canada's relations with Denmark are good, and the countries share an interest in environmental protection, NATO membership and support for peacekeeping activities. The most important shared interest is in Greenland, for whose foreign affairs Denmark remains responsible. The geographic proximity of Canada and Greenland led to a joint agreement on Marine Environmental Cooperation in 1983, but it was the close cultural links between the peoples in Greenland and the Eastern Canadian Arctic and their political development that resulted in the recent surge of mutual interest.

Greenland attained home rule status within the Danish realm with the passage of the Greenland Home Rule Act in 1979, and powers - except for national defence and security, the judicial system, currency, and foreign affairs - were transferred to the Home Rule Government between 1979 and 1992. Greenland has long looked to Canada as a natural partner and, in view of the forthcoming creation of Nunavut in the Eastern Arctic in 1999, the Canadian Government has come to realize that much can be learned from the Greenland Home Rule experience. The two jurisdictions will face common demographic, economic and other problems, and both sides are interested in learning from the experiences of the other and in arriving jointly at new solutions. As a study commissioned by the Circumpolar Liaison Directorate of DIAND explained in February 1997:

The most immediate concern of the Home Rule Government in Greenland is economic. Fishing, which was the mainstay of the Greenland economy, no longer provides the sources of revenue it once did. Tourism is strongly touted as a new source of revenue as are the non-renewable resources of oil, gas, hydroelectric power, and mineral wealth.
Nunavut could draw on the Greenland government's policies for encouraging economic development especially in the non-renewable resources sector of mining, oil and gas development.
The development of tourism as an economic venture is certainly an area of importance to the government of Greenland and the future leaders of Nunavut Territory.273
During its visit to Copenhagen, the Committee spent much of its time discussing Greenland issues with representatives of the Greenland Home Rule Government, Danish parliamentarians (including those representing Greenland), Danish government officials, and representatives of the Inuit Circumpolar Conference. Members learned that the Home Rule Government operates within the Constitution of Denmark. Greenland still depends on Denmark for block funding of up to 60% of its budget, with most of the balance still coming from fisheries. As Milton Freeman pointed out, given Greenland's dependence on marine resources and interest in cooperation with Canada, it would particularly welcome a Canadian decision to join NAMMCO, as we have recommended. Such a decision would also probably result in some savings, since the existing Canada-Greenland Joint Commission on the Conservation and Management of Narwhal and Beluga could come, in whole or part, under NAMMCO.

The scale of Greenland's dependence on Danish government funding may change in the next decade, since many feel Greenland is on the verge of significant mineral and other resource discoveries. Jurisdiction over non-renewable resources remains shared between the Home Rule and Danish governments, but all look forward to such discoveries, provided the resources can be developed without harming the environment. The last active mine in Greenland was closed by its Canadian operator in 1990, but Canadian companies are currently carrying out exploration in the country. Members were told that Greenland hopes to profit from Canadian expertise and would welcome greater cooperation in such areas as environmental assessments, mining in the North and royalty regimes.

As Jørgen Waever Johanssen, President of the Inuit Circumpolar Youth Council (and a former Carleton University student), told the Committee in Copenhagen, attention should be paid to the youth dimension of circumpolar cooperation, since education, training and employment opportunities would go far to address the common challenges facing the North. He also argued that the focus within the Arctic Council should be on the sustainable utilization and development of resources. Significant potential exists for joint enterprises between Canada and Greenland. While Greenland withdrew from the European Union following a referendum in 1982, it retains an EU link through Denmark; he argued that perhaps products produced by such joint ventures could even be exported to the EU tariff-free. Many other examples of potential for cooperation exist; Jorgen Taagholt of the Danish Polar Centre explained the potential for cooperation in the generation of a significant amount of clean hydroelectric power in Greenland, which could then be carried by cable to North America for use or sale.

In addition to existing agreements on the conservation of narwhals, belugas and polar bears, Canada and Greenland could also benefit from greater cooperation on the management and harvesting of shared stocks and renewable resources. Though Greenland has long been noted for its pristine nature and sustainable use of wildlife, the increase in its population from fewer than 5,000 a century ago to 55,000 today makes the sustainable management of natural resources a priority.274 These issues have an international dimension; Finn Linge, Greenland's representative to the European Union, told the Committee that Canada and Greenland have cooperated closely over the EU fur ban, as well as in with the Northwest Atlantic Fisheries Organization (NAFO) over fish stocks. As Milton Freeman argued:

The well-being of northerners (in Canada and Greenland more especially) continues to depend on a strong renewable resource-based economic sector . . . Development of the northern resource economy requires working to overcome artificial barriers to international trade such as, e.g. the MMPA and EU directives banning trade in sealskins and wild furs, actions of the IWC opposing the commercial utilisation of non-endangered whales, and unjustified CITES (Convention on the International Trade in Endangered Species) sanctions against trade of various abundant, non-endangered species.

Canada, Greenland, Norway and Iceland should work closely and resolutely together on overcoming these negative impacts; these countries are all non-EU nations, and all are adversely affected by EU and U.S. actions . . . Canadian leadership, in support of rational and sustainable economic development, is likely to encourage other nations . . . to support sustainable use of abundant, non-endangered wildlife stocks.275

Significant progress has been made in increasing links between Canada and Greenland in recent years. In late 1996, a Canadian delegation led by Minister of Indian Affairs and Northern Development Ron Irwin visited Greenland. Following meetings with Premier Lars Emil Johansen and his Greenland Home Rule cabinet and government, the two sides agreed to a number of general and specific understandings. These included the need to work towards the establishment of increased trade and cultural arrangements, the exchange of information on the Home Rule experience and the planning of Nunavut, and increasing the volume of cargo transported between Canada, Greenland and Denmark. While these agreements reflected the largely domestic nature of the Canada-Greenland relationship, the two sides also agreed on "enhanced collaboration on circumpolar affairs and in particular on the environment and wild fur issue."276

Canada-Sweden Relations

Long considered the "big brother" of the Nordic states, Canada also enjoys good bilateral relations with Sweden, and high-level visits between the two countries have increased substantially since 1994. Trade figures are not particularly high, but there is significant investment in the Montreal area and elsewhere by Swedish multinational firms, which perhaps see Canada as a natural entry point into the NAFTA market. Though Sweden was initially reluctant to support the establishment of an Arctic Council because of the proliferation of regional forums, it is now a strong supporter of the Council. As Canadian Ambassador William Clarke explained to the Committee in Stockholm, Sweden's "overriding priority" in the Arctic remains the protection of the environment.

Sweden's Circumpolar Ambassador, Wanja Tornberg, warned members that, while the Arctic Council was a useful platform, it must cooperate with other organizations. She also agreed with a Committee member's observation that Sweden's interest seems more regional than circumpolar at the moment; she explained that, since Sweden had just taken over the chair of the Barents Euro-Arctic Region (BEAR) Council from Russia, it would probably be somewhat inward-looking over the next year.

Of particular importance to the Committee was Sweden's emphasis on the importance of "soft" security, which includes environmental and other issues rather than traditional military ones. As Ambassadors Tornberg and Clarke explained, Sweden has long argued that modern security goes beyond military issues, and that the type of work under way in the Baltic 2000 initiative to create a sustainable development plan for the Baltic region will in fact be much more important to future security than a preoccupation with military issues. Further cooperation in developing these ideas would be of much use to the circumpolar region as a whole.

The Committee also had the chance to discuss circumpolar cooperation and Saami rights issues with the Speaker of the Swedish parliament, Birgitta Dahl, a former Minister of the Environment who participated in the Second Conference of Parliamentarians of the Arctic Region in Yellowknife in March 1996. The Speaker and several of her parliamentary colleagues argued strongly for the inclusion of a parliamentary component in the Arctic Council, and, further, that an independent Arctic parliamentary body should be established, perhaps on the model of the OSCE Parliamentary Assembly.

Canada-Finland Relations

Locked into the Soviet orbit during the Cold War, Finland has moved in the past several years to begin redefining its international role, joining the European Union in January 1995. Like Sweden, Finland opposed the EU Commission's decision to postpone the implementation of its fur import regulation and, given the impact this regulation would have on many northern communities, this remains an issue.

At the circumpolar level, Finland's interest in environmental protection prompted it to launch the "Rovaniemi process," which led to the creation of the AEPS, and Arctic environmental issues remain a key Finnish priority. While Finland was an early supporter of Canada's proposal to create an Arctic Council, it was obviously concerned with its impact on Arctic environmental protection. As Finland's Environment Minister noted at the inauguration of the Council, "As the initiator of the Rovaniemi process, Finland pays particular attention to the necessity of safeguarding progress on the well-trodden path."277

According to a former Finnish Ambassador to the United Nations, given their country's proximity to and history with Russia, "Finns may have developed an inner ear for the obscure and conflicting signals that emanate from the East."278 Apart from the Finnish perspective on circumpolar cooperation, the Committee found its discussions in Helsinki very useful for understanding the current situation in Russia. Finland has urged EU and other action to build confidence in Russia and stability in the region, and has placed emphasis on the BEAR process. As noted in earlier chapters, the Committee also benefited from meetings with Finnish parliamentarians, who welcomed Canadian interest in Nordic-Russian cooperation, in which they have an obvious stake. They also encouraged active Canadian involvement in political channels linking European and North American perspectives, notably the Standing Committee of Parliamentarians of the Arctic Region.

Canada-Iceland Relations

The Committee regrets that it was unable to visit Iceland during its study, but it has noted the strong support Iceland has given the Arctic Council and circumpolar cooperation in general. Iceland's Foreign Minister Halldór Ásgrímsson, in an informal meeting with Members on 15 May 1996 during a visit to Ottawa, referred to his country's position as helping to build transatlantic bridges, and confirmed a desire for closer ties with Canada, including through direct air links. Some have argued that the support of most Arctic states for sustainable development and utilization agendas has been driven by their indigenous populations, but the fact that Iceland supports these agendas, even though it has no indigenous population shows that other principles are involved. As Iceland's Foreign Minister argued at the inauguration of the Arctic Council:

Proximity to the ocean resources coupled with such vital dependence on them has taught Icelanders to treat them with care. We see it as a priority and a duty to cooperate with other nations in developing the Arctic Council as a framework for protecting the Arctic environment and securing sustainable development for the benefit of the indigenous peoples, other Arctic residents and for that matter the world as a whole. . . . as important as the environmental challenges are we must give full attention to the need to secure the sustainable development and utilisation of the natural resources of the Arctic . . . The indigenous people of the Arctic have the right to improve their livelihood and enhance their cultures. Utilisation of marine resources [is] in my opinion especially important in this respect.279

Our recommendation to join NAMMCO will improve cooperation between Canada and Iceland in this area.

Conclusion: Nordic Relations within Canadian Foreign Policy

In summary, it is apparent that there are still opportunities to be explored for utilizing the strong bilateral affinities and ties between the Nordic states and Canada to further circumpolar cooperation. To that end:

C. Building Canada-Russia Circumpolar Partnerships

Approaching Russia Today

The Russia that is emerging from the discontented winter of 1997 is a giant jigsaw puzzle of paradoxes, contradictions, ambiguities and uncertainties. Committee members who visited Moscow and St. Petersburg at the time of President Yeltsin's heart operation last November, had a palpable sense of this "transitional" turmoil that reinforced information learned from briefing documents, news sources and face-to-face encounters. Yet, notwithstanding a continuing atmosphere of mounting political, socio-economic, environmental and overall crisis, the past decade since the first Gorbachev-initiated reforms has brought about enormous positive changes in Russia. Indeed it is possible to forecast great things ahead. According to the Washington Post's former Moscow correspondent David Remnick: ``Although daily life in Russia suffers from a painful economic, and social transition, the prospect over the coming years and decades is more promising than ever before.''280 A recent book recording a series of remarkable achievements also observes that there is already more private property in Russia's emerging market economy than anywhere else in Eastern Europe.281 The London-based European Bank for Reconstruction and Development (EBRD), established in 1991 to assist post-Communist transitions to democratic market economies, is generally bullish on Russia's longer-term prospects, and is rapidly expanding operations there, especially in financial institution-building and services, including those for small business development.282 At the same time, after more than five consecutive years of sharply declining real output, penurious state finances, collapsing public services, and with more than a quarter of the population living below the official poverty line, there are many who have lost from reform, to the consternation of outside observers, even if overt signs of unrest have been remarkably contained to this point.283

Canada and Russia have both clearly expressed a mutual interest in doing more business together across a variety of fronts. In mid-October 1996, just a few weeks before the Committee's visits to Moscow and St. Petersburg, International Trade Minister Art Eggleton led a delegation of 57 companies, the largest business mission since 1992, to these cities, where they participated in the second meeting of the Canada-Russia Intergovernmental Economic Commission (IEC). Canada's Export Development Corporation (EDC) announced in September 1996 that it would now consider providing financing for commercial sales to Russia (up to US$250 million available on its corporate account), and Mr. Eggleton indicated that Canada account support could also be forthcoming. Bilateral trade volumes fell sharply after 1993 though Canadian exports posted significant growth in 1996 (see Chart 1). Direct investment is still only about $300 million, principally in mining (gold) and oil and gas.284 Canada's competitors in the Russian market are generally seen as being more aggressive and committed. The potential for improving Canada-Russia trade and investment performance, contrasted with the frustrating and quite often disappointing short-term realities, was a theme that emerged from our meetings with Canada's ambassador Anne Leahy and her small but efficient and hard-working Moscow staff, as well as from exchanges with resident members of the Canadian private sector who are in Russia for the long haul. Given the immensity of the diplomatic and commercial challenge, we are pleased that ways have been found to avoid the scheduled closing of Canada's consulate in St. Petersburg, where the Committee appreciated the energetic efforts of Consul General Ann Collins and the perspectives of local Canadian business representatives. At the same time, we recognize that substantially increasing the present Canadian stake is probably unlikely until a lot more questions are answered, and as long as so much remains in flux.285

The Russian federation has yet to sort out relations between central and regional authorities, which have led to legal contradictions, if not actual chaos,286 or to put in place adequate systems of market rules and regulations, for example governing taxation and safeguarding foreign investment, which are important to key sectors of Canadian interest in oil and gas and mineral resources. Deputy Foreign Minister Georgiy Mamedov, who expressed disappointment to the Committee about the fact that western investor interest was lower in Russia than in China, in spite of his country's democratic reforms, shifted some blame for legislative deficiencies and delays to the Duma, in which opposition parties, chief among them the "new" Communist party, have a majority. The Committee was nevertheless encouraged in its meetings with senior Russian parliamentarians by their genuine affinity for Canadians and their repeatedly expressed desire to cooperate in expanding both economic and political ties. Vladimir Lukin, chair of the Duma's foreign affairs committee, assured members that they would deal with the necessary legislation concerning double taxation and foreign investment, as well as new rules on production- and revenue-sharing that will have their greatest impact in northern areas and on resource projects of interest to Canadian companies. He added at the same time that Russia wants to encourage long-term equity investments rather than volatile short-term capital inflows.

We are only too aware that there remains much to make would-be investors nervous. A recent risk assessment, while giving some positives to overcome the understandable caution, offers a litany of more arresting observations:

Russian democracy is a particularly distinctive and fragile example of the species. . . . It is impossible to overstate the importance of the need to consider regional as well as national politic. . . . Russia's economy is in a peculiar state, half way between reform and collapse. . . . Organised crime is Russia's greatest growth industry. . . . Ecologically, Russia is a disaster. . . . the dangers to public health have increased for a variety of reasons. . . . Russia (like most of the former U.S.S.R.) is suffering a demographic crisis and the resurgence of diseases like tuberculosis, epidemic flu and dysentery.287
Tax collection, particularly for foreign firms, has been described by the vice-president of the U.S.-Russia Business Council as "frightening because it's so random and so capricious."288 Contradictions seem to be everywhere. Despite numerous bank failures, Russia now has several of the strongest banks in Eastern Europe, and one, the former Industrial Bank for the Soviet Union, recently opened a New York office. Despite the investor anxieties, the chief investment strategist with the U.S. investment bank, Morgan Stanley, sees Russia as "the most exciting, biggest potential play in the world." Some predict the size of its stock market could eclipse that of all of Latin America by the end of the decade.289 The contrast could hardly be sharper between such booming visions and the desperate real economic plight of most Russians, or the precarious state of public-sector finances, with many employees (including disgruntled members of the much demoralized military) going unpaid for months.

Moreover, even as the situation in major centres like Moscow continues to be "far from normal,"290 of particular concern in terms of this report is the especially acute and complicated situation in Russia's vast northern and far eastern regions; here, as already noted in earlier chapters, environmental devastation is the worst, indigenous peoples face the greatest challenges, and large amounts of external assistance will be essential for some time.291 Although Russia's "North" is the most populated and "developed" of all the Arctic states, the imposed militarization and industrialization of the Cold War has left behind urban concentrations with serious environmental and other problems, at a time when the central government can no longer afford to subsidize them. In Moscow, Vladimir Kuramin, Chairman of the State Committee on Northern Development (GOSKOMSEVER), which was reconstituted by presidential decree in November 1995, drew a striking portrait for Committee members. The Russian North as an administrative area covers two-thirds of the federation territory (including sub-Arctic agricultural areas especially in the far east), comprising 29 regional entities extending across 12 time zones. Although home to only12 million of Russia's approximately 150 million citizens (with the indigenous "small peoples" accounting for barely 200,000 souls), the breakdown of Soviet support systems means that even some of this population is "superfluous" and cannot be sustained. Out-migration creates other problems for those who stay. At the same time, federal funding for the North has dropped by 40% because of the budget crisis.

As in Canada, northern regions do receive some special considerations. And, as mentioned in Chapter Seven, a new program is being undertaken to work in cooperation with indigenous peoples. GOSKOMSEVER, which has benefited from a good relationship with its Canadian counterpart, the Department of Indian Affairs and Northern Development (DIAND), is trying, with limited resources and staff (only 300 federal employees) to construct a better framework for approaching development in northern regions. Mr. Kuramin admitted that some federal policymakers tend to see the northern and far eastern regions as a big, expensive headache. But this circumpolar zone, with 92% of Russia's gas reserves, 75% of its oil, 60% of its coal, 50% of its forests and fish stocks, could become a great source of wealth rather than a perennial drain on the treasury. Moreover, Russia's remote and increasingly independent-minded Siberian northeast, if it can overcome its tortured past, has been identified as a region of low commercial risk and enormous potential.292 Looking to the Asia-Pacific more than to Moscow, the largest republic of Sakha (Yakutia), covering one-fifth of the federation's territory (six times the size of France) and containing the coldest populated areas on earth, already accounts for 99% of Russia's diamond output (25% of world production). Sakha has also managed to negotiate a unique federal agreement giving it greater control over taxation and resource revenues. As we elaborate in the next sections, the Sakha republic is significant, too, in having developed an extensive relationship with Canada's northern territories.

The overwhelming nature of the Russian situation, not only in size, scope and complexity, but also in terms of opportunities and risks for overall Canadian foreign policy interests, including of course circumpolar cooperation, makes a compelling case for expanding Canadian diplomatic and commercial representation to beyond the capital, Moscow, rather than cutting back. Although the Committee appreciates the need for budgetary prudence, we believe the allocation of departmental resources should reflect that this is a critical time to demonstrate a clear Canadian commitment to an intensive future partnership with the Russian Federation, including its diverse regions. There is no substitute for an enlarged on-the-ground presence that would be capable of serving a growing breadth of Canadian interests. At the very least, an additional Canadian consular presence should be established to facilitate contacts with northern and eastern regions which are far distant and increasingly autonomous from Moscow.

Accordingly:

The State of Canada-Russia Relations and Northern Cooperation: Retrospect and Prospect

Over the past few years, the Government of Canada's overall cooperative agenda with Russia, including northern relations, has lost momentum.

Camil Simard, Circumpolar Liaison Directorate,
Department of Indian Affairs and Northern Development,
April 1994293

At the threshold of the 21st century new global communities are formed in the world, going beyond national borders and interests. . . . The North of our planet will play an exceptionally unique role in this new community. The North means a unique biosphere, countless natural treasures, yet unused lands. The North means a cradle of one of the most viable civilizations, entirely adapted to the severe environment and created by [the] will, mind, talent and labour of indigenous people. . . . The North is beautiful and marvellous. Its hour of triumph is yet to come.

Mikhail Nikolayev, President of the Sakha Republic (Yakutia),
June 1995294

We share a lot. . . you Canadians are the least problematic country of the G-7.

Georgiy Mamedov, Deputy Foreign Minister of the Russian Federation,
November 1996295

Relations between Canada and Russia might be described in general terms as good if unremarkable. For many who believe the relationship could and should be more dynamic, there is a sense in which it has underachieved, in spite of the oft-cited "natural partnership" of geography and climate and the tireless efforts of individual Canadian veterans of cooperative contacts.296 Some of the high-profile flurry of diplomatic activity and enthusiasm of the early 1990s has noticeably worn off in the face of the difficulties of overcoming the legacy of seven decades of Communism. At the same time, Canada has developed a substantial assistance program in Russia (which we examine in detail in the next section), and the recent business delegation led by Minister Eggleton should give a boost to a flagging commercial relationship. Significant territorial, provincial, and aboriginal contacts have also helped to sustain momentum, notably at the interregional and circumpolar level. Nevertheless, it would be wise to keep current expectations reasonably modest and to direct Canadian bilateral efforts as strategically as possible to already identified areas of strong mutual interest (e.g. cold-climate technologies, institution-building and specialized training, environmental rehabilitation and regulation, resource development and management systems, sustaining indigenous communities).

The modern post-war history of Canada-Russia relations has been extensively surveyed elsewhere, and astutely analyzed with a special focus on the northern cooperation by several practitioners who gave their views to the Committee.297 Some highlights of that period, leading up to the 1992 bilateral accord (see Box 14 "The 1992 Canada-Russia Agreement on Cooperation in the Arctic and the North'') that is due to be renewed in June 1997, may be useful in setting the context. The first and most obvious observation is that, despite geographic proximity and wartime alliance, the Cold War dominated relations between Canada and the U.S.S.R. for over four decades. As a result, the world's two largest countries, sharing between them 85% of the Arctic ocean coastline, came to be described as, at best, "nearly neighbours." Diplomatic contacts were cool if correct, largely determined by developments in the broader international system, particularly by each country's respective relations with the United States. Canada was firmly in the western (and American) camp throughout the Cold War, yet it was clearly not the United States, and benefited from this in the eyes of the Soviets. Indeed, in 1955 Lester Pearson became the first NATO foreign minister to visit the U.S.S.R..

Box 14 - "The 1992 Canada-Russia Agreement on Cooperation in the Arctic and the North"

The main provisions of the Agreement signed during President Yeltsin's June 1992 visit to Canada are as follows:

A total 35 projects and activities have taken place under the auspices of the Agreement, in such areas as geoscience, construction, health, aboriginal issues, social development, environmental issues, economic development, and mining.

These activities provided for the participation of federal departments (Agriculture Canada, Indian Affairs and Northern Development, Natural Resources Canada, Fisheries and Oceans Canada), the Government of the Northwest Territories, aboriginal organizations and corporations (Inuit Circumpolar Conference, Inuvialuit Regional Corporation, Unaaq Inc.), universities (Laval University, University of Northern British Columbia), and other organizations (Association of Universities and Colleges of Canada, NWT Chamber of Commerce, Canadian Society of Circumpolar Health, Canadian Museum of Civilization, Circumpolar Agricultural Conference).

Projects and activities involved on the Russian side, in addition to Moscow-based governmental and nongovernmental organizations, the following regions: Republic of Sakha (Yakutia); Megadan Oblast; Irkutsk Oblast; Chukotka Okrug; and Nebets Okrug.

While DIAND has provided some funding support for the Agreement and its projects (e.g. interpretation, travel costs) many Canadian participants have funded their involvement in the projects. On the Russian side, however, GOSKOMSEVER has not provided any funding in support of Russian participation.

It was not for another 15 years, however, that bilateral cooperation with the Soviet Union on a number of still quite narrowly defined fronts began to take on a more substantive and formal dimension. Prime Minister Trudeau, who had first visited Moscow privately in 1952, made a high-profile eleven-day trip to the U.S.S.R. in 1971 which resulted in several agreements, including a Protocol aimed at putting contacts on a more systematic basis and providing for "consultation on important international problems of mutual interest and on questions of bilateral relations." The visit also excited interest in the Soviet press, and Premier Alexi Kosygin reciprocated with a visit to Canada within six months. ``Détente'' also continued in the bilateral relationship longer than it did between the superpowers, until interrupted by the Soviet invasion of Afghanistan in 1979. The Arctic had traditionally been an important element of the bilateral relationship, and in fact throughout the Cold War the U.S.S.R. cooperated on Arctic issues solely on a bilateral basis. Most of the early contacts - for example, a 1965 visit to the Soviet North by Northern Affairs Minister Arthur Laing - while centred on science issues, also included shared interests in infrastructure technologies and wildlife conservation. After a brief suspension following the Soviet invasion of Czechoslovakia, northern exchanges resumed in the early 1970s. Of particular importance was the 1971 visit of the current Prime Minister Jean Chrétien, then Minister of Indian Affairs and Northern Development, to the northern regions of Siberia.

As John Hannigan points outs, this visit also signalled an important divergence between the Canadian and Soviet approaches to northern development - "Although scientific matters and natural resource development remained important components of potential bilateral collaboration, Mr. Chrétien also stressed cultural development and education for northern peoples. . . ".298 From the 1970s on, increasing Canadian domestic concerns over environmental and social issues, combined with the movement for aboriginal peoples' rights and northern political devolution, strongly influenced Canada's approaches to Soviet cooperation, and provoked resistance from the Soviet side which stuck to its centrally planned scientific-industrial model. Nonetheless, discussions were renewed in the early 1980s, prompted during the 1982 visit of a Quebec delegation to Siberia, and led to the signing of the first extensive bilateral protocols in 1984 on scientific and technical cooperation in the Arctic and the North. Although referred to as the Arctic Science Exchange Program, Canada was able to have included important environmental and social science ("ethnography and education") components. As well, this broader bilateral framework provided a significant boost to subnational initiatives, with the Government of the Northwest Territories playing a leading role in the social dimension, both for issues related to indigenous peoples and for northern construction.

Over the course of the 1980s, bilateral cooperation along these lines continued to deepen (helped by the fact that leading Soviet reform figures, Alexandr Yakolev and Mikhail Gorbachev himself, were familiar with Canada). Prime Minister Mulroney's November 1989 state visit, where he sought Soviet support for the Canadian idea for an Arctic-region council, produced an Agreement on Cooperation in the Arctic and the North which added a northern economic development program and the facilitation of exchanges among northern indigenous peoples. Moving into the 1990s, there was increasing emphasis on both multilateral-level channels (with Canada and the U.S.S.R./Russia involved in negotiations leading to new Arctic and circumpolar organizations, as we have seen in previous chapters) and, very important as well, on subnational and nongovernmental activities. For example, before the Soviet Union disintegrated, Quebec had entered into a cooperation agreement with the Russian federal republic, and the NWT had signed a Memorandum of Understanding with the Sakha republic (Yakutia). The Committee during its northern travels heard encouraging testimony about enterprising territorial-led activities with Russian Arctic regions, with government working closely with private-sector joint ventures - including on such priority areas as housing construction adapted to northern needs, and technical and management training for native people - which continue to evolve in directions that seek practical benefits for northerners.299 Arctic-based aboriginal organizations such as the Western Arctic Inuvialuit Regional Corporation, and Nunavut (eastern Arctic) and Nunavik (Quebec/Labrador) bodies through the Inuit Circumpolar Conference, have also been involved in pursuing working relationships with indigenous groups in Russia.

The breakup of the U.S.S.R. in 1991, although traumatic and still unsettling, fortunately did not disrupt this promising evolution, much of which was now taking place below the federal state level, and instead cleared the way for a new comprehensive Canada-Russia bilateral agreement on northern cooperation to be put in place in June 1992. An earlier "Declaration of Friendship and Cooperation" signed by President Yeltsin and Prime Minister Mulroney affirmed the promotion of "direct contacts between local and regional governments and aboriginal peoples of Northern Canada and Russia, on the basis of their working arrangements." Given that trend, the role of the national governments was shifting, as John Hannigan has pointed out, towards "facilitation and coordination of collaborative projects rather than as direct players. . . [the exception being] the areas of science and the environment, where much of the research falls within the realm of the federal governments." At the same time, as he observed already several years ago:

In Canada, funding is increasingly being directed toward technical assistance programs rather than scientific or cultural cooperation. In Russia, there is simply a shortage of government funds to meet many of the basic demands of the Russian population, let alone conduct a program of international cooperation. . . . . the fate of Canadian-Russian northern cooperation is no longer dependent on the presence of common approaches to northern development, or the clearing of foreign policy and security concerns. Ironically, ten years into the program on Arctic exchanges, the predominant inhibiting factor is funding.300
Before turning to current and future realistic expectations for a Canada-Russia bilateral circumpolar partnership, given these resource rather than high policy or structural constraints, it is important to go back a bit to underline just how much the Cold War's demise and aftermath has truly transformed the overall foreign policy context for considering such relationships. Like most western governments, Canada had been slow to understand and accept the revolutionary nature of the Gorbachev reforms, repeatedly taking a cautious line on Soviet initiatives, including Gorbachev's 1987 Murmansk initiative, which called, among other things, for greater civilian cooperation in the Arctic. (Gorbachev, as noted earlier, was nonetheless personally well-disposed toward Canada, having led a parliamentary delegation here in 1983 on one of his first trips outside the Soviet Union. Moreover, his mentor, Alexandr Yakovlev, had spent ten years "in exile" as Soviet ambassador in Ottawa, and had developed a good personal relationship with Prime Minister Trudeau.) With the fall of the Berlin wall in 1989, Canada and other countries finally accepted the transformation of the Soviet Union as the effects of perestroika and glasnost were extended to Central and Eastern Europe. By that time, the benefits of the foreign policy "new thinking" with the goal of demilitarizing the Arctic region were also increasingly apparent, both bilaterally and on a circumpolar basis, in the Soviet endorsement of further progressive northern cooperation initiatives.

There followed a flurry of activity in Canada-U.S.S.R. relations, beginning with a successful high-level November 1989 visit to Russia led by Prime Minister Brian Mulroney accompanied by a large entourage of Canadian business people. In addition to a joint political Declaration, the visit resulted in some 14 agreements to expand bilateral cooperation in areas including the Arctic and the environment, as well as air links, investment protection, and "wide-ranging discussions" on a range of issues. This visit was followed by at least four more in the next four years: Gorbachev to Ottawa in 1990, Mulroney to Moscow in 1992, Yeltsin to Ottawa in 1992, and Yeltsin to Vancouver to meet with U.S. President Bill Clinton in 1993. The high point of the new relationship was probably the signing by Prime Minister Mulroney in Moscow in 1992 of a large number of further bilateral agreements, which often involved the creation of "Mixed Commissions" of Canadian and Russian officials to pursue various issues.

Russia's subsequent movement towards a democratic market system, albeit hesitant and contested, has also allowed more diversified and business-oriented economic relations to develop. However, as noted in the preceding section, given the severity of Russia's transition process, with steep declines in real output and high commercial risk factors, bilateral trade and investment volumes have remained unsatisfactory. There may be far more profitable opportunities than ever before and most agree the future holds great promise, but short-term crises and continued legal-political uncertainties have resulted in a troubled business climate that still deters many. It is a situation which seems to require strong nerves as well as a long-term commitment to staying in the Russian market. Some Canadian businesses that were among the first to penetrate the Russian market have had notable success (e.g. McDonald's Canada, which opened a flagship restaurant in Moscow in 1988, and has continued to expand, recently into St. Petersburg). Russians we met welcomed this involvement, not only in strict investment terms, but also as contributing to the transfer of business management skills, the raising of marketplace standards and the spread of better business practices generally. Some ventures have gone sour, with discouragement sometimes followed by disinvestment (e.g. Gulf Canada's withdrawal from KomiArcticOil consortium in the fall of 1994, in the wake of the major oil spill from a highly publicized pipeline break and other problems, on the grounds that operations were not profitable). But others are taking their place - for example, Alberta-based Bitech Petroleum Corp. expects to more than treble its oil production over the next year in the northern semi-autonomous Komi Republic.301 And in Moscow, Calgary's Southern Alberta Institute of Technology is helping to set up a Russia-Canada Fuel and Energy Training Centre financed by a $2.2 million CIDA contribution announced in December 1996.

Past setbacks and present anxieties have to be taken in stride. We see tremendous potential for the Canadian private sector to play a larger role, not by waiting on the sidelines while competitors in Europe and the U.S. move ahead aggressively, but by contributing, as some firms are already doing, to making improvements in Russia's still struggling economy and business climate during this critical formative period. Certainly that is one of the positive messages the Committee heard. We note that it was during Prime Minister Chernomyrdin's first visit to Canada in October 1995 that the Canada-Russia Intergovernmental Economic Commission (IEC) was established to include private sector participation and to provide a mechanism for addressing trade and investment issues affecting Canadian and Russian business interests. Four working groups have been operating in the areas of fuel and energy, agriculture and agri-food, advanced technology, construction and housing. Under the 1995 initiative, Canada and Russia resolved to work towards a doubling of bilateral trade by the year 2000. International Trade Minister Art Eggleton, co-chairing the IEC's second meeting in Moscow in October 1996, indicated Canada's commitment to this goal.

The Committee is particularly interested in encouraging attention to the part that northern-based enterprise can play in contributing to sustainable economic cooperation objectives. For example, in Yellowknife we were impressed by the successful experiences of Stefan Simek, President of Ferguson, Simek, Clark, in doing business in some of Russia's remotest regions over the past several years (e.g. the building of the model "Canadian village" in Yakutsk in northeastern Siberia). He made several useful suggestions for invigorating Canada's bilateral ties with Russia: inter alia, improving air links, establishing a joint Canada-Russia Contract Dispute Settlement Panel, and sending a Team Canada-type trade mission to Russia. His field-tested advice was for Canadian firms not to be passive but to search out niche markets in Russia where we can be strongly competitive. Many of these areas will be where Canada has been an acknowledged leader in developing knowledge and expertise (e.g. cold-climate research, technological development and infrastructure; resource management systems incorporating aboriginal participation as well as environmental protection and remediation elements) that is especially suited to being applied to meeting the tremendous sustainable human development needs of Russia's northern regions and indigenous Arctic communities.

With respect to the overall state of Canada-Russia northern cooperation at the official level, we think there is much still to be done, despite a diverse range of activities - involving provinces and territories, aboriginal groups, and research, educational, health, cultural and other organizations, in addition to activities of federal departments and agencies - which have been taking place under the aegis of the 1992 agreement.302 Indeed Harald Finkler, Director of DIAND's Circumpolar Liaison Directorate (CLD), which was given responsibility for implementing the bilateral agreement, acknowledged during his appearance before the Committee in May 1996 that it had come with no resources attached [18:25]. Russia has not been able to provide any funding to support Russian participation and both sides have been unsuccessful in proceeding with a ministerial-level meeting of the Mixed Commissions created by the agreement, although regular meetings between officials of DIAND and its counterpart Russian State Committee (GOSKOMSEVER) have taken place. Given that the agreement will be up for renewal in a few months, John Hannigan's ambivalent assessment gave the Committee several points to consider:

Canada-Russia Arctic cooperation has lost momentum in the past three or so years largely because of financial constraints in both countries, and uncertainties and change in Russia. The government-to-government bilateral relationship is therefore at a point where it should be closely examined with regard to its benefits and its relationship with multilateral forums, such as the Arctic environmental strategy and the Arctic Council.

With all of the changes in Russia over the past four years, combined with the move toward multilateral cooperation and joint northern-related projects outside of the formal bilateral agreement. . . . is it time to . . . concentrate efforts instead on multilateral Arctic initiatives? To answer that question, one would have to weigh carefully the consequences of a decision to end the [formal federal government-to-federal government bilateral Arctic cooperation] relationship. It would require input from many of the people who have participated in the program and who are still deriving concrete benefits from the cooperation. [18: 22-23]

Perhaps the most promising aspect of the formal intergovernmental framework has been its distinct emphasis on fostering direct contacts among regions and among aboriginal peoples themselves, even if raising the necessary supporting funds has been ad hoc and problematic. Moreover, although the Russian side is especially fiscally challenged, it has shown great intellectual and policy interest in pursuing whatever avenues may be opened by the agreement. CLD officials have been as responsive as funds allow, and have facilitated participation by Canadians with noted expertise in major international meetings hosted by Russia on northern cooperation issues, including one in Archangel in September 1995 that was cited by GOSKOMSEVER Chairman Kurmin during his forceful presentation to the Committee in Moscow. Canadians also made their mark in contributing to an earlier NATO-sponsored Advanced Research Workshop on Management, Technology and Human Resources Policy in the Arctic held in Novosibirsk which involved Russia's federal ministry for nationalities and regional policy and the Siberian republic of Sakha (Yakutia). Several of the Canadian presentations focussed on aboriginal self-determination and sustainable development issues.303 The NWT's Robert Doherty explained the growing territorial activities with Russia's northeast which we have already noted above. Clifford Hickey of the University of Alberta's Canadian Circumpolar Institute, who, along with colleagues, met with the Committee on its return from the western Arctic, outlined a number of suggestions to assist northern Russia's transition to a market economy; these included: a circumpolar trade and tourism strategy, emphasizing renewable resources and the extension of the region's traditional economies; increased circumpolar use of developing telecommunications technologies; and capitalizing on Russia's noted science base to create and market electronic databases.304 (The CIDA-supported "Intaris" project, which the Committee visited in St. Petersburg, as described in the next section, is a model illustration of the latter potential.) Also at the Novosibirsk conference, Gérard Duhaime of Laval University, twice a witness before the Committee, elaborated on growing Quebec-Russia research collaboration in recent years. Among his forward-looking suggestions, referred to earlier in Chapter Eight, were to establish a Northern Educational Exchange Program under the Arctic Council, to be modelled on the ERASMUS program of the European Union.305 The participants in this NATO-sponsored gathering, coming from all eight circumpolar countries, endorsed a declaration calling for new multilateral approaches to Arctic development based on principles of sustainability, aboriginal involvement, and support for knowledge-based cooperation, within what the Russian participants referred to as an emerging interregional as well as interstate "Arctic and Northern Community."

From DIAND's perspective, Harald Finkler outlined in a submission to the Committee a number of reasons why the bilateral channel administered by his Circumpolar Liaison Directorate remains important to developing a program of Arctic cooperation with Russia. The acute needs of Russia's northern regions, in particular those of northern indigenous peoples, and the complexity of their situation, notably in regard to environmental and economic recovery, are a strong argument in favour of utilizing Canada's extensive experience and expertise to help build up Russia's institutional and managerial capacities in these areas. As our Circumpolar Ambassador Mary Simon has stated with respect to the abrupt termination of state subsidies to hundreds of communities across northern Russia:

Clearly, it is in no one's interest to see northern Russia left to stagger and fall by the wayside like this. Apart from the terrible impact on individuals, families and communities, the economic and social collapse there threatens to obstruct efforts to stem the flow of contaminants out of Russia into the Arctic Ocean and skies and onto our northern shorelines.306
Certainly the Russians with whom we met are eager to explore opportunities for mutual benefit. At the same time, the content of this Canada-Russia cooperation is increasingly oriented towards initiatives being delivered at the subnational or nongovernmental levels - e.g. territorial government programs, linkages among aboriginal organizations - or in support of multilateral cooperation through the AEPS/Arctic Council. As well, other Canadian and Russian federal ministries besides DIAND and GOSKOMSEVER are also concerned with issues heavily impacting the North, such as nuclear safety and environmental security which we discussed in Chapter Four. Deputy Foreign Minister Mamedov pointedly acknowledged to the Committee that demilitarization and the decommissioning of reactors are a "matter of survival," but the "major problem is money." Russia is therefore interested in a range of partnership proposals to help it cope.307 We were told that environmental projects in the Arctic have been put on hold because of the budget crisis. Again, this is an area where Russia is welcoming more Canadian involvement.

Since the 1992 framework agreement on Canada-Russian northern cooperation was signed, much has happened that needs to be factored into the consideration of the relationship beyond June 1997. Canada continues to develop an extensive program of bilateral assistance to Russia which is now managed by the Canadian International Development Agency (CIDA), and to which we turn in the next section. The appointment of an Ambassador for Circumpolar Affairs and the creation of the Arctic Council also make it important, as we argued in the early chapters, for Canada to develop a comprehensive and coherent Arctic policy framework as a basis for exerting international leadership. A vigorous multi-faceted Canada-Russia relationship is clearly an integral component of developing a Canadian circumpolar foreign policy that will be up to this task. Agreements on bilateral Arctic cooperation, such as that of 1992, which came without specific resources attached and without strong linkages to foreign policy objectives, should therefore be reviewed and renewed in a new light. While programs in various sectors of activity can continue to be carried out through different departments and agencies, the coordination of Canada-Russia relations must take place within the Department of Foreign Affairs and International Trade, thereby reinforcing that overall circumpolar cooperation objectives are a priority of Canada's foreign policy.

Accordingly:

The Future of Canada's Technical Cooperation Assistance to the Russian North

The U.S.S.R. was for many years an important aid donor within its sphere of superpower influence. When the Soviet regime rapidly unravelled after 1989, there was therefore no experience of, or indeed preparation for, receiving "aid" from foreign governments, especially not help of an explicitly democratic capitalist nature. To meet the unprecedented challenges of post-Cold War, post-Communist transition, much had to be done that was new and experimental in terms of providing temporary assistance in support of reform processes. The ensuing fracturing of the U.S.S.R. into diverse groupings of independent states - despite the residual loose association of most within a "Commonwealth of Independent States" (CIS) - added to the already daunting complexity of programming aid to the "former Soviet Union." Russia itself was an immensely complicated federation of regions increasingly assertive (in several cases violently so) vis-à-vis the central state. Moreover, as a major power still, possessing a highly educated population, Russia could obviously not be approached on the basis of any traditional donor-recipient relationship.

The focus of international aid has been on supporting market and democratic reforms to permit the new Russia to move as quickly and, it is hoped, as smoothly as possible towards integration into the global economy and establishment of normal commercial and political relations with democratic capitalist countries. The intentions of this transitional assistance, in short, have been markedly different from long-term aid programs for developing countries, which emphasize basic needs and poverty alleviation. Accordingly, the EBRD, the new multilateral bank established for the region in 1991, was explicitly given a unique market/democratic reform and private-sector orientation, rather than the more familiar "development" mandate. The overall record of bilateral western assistance to Russia has, however, been criticized on a variety of grounds - that it was more easily promised than actually delivered, and when delivered was often ad hoc and poorly organized. The continuing turmoil in Russia, from the centre out through the regions, indicates another critical element that has sometimes been missing - finding reliable Russian partners capable of implementing sustainable projects. The importance of developing in-depth knowledge on the ground of Russian conditions, of sound personal as well as organizational relationships, and of establishing rigorous, results-oriented selection and evaluation procedures, were among further related points raised with the Committee by the Office of the Auditor General and confirmed in overseas meetings. With regard to circumpolar assistance partnerships, Piers Vitebsky of Cambridge University, emphasized building human and community-level contacts, drawing on his own intimate knowledge of indigenous life in Russia's northern regions.

It is understandable that Canadian technical assistance to the Soviet Union and successor states had to be set up quickly in 1991. The targeted amounts also rose quickly, from an initial $5 million per year announced at the 1991 G-7 summit, to the $30 million per year over five years announced in 1993. This was in addition to some $23 million in humanitarian assistance and $30 million over three years for the Canadian Nuclear Safety Initiative established in 1992.308 Indeed, Prime Minister Mulroney claimed in a July 1992 speech at Johns Hopkins University that Canada had already disbursed over $1.6 billion in credits and aid to the former Soviet Union, the second highest per capita assistance of the G-7, exceeded only by Germany. Most technical assistance in these early years - through a bureau for that purpose created within the Foreign Affairs Department, as well as a "Renaissance Eastern Europe" facility designed to foster Canadian private sector activity309 - focussed on such familiar sectors as oil and gas and agriculture, both areas of known Canadian expertise and key to Russia's plans to increase oil exports and reduce agricultural imports. In 1994-95, some discussions were held on a bilateral Memorandum of Understanding (MOU) between Canada and Russia on technical cooperation, but these reached a stalemate over tax treatment issues. The Government is since pursuing instead joint G-7 efforts to achieve appropriate Russian tax legislation governing foreign assistance transactions. In 1995, following the foreign policy review and publication of Canada in the World, an important reorganization in Canada transferred and consolidated responsibility for delivering the Canadian assistance program to the "countries in transition," including Russia, to CIDA in order to take advantage of that department's organizational and field experience in project implementation. However, overall responsibility for setting policy direction remains with the Department of Foreign Affairs and International Trade.

To the end of 1996, Canada had committed over $130 million and disbursed more than $115 million in support of over 200 technical cooperation projects in Russia. The budget for the 1996/97 fiscal year was $23 million, and according to official sources, interest has been such that the bulk of available funding is already committed for the next two fiscal years. (Russia has accounted for just under one-quarter of total "Countries in Transition" assistance, which according to the Government's 1997-98 Main Estimates documents is to be reduced by about 8% in the current fiscal year and a further 8% in 1998-99.) Under CIDA's management, the technical cooperation program with Russia continues to have a strong reform and private-sector orientation.310 The Auditor General's office, which, as well as CIDA officials, briefed Committee members prior to their travelling to Russia, noted in a November 1996 follow-up audit that some systemic improvements were being introduced.311 At the same time, especially given the program's reactive nature as it has evolved within a volatile and fluid set of circumstances, it is apparent that many challenges remain in giving this bilateral cooperation a solid, stable foundation, and increasing confidence that the activities being funded are those that best meet both Russian and Canadian partnership objectives. An ultimate indicator of success will be whether committed sustainable relationships that are not simply dependent on continuous government funding from the Canadian side are generated. At a minimum, in an admittedly high-risk environment with limited resources and means of influence, CIDA needs to proceed from a basis of clearly targeted goals, with strong corporate procedures for managing risk and monitoring performance, and to demonstrate an ability to apply lessons learned and work closely with partners with expert knowledge of local Russian conditions.

The Committee notes that a more explicit framework for technical cooperation is being put in place as CIDA moves through the process of applying a more focussed and results-driven programming strategy for Russia. CIDA has recently finalized a country strategy document for Russia which acknowledges the first lesson that CIDA has learned about what makes for successful projects:

Project proposals must be developed through close collaboration between the Canadian and Russian partners. The relevant institutions in Russia must be fully committed to the project's goal and to its sustainability into the future. The Canadian partner must have established its capacity and credibility to work successfully in Russia.312
Within the strategy's guiding principles, projects must address one or more of the principal program objectives of promoting transition to a market-based economy, supporting democratic development, and increasing Canadian trade and investment.313 Of particular interest to the Committee in the context of this report are the further "special considerations" that are then to be taken into account in making programming decisions. In addition to environmental, nuclear safety, and gender equity factors, CIDA has rightly identified "northern and aboriginal issues" as an important element of bilateral cooperation where Canadian strengths can develop niches of comparative advantage. A priority aim is also to strengthen the role of Russia's indigenous peoples in planning and managing development for their benefit. However, as part of a circumpolar foreign policy for Canada, we believe that development of Arctic and northern cooperation should become a central objective of CIDA's Russia program, rather than being included only as an added consideration.

In light of that, there are several priority sectors of bilateral activity that we see as deserving particular attention and as contributing to overall Canadian foreign policy interests in advancing the circumpolar cooperation goals that are the raison d'être of this report. As well, given the severity of Russia's economic crisis, which has dramatically affected northern and remote regions, along with the usual pressures for short-term benefits to Canada, there is a danger that policymakers will shy away from the more challenging, problematic aspects of the northern dimension. Yet it is precisely because these problems are not easy to solve that the Committee is concerned to see the long-term Arctic environmental and sustainable human development elements of bilateral cooperation in a foremost place in intergovernmental calculations. These are among areas where the need for external public assistance is greatest, and accordingly where directed Canadian contributions can do the most good to benefit people at the grassroots community level in Russia.

In our discussions with Russian aboriginal representatives, it was evident that they look to Canada as a key ally in supporting the efforts of indigenous minority communities during the difficult transition process. (According to additional information received in February 1997, the Russian government is seeking international partners in establishing a new "International Development Fund to assist Indigenous Peoples of the Russian North.") The major Canadian technical assistance project in this area aims to address institution-building for these northern aboriginal peoples in order to strengthen their capacities to act on their own behalf both within Russia and internationally. The project, which began in the fall of 1996 and will continue over four years, is being managed for CIDA by the Inuit Circumpolar Conference, working directly with its Russian counterpart organization on the Arctic Council, the AKMNSSDV, R.F. It is also collaborating with DIAND's Circumpolar Liaison Directorate and its Russian federal government counterpart GOSKOMSEVER to advance overall Russian policy towards northern development and indigenous peoples. In addition, given the importance of grassroots communication and participation in policy development, as stressed by many witnesses, the Committee hopes that this project, while understandably directed in its execution by aboriginal leaders at the national level working with federal officials in both countries, will make a concerted effort to reach down to the local community base so that its benefits can be spread widely within Russia's northern regions.

The Committee was also impressed by the accent put on these issues during our meeting with Mikhail Gorbachev, whose Foundation is actively working on a number of promising joint projects with the University of Calgary. The former Soviet leader acknowledged that past northern development had left multiple ecological and human crises in its wake. Some areas near Murmansk have been so devastated that they look as if a nuclear explosion had taken place. Besides radioactive contamination (a major problem in far northeast regions as well), major damage has been inflicted by pipelines and mining developments. Disturbingly, these problems could intensify as some companies are now extracting rich profits from northern resources without helping native populations to deal with the social and local impacts of this activity. In Mr. Gorbachev's view, aboriginal peoples need an adequate land base that goes beyond any system of "reserves" which could become an "open prison." Consideration should be given to setting aside specially protected areas in which indigenous peoples can exercise control and co-management responsibilities. In this regard, he highlighted the importance of the Canadian-sponsored land-use mapping project, with which his foundation has been involved in cooperation with the University of Calgary's Arctic Institute of North America, and which aims to establish a co-management regime for the impoverished Saami people of the Kola peninsula. Although Committee members were prevented by bad weather from meeting with Saami representatives in Murmansk, through contacts with Michael Robinson of the Calgary Institute we were able to gain a fuller appreciation of the merits of this project's approach. Reinforcing that, and observing the rather chaotic and unfinished state of land reform across Russia, social scientist Piers Vitebsky, of the Cambridge Polar Institute, underlined the value of assisting policy-oriented research on indigenous land ownership issues at the regional level. During discussions at Cambridge, visiting geosciences Professor Peter Williams, of Carleton University, also appealed to the contribution that knowledge developed in Canada (e.g. on soil remediation following pipeline breaks) could make to the rehabilitation of permafrost areas damaged through resource developments.

The Committee's discussions in Russia, including those with senior environment ministry officials, drew attention to the scope for cooperation in environmental protection and rehabilitation. Given the Russian government's chronic fiscal crisis, there was great interest in encouraging more Canadian involvement along with the already strong presence of the neighbouring Nordic countries, notably in northwestern Russia. Several major CIDA-supported projects are currently proceeding for strengthening Russian capacities in Arctic environmental monitoring (in the context of Russia's participation in the circumpolar Arctic Monitoring and Assessment Program of the AEPS) and environmental impact assessment related to offshore hydrocarbon development. In such cases, as with the technical cooperation program generally, CIDA contracts out actual aid delivery to both public and private entities who must find appropriate Russian partners with which to work through the phases of project design and implementation. In the environmental initiatives cited above, the respective Canadian executing agencies are Toronto-based Bovar-Concord Environmental and Vanvouver Island-based Axys Environmental Consulting Ltd. As part of the latter project, a Russian-Canadian Centre for Environmental Impact Assessment was opened in Moscow in June 1996. The Committee's discussions with Russian officials and CIDA staff based in Moscow indicated that, while problems have occasionally arisen in the course of such contracting-partnership relationships, so far these have been able to be smoothed over. The larger issue at stake is maintaining a strong joint commitment to environmental sustainability objectives. The Secretary General of Finland's Environment Ministry, Sirkka Hautojarvi, who subsequently met with Committee members in Helsinki, worried that the environment was not a high priority within the Russian government overall and was perhaps losing influence. She reported that it has been a difficult period in which to undertake joint projects because often the Russian partner agencies are themselves trying to cope with a very insecure, and budget-strapped, institutional environment. However, Russia's needs and interest in further cooperation are not in question. A multi-million dollar project currently in development could see a Canada-Russia Centre for Environmental Excellence established at a Moscow university in which Environment Canada would be working with experienced Canadian firms including Quebec-based SNC Lavalin. We have no doubt that enhancing Russia's capacity to manage its environmental problems, especially in the worst-affected Arctic regions, must continue to be a principal thrust of Canadian circumpolar assistance activities.

Another area deserving of strong continued support involves knowledge-based transfers in areas of Canadian expertise, and commercially exportable success, at the interregional level. An excellent example is the Northern Management Program (NMP) being carried out by the Northwest Territories government and growing out of its close relations with the northeast Siberian republic of Sakha (Yakutia). The model village constructed by the firm of Ferguson, Simek, Clark, with whom the Committee met in Yellowknife, and an associated Arctic trades training program were among early spinoffs from this project, which continues to evolve. Alberta-based companies are also benefiting from opportunities being generated within the Siberian region to apply cold-weather construction technologies developed in Canada. At the same time, bright young people from Sakha are acquiring practical management skills and positive relationships are being formed with Canada which will be of long-term value in more than bureaucratic or commercial terms. What is noteworthy indeed is the emphasis put on direct northern-based contacts and developing the North's human-resource potential. The message to the Committee of NWT Deputy Minister Robert Doherty, Canadian supervisor for the NMP, is that its key elements include "transferring knowledge and assistance to the community level [which] empowers people to solve their problems." He added pointedly that "Far too much of our effort goes to working at senior levels of the Russian bureaucracy and mega-projects. The thousands of rural communities are important."314

Taking that theme further, the Scott Polar Research Institute at Cambridge University, which hosted Committee members and staff on several occasions, has been in the forefront of developing some extremely interesting technical training projects, also in the Sakha republic. It applies its expertise in methodologies of sustainable economic recovery for remote Arctic indigenous communities, to which we referred in Chapters Six and Seven. According to Piers Vitebsky, head of the Institute's Russian program, the "main resource is not money but skilled people," though of course some funding is required to train people at the local level through circumpolar human-resource development initiatives.315 For its part, the Institute has been building long-term relationships with local Sakha institutions and also working closely with the University of Alaska to utilize its knowledge of the Alaskan native experience in managing development for northern benefit. The Institute's ongoing project for rural economic development - and specifically reindeer meat marketing (although Sakha has 300,000 reindeer most of the population has been dependent on expensive imported meat products) - has obtained some funding through U.S. AID and been cited as one of its most successful projects in Russia. The Institute is also looking to generate interest from international partners in the areas of oil and gas capital markets training (despite Sakha's large undeveloped oil reserves it remains entirely dependent on imported fuels) and in projects aimed at improving environmental quality in a region. Although Russia's far northeast has some of the world's most pristine natural areas and largest supplies of renewable and non-renewable resources, it was among the hardest hit by the effects of Soviet-era military-industrial activities, including atmospheric nuclear fallout from the high Arctic Novaya Zemlya testing site.316 The sectors mentioned above should clearly be of Canadian interest; we would therefore encourage the Government to explore the potential within them for bilateral cooperation, drawing upon comparative circumpolar project experience.

Mention must also be made of the very significant Arctic ice project which the Committee had the opportunity to visit at the Arctic and Antarctic Institute in St. Petersburg - symbolically, in the very building where, seven years earlier in November 1989, Prime Minister Mulroney had first spoken internationally of Canada's proposal for an Arctic Council to promote circumpolar cooperation. Bringing together several priority themes of environmentally sustainable Arctic resource development, and knowledge transfers with the prospect of commercial spinoffs benefiting both countries, the Intaris (Integrated Arctic Resources Information System) Project is one of the most promising examples of a forward-looking public and private sector collaboration through a CIDA-supported bilateral joint venture partnership. Developed over several years and begun in 1995, this project is being implemented by a subsidiary company (Intaari) created by the Russian Institute working with a technical services subsidiary (Enfotec) established by the Canarctic Shipping Co. in 1996 to market its expertise gained in the Canadian Arctic. As explained to the Committee by Russian director Alexander Tchernychov (himself a distinguished veteran of Russian polar science expeditions), and Canadian counterparts Martin Luce and Brian Eddy, the objectives are to provide a range of information and environmental data to support Russian offshore petroleum resources development, as well as to generate further commercial applications from associated technologies.317

Among this project's practical strengths are its utilization of advances in Canadian-based technologies and employment and training of Russian researchers at a time when the state institutions increasingly need to innovate and to find enterprising outside partners. Intaris will also contribute to creating a central digitalized database on Arctic ice and climatological and other environmental conditions. Eventually the goal is to be able to provide on-line customized information services on a commercial basis to clients - e.g. monitoring the effects of ice conditions for polar navigation or offshore exploration. While the partners' analysis of market demand is positive, and they are actively pursuing business interests within Russia and internationally, further Canadian subsidization of the substantial front-end development costs of such a system remains necessary to reach the stage where payback from commercial applications will become feasible. Such projects, understanding that a long-term commitment by all parties is required to achieve their ojectives, offer useful lessons for future Canada-Russia joint ventures. Moreover, as they become more developed, they are also of more than just bilateral interest. Intaris is an excellent illustration since it was described to us as an "open architecture concept" that could atttract other international (e.g. Nordic) partners, and indeed be a prototype for creating economic spinoffs from collaborative circumpolar research and development activities. Moreover, the knowledge gained could complement Canadian efforts within international maritime bodies to harmonize standards for ice navigation and minimize environmental risks from an expansion of commercial shipping and development activity in polar regions.318 Given the troubling historical record in the Canadian as well as the Russian Arctic, the Committee is particularly concerned that all Canadian technical cooperation, especially that supporting needed economic development, adhere strictly to sustainability principles with respect to both environmental and human impacts that were emphasized in Part II of this report.

A final area we wish to raise briefly is that of financial resources for small-scale enterprises and community-based development; these are critical for Russian economic reform and recovery generally, and have a particular importance for remote and hard-pressed northern regions. We note that CIDA's contribution to the innovative Russia Small Business Fund (a cumulative $10 million since the Fund, totalling US$300 million, was first established at the 1993 G-7 Summit) is the largest single item in the Canadian technical cooperation program. This Fund is managed by the EBRD and disbursed through local Russian banks, which also benefit through technical assistance partnerships. In full implementation since 1995, the Fund includes a growing micro-credit - with loans as small as US$100 - and small loans facility, along with a small enterprise equity fund component. Disbursements are now growing rapidly (posting a 600% increase in 1996), while maintaining an impressive repayment performance (arrears below 3% on the micro-credit component). According to Elizabeth Wallace, the EBRD's principal banker for the project, "demand has increased so dramatically that it has become one of the most attractive initiatives that we have."319 The objective is to continue expansion to reach a level of US$50 million in credit being made available every month. So far, however, little of this activity has extended into the more remote or rural northern regions, where needs for local access to small amounts of capital are great.320 The Committee's concern, therefore, is that the Russian Arctic, and notably indigenous communities, benefit as much as possible from small-business loan initiatives to which Canada is contributing.

Recalling Oran Young's suggestion, referred to in Chapter Six, for circumpolar countries to consider creating an Arctic development bank to assist sustainable community development, it is obvious that northern Russia would be the primary beneficiary of such an initiative. In our view, it may be more practical at present for Canada to see how existing international financial instruments as described above can be utilized more to help regions and sectors as yet little served by private capital markets. In this regard, the EBRD's regional venture funds for Russia should also be explored. Financed through voluntary bilateral contributions from Bank members (G-7 and European Union donor states), these funds consider equity investments in private-sector enterprises. Of eleven established to date, at least three are in the Russian North: the North-West Russia Regional Venture Fund (sponsored by Finland); the Daiwa Far East and Eastern Siberia Investment Fund (Japan); and the Foreign & Colonial West Siberia Venture Fund (UK).321 While Canada has yet to become involved in this initiative, it may be an opportune time to consider some options. Such a hybrid bilateral/multilateral instrument could be employed to focus, for example, on the far northeast Russian region, the Sakha republic, where close working relationships already exist with Canadian territorial governments, northern-based firms and aboriginal organizations and regional corporations.

In sum, the Committee hopes that the Canadian Government and agencies like CIDA will be proactive and imaginative in using available bilateral means to meet Arctic sustainable development needs as a priority of Canada-Russia technical assistance programs. At the same time, in doing so, Canada should be prudent and strategic in seeking Russian partners, and should emphasize that its commitment is to building up sustainable long-term cooperative relationships.

In light of such considerations:

249
Walter J. Hickel, "An Agenda for the Arctic World," in The Changing Role of the United States in the Circumpolar North: A Conference on U.S. Arctic Policy, 12-14 August 1992, University of Alaska in Fairbanks, p. 9.

250
Terry Fenge, "The Evolving U.S. Policy toward the Arctic," in Lamb ed., A Northern Foreign Policy forCanada (1994), p. 150.

251
Elizabeth Leighton, "U.S. Arctic Policy Undergoes Reassessment," Northern Perspectives, Winter 93-94, p. 28.

252
Oran Young, The Arctic Council: Marking a New Era in International Relations (1996), p. 11.

253
Elizabeth Leighton (Winter 93-94), p. 27.

254
The version referred to is probably a draft, since the only public version of the policy is a two-page summary. See "U.S. National Arctic Policy Statement," Appendix G in Arctic Research of the United States, Vol. 9, Spring 1995, Washington, Interagency Arctic Research Policy Committee, p. 63-64.

255
Under Secretary For Global Affairs Timothy E. Wirth, Statement on the occasion of the signing of the Arctic Council Declaration, Ottawa, Canada, 19 September 1996, p. 3.

256
Remarks by Governor of Alaska Tony Knowles to Kerrville, Texas Oil Conference, 17 November 1995.

257
John Stager, "Report of the Workshop on Canadian-American Relations," in Lamb ed., A Northern Foreign Policy for Canada (1994), p. 163.

258
House of Commons Standing Committee on Aboriginal Affairs and Northern Development, Second Report,9 June 1994, p. 9:5-6.

259
Submission of Milton R. Freeman, 3 June 1996, p. 2.

260
Ibid.

261
Oran Young, The Arctic Council: Marking a New Era in International Relations (1996), p. 41.

262
Ibid., p. 29.

263
Peter Morton, "Whaling and Forestry Top Chrétien, Clinton Talks," The Financial Post (Toronto), 15 February 1997.

264
Sanjay Chaturvedi, The Polar Regions (1996), p. 183.

265
Shelia Watt-Cloutier, Joe Kunuk and Terry Fenge, "The Arctic Council, Sustainable Development and Inuit," WWF Arctic Bulletin, No. 4.96, p. 8.

266
Marianne A. Stenbaek, "Canada and the Nordic Countries," Submission to the Standing Committee on Foreign Affairs and International Trade, May 1996, p. 1.

267
Ibid.

268
See Graeme Magor, "Otto Sverdrup Centennial Expedition," Factsheet, November 1996.

269
Agreement on Cooperation in Research, Conservation and Management of Marine Mammals in the North Atlantic, Article 2.

270
Oran Young, The Arctic Council: Marking a New Era in International Relations (1996), p. 20.

271
Submission of Milton R. Freeman, 3 June 1996, p. 3.

272
Ibid., p. 2.

273
Jette Elsebeth Ashlee, Greenland 1996: Notes on Selected Issues of Interest to Canada, Working Papers Series 97-01, Department of Indian Affairs and Northern Development, February 1997, p. 51.

274
Anne-Marie Mikkelsen, "Conservation and Resource Management in Greenland: A Challenge for the Future," WWF Arctic Bulletin, No. 4.96, p. 15.

275
Submission of Milton R. Freeman, 3 June 1996, p. 6-7.

276
"Premier Lars Emil Johansen, Greenland and Ronald A. Irwin, Minister of Indian Affairs and Northern Development, Canada Promote Circumpolar Cooperation," News Release 1-9653, Ottawa, 3 December 1996.

277
Mr. Pekka Haavisto, Minister of the Environment of Finland, Statement at the Inauguration Ceremony of the Arctic Council, Ottawa on 19 September 1996, p. 2.

278
Max Jakobson, "Finland: A Nation that Dwells Alone," the Washington Quarterly, Autumn 1996, p. 50.

279
His Excellency Mr. Halldór Ásgrímsson, Minister of Foreign Affairs of Iceland, Statement at the Inauguration Ceremony of the Arctic Council, Ottawa, 19 September 1996, p. 2.

280
David Remnick, "Can Russia Change?," Foreign Affairs, Vol. 76, January/February 1997, p. 43. Remnick readily acknowledges that: "Power in Russia is now adrift, unpredictable, and corrupt... In the new Russia, freedom has led to disappointment. . . . Development and progress are wildly different in the country's 89 regions, and much depends on the local political map.'' Yet at the same time: ``Russia is an increasingly urban nation with a literacy rate of 99 percent. Nearly 80 percent of the Russian economy is in private hands. . . . Russia's natural resources are unparalleled,'' (p. 35, 46, 48).

281
Richard Layard and John Parker, The Coming Russian Boom: A Guide to New Markets and Politics, The Free Press, New York, 1996, p. 2.

282
Canada, the EBRD's eighth largest shareholder, holding 3.4% of the Bank's capital, has ratified the doubling of those resources to ECU (European Currency Units) 20 billion - approximately C$32 billion - approved by the Bank's board in April 1996. By the year 2000 nearly one-third of the Bank's total portfolio will be in Russia, already the largest recipient of technical cooperation funds provided by member-country donors (totalling US$162 million in 1995). With regard to the latter, of particular note is the rapidly expanding Russian Small Business Fund, to which Canada has committed C$10 million. The EBRD's office in Moscow is also headed by a Canadian, Lou Naumovski. Further details on bilaterally-sponsored programs through the Bank are in the later section on technical assistance. For an overall assessment of Russia's progress on reforms cf. European Bank for Reconstruction and Development, Transition Report 1996, London, November 1996, especially, p. 169-72.

283
According to Sergei Markhov of the Carnegie Institute for International Peace: "Russian people are former Soviet people. They're tired of struggle. The majority of the population is disaffected and see few prospects for themselves, it's true, but they don't want to fight anymore. This works well for the authorities." But which authorities? By most accounts, the central government's power is waning in relation to Russia's increasingly restive 89 subnational entities (republics, okrugs and oblasts) represented in its elected upper house of Parliament (the Federation Council, with which the Committee met in Moscow). Senior political adviser Andrei Federov contends that: "With Mr. Yeltsin sick, the country is on auto-pilot and the regions have become much more sovereign than they were before" (quoted in Mike Trickey, "Russia Is Heading for Economic Collapse, Critics Say," The Ottawa Citizen, 30 January 1997, p. A9).

284
However, Marie-Lucie Morin, head of commercial relations at the Canadian embassy, told the Committee that there is a rising services trade (e.g. legal firms, often in conjunction with resource investment transactions) of a similar magnitude that is not adequately captured in the official statistics.

285
As stated by Franco Boulle, chairman of Vancouver-based Archangel Diamond Corp. which has invested US$11 million in Russia since 1993: ``Country risk is a real factor. ...We would benefit enormously if the Russian government would send some clear signals to the international community to allay the concerns people have.'' (Fred Weir, ``Canadians Wary of Investing in Diamond Project in Russia,'' The Ottawa Citizen, 8 March 1997,p. E4.)

286
Former Yeltsin security advisor and presidential aspirant Alexander Lebed is quoted as saying that: "Russia is no longer a federation, but a confederation of regions." Russia's minister of justice has stated that all of Russia's 21 autonomous "ethnic" republics (although ethnic Russians are a majority in all but six) have laws contravening the federal law, and that 19 have adopted constitutions that directly contradict the 1993 federal constitution. Mike Trickey, "Regions Battle Moscow as Russian Federation Frays," The Ottawa Citizen, 26 February 1997, p. A7).

287
Mark Galeotti, "The Pros and Cons of Investing in the Bear," Jane's Intelligence Review, January 1997, p. 5-6. On the issue of criminal activity, see also Mafiya: Organized crime in Russia, Jane's Intelligence Review Special Report No. 10, June 1996. The pessimism of the Russian population is reflected in a birth rate which has dropped almost in half from 1985 to 1995. Demographers predict the population could decline by as much as 25 million over the next three decades, an almost unprecedented peacetime trend.

288
Quoted by Fred Hiatt of the Washington Post, "Russia Defies Economic Rules," The Ottawa Citizen, 16 December 1996.

289
John Thornhill, "Hunt for the Siberian Tiger," Financial Times of London, 19 February 1997, p. 23.

290
See the essay by Ken Kalfus, "Far from Normal: Scenes from the New Moscow," Harper's Magazine, December 1996, p. 53-62.

291
Piers Vitebsky of Cambridge University told Committee researcher Gerald Schmitz in February 1997 that a colleague has adapted a famous phrase from Tolstoy's Anna Karenina to describe the present extremes of diversity in adversity: "All of the regions are miserable, but all are miserable in different ways."

292
The transition in turn creates new dilemmas, summarized in a recent report: "An epic landscape steeped in tragedy, Siberia suffered grievously under communism. Now the world's capitalists covet its vast riches." ("The Tortured Land," Time Magazine, 4 September 1995, p. 36-47.)

293
"Canada's Northern Relationship with Russia: A DIAND Perspective," in Lamb ed., A Northern Foreign Policy for Canada (1994), p. 170.

294
"The Arctic Role in a Global Community," in Lyck and Boyko, eds., Management, Technology and Human Resources Policy in the Arctic (The North), Kluwer Academic Publishers in cooperation with NATO Scientific Affairs Division, Dordrecht, the Netherlands, 1996, p. 3-4 and 9.

295
Meeting with the Committee, Ministry of Foreign Affairs, Moscow, 4 November 1996.

296
A number of these have been at the scientific and academic level. However, we would like in particular to cite the role of Walter Slipchenko, for three decades a leading consultant to the federal and territorial governments, to Canadians doing business in Russia, and recently to the Arctic Council secretariat. Mr. Slipchenko graciously helped to brief the Committee prior to its travel to Russia, and his contribution was raised several times by Russians with whom we met. While his enthusiasm for the Russian North remains undimmed, he expressed some frustration at slow and diffident responses of Ottawa's official circles, indicating that more could be done from the Canadian side, including on such practical matters as quick processing of visa applications, to encourage instead of retard Canada-Russia activity.

297
Cf. John Hannigan, "Canada's Northern Cooperation with the Soviet Union and Russia: A Natural Partnership?," International Journal of Canadian Studies, Vol. 9, Spring 1994, p. 53-70; Robert Doherty, "Social, Economic and Technical Links Between Northern Regions of Canada and Russia," in Lyck and Boyko (1996), p. 19-30.Mr. Hannigan testified before the Committee on 2 May, 1996. Mr. Doherty, Deputy Minister in the NWT Government Department of Public Works and Services, sent additional information to Committee staff (from Vladivostok while on a business trip to the Sakha republic) prior to the Committee's travel to Russia.

298
John Hannigan (1994), p. 58.

299
Robert Doherty gives a wealth of detail on the range of contacts and programs undertaken to date. Some, which have been supported by Canadian technical cooperation funds, show considerable commercial potential. According to information supplied by Doherty in October 1996, recent discussions have expanded into consideration of polar air routes, and he is also currently involved in efforts to establish a technical centre in the Russian far east to further promote Canadian construction services in these regions.

300
John Hannigan (1994), p. 66-67.

301
Reed Landberg, ``Canadian Oil Producer Finds Rich Harvest in Russia,'' The Ottawa Citizen, 12 March 1997.

302
These are indicated in some detail in a July 1996 "Summary Report of Activities: April 1995 - March 1996," prepared by DIAND, which was tabled with the Committee prior to its travel to Russia.

303
Greg Poelzer, "Prospects for Aboriginal Self-Government in Russia" and Barry Bartmann, "Footprints in the Snow - Nunavut: Self-Determination and the Inuit Quest for Dignity," in Lyck and Boyko (1996), p. 141-64; also in the same volume, Finkler, "Modernization and Adaptation among Indigenous Peoples in Chukotka (Russia)," and Hannigan, "National Villages in Chukotka: Marginalized and Forgotten, or New Prospects for Economic Well-Being?," p. 399-412.

304
Clifford Hickey, "Avenues Toward a Successful Transition to a Market Economy in Northern Russia," in Lyck and Boyko (1996), p. 289-96.

305
Gérard Duhaime, "Don't Steer Without a Map", in Lyck and Boyko (1996), p. 61-71. See also in the same volume, Charles Bélanger, "Southern Strategic Thinking and Research Policy for the North (Arctic)," p. 51-59.

306
Mary Simon, ``Building Partnerships'' (1996), p. 4.

307
One of these, promoted to us by Russian officials though it remains controversial within Canada, would see the conversion of plutonium from Russian military stockpiles into a mixed (plutonium plus uranium) oxide fuel that could be used in Canadian CANDU reactors. At the April 1996 Moscow Summit on Nuclear Safety and Security, Prime Minister Chrétien agreed to consider the concept in principle. While CIDA is contributing $1.5 million towards a feasibility study of the MOX initiative with Russia, it must still pass a number of tests. Canada has also indicated that any eventual supply of MOX fuels from Russia would not be subsidized and must therefore demonstrate its viability as a commercial proposition.

308
The Canadian initiative included a $7.5-million contribution to the multilateral Nuclear Safety Account managed by the EBRD. Atomic Energy Canada Ltd. AECL has been the principal executing agency for bilateral activities undertaken under this fund. With the completion of this project work, AECL's CIDA-sponsored Moscow office is due to close in the spring of 1997.

309
The REE program, still managed by the Department of Foreign Affairs and International Trade, to the end of 1996 had committed some $6.4 million to over 120 projects in Russia.

310
As one analysis put it: "The programs are meant to provide nuts-and-bolts help to Russia to transform into a market economy, to democratize the political system, to establish commercial links with Canadians and to support Canadian investments. . . . the lion's share of the $23 million allocated for Russia is spent in Canada or on Canadians" (Juliet O'Neill, "Canadians Have a Lot Riding on Russian Election," The Ottawa Citizen, 30 June 1996, p. A4). This article also addressed prospects for Canada-Russia cooperation within the Arctic Council, but did not link it with the bilateral technical cooperation activity, an indication of how the two have evolved on separate tracks. An implication of our analysis further on is that these dimensions of Canada-Russia policy should be brought together more explicitly in support of specific shared circumpolar interests.

311
Cf. Report of the Auditor General of Canada to the House of Commons, Chapter 29, "Canadian International Development Agency: Follow-up of the Auditor General's 1994 Report on Technical Assistance Contributions to Central and Eastern Europe and the Former Soviet Union," Ottawa, November 1996, p. 41-47.

312
Canadian International Development Agency, Central and Eastern Europe Branch, CIDA's Programming Strategy, for Russia, Hull, Quebec, January 1997, Annex A "Program Delivery," p. 1.

313
A detailed elaboration of assistance criteria is given in Annex A and an explanation of results sought in Annex B. For information on individual projects see CIDA, Former Soviet Union Division, Central and Eastern Europe Branch, Canadian Cooperation with Russia, "Project Listing as of 15 October 1996."

314
Robert Doherty, personal memorandum of 25 October 1996. A very brief profile is contained in CIDA's project overview document Canadian Cooperation with Russia, p. 32. For the details of the NWT's involvement with the Sakha republic, refer back to Doherty, "Social Economic and Technical Links Between Northern Regions of Canada and Russia," (1996).

315
Piers Vitebsky, meeting with Committee research director Gerald Schmitz, Cambridge University, 15 February 1997.

316
Information provided by Piers Vitebsky. According to the project documentation: "Local NGOs and small business are making an effort to address these environmental problems, but need assistance and training in creating a system to assess environmental quality. Local NGO leaders are non-scientists and are novice politicians who are trying to coordinate their desires of maintaining environmental quality with the political and economic framework [of a transitional economy]."

317
Presentation of 7 November 1996, St. Petersburg, Russia. The Committee was also provided with a detailed prospectus of the project's scope and planned stages of development.

318
These issues have taken on added importance in the light of the opening of the Nordic-Russian "northern sea route" across the Arctic ocean to commercial foreign traffic in 1992, and huge offshore oil and gas ventures such as Exxon's proposed Sakhalin island project (in which Enfotec is bidding for services contracts). In regard to increased shipping prospects, views are clearly divided. As one commentary on Siberian development put it: "Market pressures and the demands of the Russian economy may eventually make the [polar sea] route financially viable. That is a moment many environmentalists dread. Tankers are likely to be the chief users of the route, and oil spills could do unimaginable harm to arctic ecosystems." ("The Tortured Land," Time Magazine, 4 September 1995, p. 44.)

319
Meeting with Gerald Schmitz at the headquarters of the European Bank for Reconstruction and Development, London, England, 17 February 1997.

320
Loan disbursements surpassed US$8 million per month for the first time in December 1996, and this is expected to rise to $20-25 million per month by the end of 1997. For a detailed analysis overall and by region cf. Russia Small Business Fund Quarterly Operation Report, EBRD, London, January 1997.

321
Cf. the latest version of the EBRD publication, Alternative Sources of Finance for Small and Medium-sized Projects in Central and Eastern Europe and the Former Soviet Union, "Sources by country: Russian Federation." (This is one of a number of EBRD documents that can now be accessed on the Internet at the EBRD Web site: http://www.ebrd.com.)

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