Trans-Siberian Railway from Beijing China to Ulaanbaatar, Mongoliajaturunp/Getty Images/iStockphoto
Bombardier Inc. says it lobbied the federal government over Russian sanctions in 2014 because it feared that its rail equipment business would be put at a disadvantage.
The Montreal-based company said in a letter to The Globe and Mail that it was worried it would lose business to Asian and European manufacturers, as Ottawa moved to punish Russian President Vladimir Putin and his allies for Russia's invasion and annexation of the Crimean Peninsula from Ukraine.
The United States placed sanctions on individuals close to the Kremlin in March, 2014, including Vladimir Yakunin, then the head of state-controlled Russian Railways, a major customer and partner of Bombardier in the country.
Ottawa quickly followed and imposed economic sanctions on 32 individuals. The sanctions prevented them from travelling to Canada and froze their Canadian assets. But Mr. Yakunin was not included, even though he was considered to be a confidant of Mr. Putin and was prominent on the U.S. sanctions list.
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"Like many other companies, we informed the Canadian government of Bombardier's investments and interests in Russia when Canada was considering imposing sanctions. Our main concern was ensuring that our rail business would not be placed at a competitive disadvantage against our global competitors," said the letter by Mike Nadolski, the company's vice-president of communications and public affairs.
He cited competition from countries that did not sanction Mr. Yakunin. "Our rail competitors are not from the U.S., but rather from Europe, Japan, China and Korea.
"Including Mr. Yakunin on Canada's sanctions list could have unilaterally harmed a Canadian business," he added.
Under Canadian laws, not only are the individuals on the sanctions list banned from travelling to Canada, but they are essentially prohibited from doing business with Canadians. For example, Canadians cannot make goods available to designated individuals, nor can they provide any financial or related service to or for the benefit of a designated person, according to the regulations.
But it is not clear that Mr. Yakunin's place on the sanctions list would have prevented Bombardier from continuing to conduct business with Russian Railways. Bombardier did not respond to questions about the issue Thursday.
Canada's sanction list has since expanded to include more than 100 individuals and 30 entities. But Mr. Yakunin is still not included. He resigned from Russian Railways last year amid corruption allegations.
The letter was in response to a Globe and Mail investigation, published Dec. 17, that looked into sales of Bombardier rail-signalling equipment into the Russian market between 2011 and 2016. The investigation found evidence that the transactions flowed through a company called Multiserv Overseas Ltd. that had connections to allies of Mr. Yakunin and a series of shell companies based in offshore tax havens such as Belize and Panama. None of the information seen by The Globe suggests any criminal wrongdoing on the part of Bombardier.
Bombardier has denied having any influence over the Canadian government's sanctions list and Mr. Yakunin's exclusion. A well-placed source close to the Conservative government of the day told The Globe that "there was some lobbying" by Bombardier on the sanctions issue, but that the pressure was "fairly circumspect."
Bombardier also said in the letter than its business dealings with Multiserv Overseas were entirely legitimate. As part of its investigation, The Globe visited offices in Cyprus, Russia and the United Kingdom, where Multiserv is incorporated, but could not find any staff.
"Multiserv remains in good standing as a corporation and there are no prohibitions – in any jurisdiction – for doing business with the company or its owners," said Mr. Nadolski. "Just because a business does not have a large street-front office building like, say, a newspaper, does not make it illegitimate."
Recently, Bombardier has run into problems with the expansion of its commercial jet program. It is seeking a cash infusion to help turnaround its business and has been negotiating with Ottawa in an attempt to secure a large federal investment, thought to be worth about $1-billion.
Prime Minister Justin Trudeau told reporters earlier this month that he remained hopeful that a federal announcement on Bombardier will be made before the 2017 federal budget, which will likely be released in March.
"For us, the priority is to ensure that good quality jobs, R&D investments, and head office remain in Canada," said a spokesperson for the federal Economic Development Minister, Navdeep Bains. "Any action the government takes with regards to Bombardier will be in the interest and respect of Canadians and the sector."
Bombardier did not immediately respond to inquiries about the federal cash infusion.
Communications between Bombardier and Ottawa have ramped up over the past few months. In November alone, Bombardier spoke or met with various government officials nine times, according to public lobbying records.
Bombardier had direct access to Mr. Trudeau late in April, just days after coming to an impasse with Ottawa over terms of a bailout.
With reports from Daniel Leblanc and Sean Silcoff