Kinross Gold Corp. is caught in a diplomatic row between Canada and Russia.
A third of the Toronto-based company’s gold production is in Russia, and Kinross is trying not to inflame relations with Canada’s Conservative government while carrying out its fiduciary duties.
The company ignored the Harper government’s plea to boycott Russian events and is sending its chief executive officer to St. Petersburg for an economic summit this week. Its decision is seen as shrewd given that the company has a lower profile than other global companies like Morgan Stanley and Alcoa, which have heeded Western requests to stay away from high-profile events in Russia in protest against its aggression in the Ukraine.
“I don’t think it is going to cause blowback to Kinross,” said Ian Lee, a professor of corporate strategy and public policy at the Sprott School of Business at Carleton University. “They will win some kudos in Moscow, obviously, because they will be seen in Putin’s crowd to have stood up to the Canadian authorities who were pushing or promoting the boycott and the sanctions.”
Canadian companies were not warned before International Trade Minister Ed Fast issued a statement to media urging business people to skip prominent events in Russia.
Toronto-based Silver Bear Resources, which has a mineral project in Russia, said it first found out through media reports and then was directed to the Prime Minister’s website.
A spokesman in Mr. Fast’s office said the department is not working behind the scenes to sway companies from travelling there.
“We have been clear, any Canadian company doing business in Russia right now, does so at its own risk,” Rudy Husny said.
Kinross’s disagreement with the Canadian government comes as the company repairs its balance sheet after making a disastrous acquisition in Africa during the commodity boom.
The company has since hired three lobbyists with ties to the Conservative government, apparently in connection with the sanctions against Russia, according to federal records made public in May, including the high-profile Michael Coates who helped Prime Minister Stephen Harper prepare for three elections.
Mr. Coates, the CEO of Hill and Knowlton Canada, has become a go-to lobbyist for foreigners who want to make inroads with the Harper government. He was hired by China’s CNOOC when the Chinese oil company successfully made a bid for Canada’s Nexen Inc. He was also hired by Australia’s BHP Billiton Ltd. when it tried to acquire Potash Corp. of Saskatchewan, but failed in his efforts.
Jack Hughes and Goldy Hyder, also former Conservative government aides and who are now at Hill and Knowlton, were also hired by Kinross at the end of April, according to federal records. In addition, Kinross CEO Paul Rollinson also registered to lobby the government, the first time the Canadian company has deployed its CEO to formally petition Ottawa.
Prof. Lee, who has taught in Russia and Eastern Europe, said international blue-chip companies could not take the same risk as Kinross. Their reputations are under constant scrutiny, and it would be too politically risky for them to defy the wishes of Western governments in such a heated political crisis, he said.
“The [bigger companies] must be extraordinarily careful. Kinross is not in that league,” Prof. Lee said. “They are not as big. They are not as important.”
Suncor Energy Inc., which does not have operations in Russia, announced it was dropping out an energy event in Moscow immediately after the Alberta government said it was dropping out.
A number of global brand name companies with operations and relationships in Russia, representing a variety of industries and countries, have bailed on the event in St. Petersburg. Examples include Citigroup, Siemens and PepsiCo.
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