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Canada's diplomats in Moscow will have to work another three years in an embassy compound that's vulnerable to terrorist attack and the prying eyes of foreign spies, The Canadian Press has learned.

Foreign Affairs Minister John Baird was warned in an internal memo from a senior bureaucrat that Canada's embassy in the Russian capital offers "almost no protection" against a terrorist attack.

A leaked copy of the memo details the stalled embassy project, outlining why diplomats won't be moving to a more secure facility until January 2016 instead of last July as planned.

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The delay has added nearly $30-million to the cost of the project, since Foreign Affairs received approval in 2008 to move the embassy to a more suitable building.

A quarter of the increased cost – or $7.5-million – is for extra construction to keep unidentified "threats" from spying on Canadian diplomats in the new embassy.

The memo surfaced after the recent high-profile closures of Canada's embassies in Iran and Syria, decisions that Prime Minister Stephen Harper and Baird have said were made to keep Canadian diplomats out of harm's way.

Meanwhile, the current Russian embassy remains open even though the "embassy complex does not meet DFAIT security standards in terms of the building envelope."

As of Sunday afternoon, Foreign Affairs had not responded to a list of questions about the memo that was given to the department two days earlier.

The Canadian embassy and ambassador's residence have been housed in a series of connected buildings in Moscow that date back to 1898.

"The possibility of terrorist incidents in Russia is high and the existing site offers almost no protection against an attack. Moscow is an extremely hostile environment and the current site is highly vulnerable to counter-intelligence threats," says the memo from an associate deputy minister.

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"These buildings have deteriorated beyond acceptable workplace standards. Compounded by age, numerous physical and structural deficiencies, and severe overcrowding, the chancery poses ongoing health, safety and security risks to Embassy staff and other user(s) of the facility, and impedes the effective delivery of mission programs."

Hundreds of people have been killed in terrorist attacks in Moscow dating back to the mid-1990s. The two most recent – also cited in a Foreign Affairs warning to Canadian travellers – are the January 2011 blast at Moscow's Domodedovo International Airport that killed 30 and injured about 100; and the March 2010 rush-hour attacks on the Moscow subway system that killed 37 and injured 120.

The department will absorb the extra project cost, which will impose an added financial burden because the last federal budget called for $170-million to be shaved from Foreign Affairs' $2.6-billion annual budget.

NDP foreign affairs critic Paul Dewar said the delays in the embassy project raise questions about the government's ability to manage Canada's diplomatic missions.

"It shows incompetence at a time when the government is cutting staff overseas. They're closing embassies and making the claim at the same time that security and safety of their staff is a top priority," Mr. Dewar said.

"What's happening in the interim? Does that mean, as we speak, we're vulnerable? If so, what are they doing about it?"

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In February 2008, Treasury Board gave approval to Foreign Affairs to sign a new 20-year lease with the Russian government. Russia's foreign ministry leases embassy space in the country from an inventory of properties under its control.

The decision to move was made following a 2007 audit by the department that found the embassy deficient.

A lease for a new building was signed in March 2008, contingent on Foreign Affairs coming back to Treasury Board with a revised submission on the final cost.

Canada signed the lease because the Russians offered a building "at submarket rates" that would provide a "long-term solution."

But there was a catch.

"The offer was time-sensitive and required the Canadian government to respond by March 1, 2008 or the property would have been offered to another organization," the memo states.

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The new building has since sat unused while the project cost jumped from $78.1-million to $107.3-million, in part because of $9.5-million of "increased rent costs while the building remains unoccupied."

Dewar said the government needs to answer publicly for how it negotiated the new embassy with the Russian government.

"Is this the standard for all other countries, or are we just seen as suckers, or the ones who will pay a king's ransom for an empty building?"

The added Russian embassy project costs include $7.5-million to pay for "increased construction costs to mitigate counter intelligence threats."

The embassy move comes amid a full-blown spy scandal between Canada and Russia.

Navy Sub-Lieutenant Jeffrey Paul Delisle pleaded guilty last month to espionage-related charges and breach of trust for selling classified information to Russia from 2007 to 2012. Sub-Lt. Delisle, 41, worked as a threat-assessment analyst at a highly secretive military facility in Halifax.

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The Delisle affair has sparked concerns that Canada has compromised the secrets of its allies in the "Five Eyes" intelligence group that includes the United States, Britain, Australia and New Zealand.

The memo attributes delays to the "intelligence-related threats in Russia," but provides no specifics.

"Addressing this threat to the satisfaction of the Department and our key allies has added to the complexity of the project and has required significantly more consultation than typical chancery projects," says the memo.

Other extra costs include $4.6-million for "additional specialized on-site supervision to mitigate counter intelligence threats," and a Russia value-added tax or VAT of $6.6-million.

"Russia changed its policy for diplomatic entities after 2008 and now requires diplomatic entities to pay VAT at source. Although this is recoverable, the process is neither clear nor timely," says the memo.

Foreign Affairs also blamed delays on the "byzantine design and building permit approval process in Moscow."

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Baird was told his department was sitting on a sensitive story that would likely become public because some MPs had noticed problems on a recent visit to Moscow.

"The department will take a responsive approach to questions from the media and members of Parliament, should they arise," says a section of the memo under heading of "communications implication/actions."

Under the heading "Parliamentary implications/actions," the memo states: "We can expect some interest by parliamentarians as some of them have visited the Moscow facility and have commented on the inadequacy of the current facilities."

The memo doesn't say when the MPs paid their visit, but it outlines details of what they would have seen.

"For example, overcrowding has turned the hallway to the trade section into a storage space for chairs, which does not provide a professional welcome to clients. The lack of adequate space to host Russian counterparts limits the ability of diplomatic staff to build the relationships necessary to further Canadian interests."

That leaves a lack of space for "surge capacity" to deal with planning special events in Russia, including the recently completed APEC summit in Vladivostok, forthcoming G8 and G20 summits, as well as the 2014 Winter Olympics.

Canada and Russia will enter a crucial phase of their relationship next year when Ottawa assumes a two-year term as chair of the Arctic Council. Among other things, the council will help deal with boundary disputes in the resource-rich Arctic.

Shortly after Mr. Baird was appointed to the Foreign Affairs portfolio in May 2011, a memo from his briefing book, released under the Access to Information Act, noted that the 2010 budget set aside $450-million over seven years for the Security Abroad Strategy to bolster security at Canada's foreign embassies.

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