When Prime Minister Stephen Harper travelled to Kiev recently to show support for Ukraine's new government, he took a hard line on sanctions against Russia and mused about kicking Russia out of the G8.
Mr. Harper's tough language likely reflects the fact that Canada has far less to lose in a diplomatic row with Russia than other countries, particularly the members of the European Union. Unlike the EU, which relies on Russia for most of its energy needs, Canada's trade with Russia is less than $3-billion annually, making it our 18th largest trading partner.
However, the trade figure has been growing rapidly in recent years. And before the standoff over Crimea, Canada had put a priority on increasing commercial ties with Russia.
The value of Canadian exports to Russia has increased by 7.5 per cent annually on average since 2007. Most of that consisted of manufactured goods and agricultural products, especially pork.
While Canada's overall trade with Russia is relatively small, there are other key relationships. Several Canadian companies, such as Bombardier Inc. and Kinross Gold Corp., have operations in Russia. Russia is also an important player in the Arctic Council, which Canada is currently chairing and trying to turn into an economic forum.
Canada could face repercussions if further sanctions are imposed. Until now, the punitive measures have consisted largely of assets freezes and travel bans aimed at more than 30 Russian and Ukrainian individuals.
The United States and the European Union have threatened to introduce so-called "third-stage sanctions," which would target Russian economic sectors such as finance, energy and defence.
Russia would almost certainly retaliate, potentially causing havoc for Canadian businesses operating in the country.
Bullish on the Bear: Canadian investment
Rapidly increasing interest in Russia from Canadian companies and investors and Ottawa is expected to be put on hold, whether new sanctions are imposed or not. In 2012, Canadian direct investment in Russia hit $4.8-billion, up from just $540-million in 2007, according to Statistics Canada.
While energy and mining have been important sectors, Canada’s pharmaceuticals, construction, aerospace and agriculture industries have also been eyeing new opportunities. Experts say future sanctions that restricted dealings with a large number of Russia’s banks or Russian companies, or a long list of business figures could great restrict investment in a country already seen as a risky place to do business.
Russian direct investment in Canada hit $1.2-billion in 2010, the last year that figures were available.