Export Development Canada backs loan to primarily Russian-owned Buhler Industries

Export Development Canada — a federal Crown credit corporation — signed a guarantee to back half of a $14-million loan to Buhler Industries in December 2020 to support the company's ongoing operations. 

The Winnipeg-based manufacturer of farming equipment, including Versatile tractors, has been under scrutiny since Konstantin Babkin, who resigned as a Buhler director on March 2, made at least two public statements in support of Russia's invasion of Ukraine.

In a Feb. 27 Russian language interview on CGTN, a Chinese state-owned broadcaster, Babkin blamed the Russian attack on U.S. interference and said "it is necessary to stop the conflict, to build a unified economic space with Russia."

Babkin also leads the Action Party, a Russian political party that has supported Russian President Vladimir Putin. On Feb. 21, Babkin tweeted out the party's support of Putin's decision "to recognize the Donetsk and Luhansk People's Republics" — two separatist-controlled areas that are recognized by the international community as Ukrainian territory.

Since Russia's invasion began on Feb. 24, more than 400 civilian deaths have been officially recorded by the UN human rights office, which said the actual number is much higher. The UN said two million people have now fled Ukraine. 

The Russian military doesn't offer regular updates on its casualties. Only once, on March 2, it revealed a death toll of nearly 500.

Buhler Industries has repeatedly denounced Russia's attack on Ukraine.

Babkin's resignation did not impact his ownership stake in Buhler Industries, which is 97 per cent owned by Combine Factory Rostselmash.

That company is a subsidiary of Novoe Sodrugestvo CJSC, a Russian conglomerate co-owned by Babkin, current Buhler director Dmitry Udras and Buhler CEO Yury Ryazanov. 

Pulling out of loan would have huge impact: Buhler

Buhler spokesperson and vice-president Adam Reid, who has taken on Babkin's director role, stressed his company "is completely independent of Combine Factory Rostselmash, which has not collected profits or dividends from Buhler Industries in any way since acquiring a majority share in the company in 2007."

Buhler exports more than $150 million worth of machinery and parts each year, predominantly to the United States. That accounts for about 60 per cent of the company's total sales, according to Reid.

The last dividend distribution at Buhler was in 2007, although the heavy machinery manufacturer has seen profitable years since then.

Udras and Ryazanov, who are Russian nationals, were on the federal council of the Babkin-led Action Party, according to the party's website.

On Friday, Reid confirmed Udras and Ryazanov have resigned from the leadership of the party but remain as directors of Buhler Industries.

"The fact that these individuals have resigned from that party … means that they are feeling the effects of those sanctions that we're applying elsewhere," said Marcus Kolga, senior fellow at the Macdonald-Laurier Institute, an Ottawa-based think tank.

Kolga, whose area of expertise is Central and Eastern European politics, says Canada needs to be extremely vigilant when it comes to dealing with companies owned by Russians. 

"It doesn't matter [what] sort of financial interactions … the federal government might have with any of these companies. We need to be very sure of who we're dealing with," said Kolga. 

Russia can now be considered a hostile nation, he said.

Export Development Canada — a federal export credit agency with a mandate to support international trade — says it applies additional scrutiny to agreements when Russia is involved.

The agency has no longer pursued any business related to Russian contracts or Russian borrowers since 2014, when Russia annexed the Crimean peninsula, a spokesperson said.

"Any transaction with any direct/indirect Russian connection will continue to be subject to enhanced due diligence which could include seeking additional information on counterparties, contract awarding processes, and reviewing financial statements," wrote Zoé de Bellefeuille.

The agency says it backed the Buhler Industries loan to promote Canadian agriculture equipment exports and create domestic jobs. 

Buhler Industries says pulling out of the loan could have a huge impact on workers, farm equipment dealers and farmers who count on the company for spare parts. 

"Consequences of the removal/cancellation of the loan could include staff layoffs of Canadian jobs, less investment in research and development, liquidation of inventory and property, a decrease in sales and inventory and a reduction in competitiveness as a result of lower volumes," said Reid. 

Reid says Buhler Industries employs approximately 700 workers in Canada and 50 in the United States, which amounts to more than $50 million in jobs and taxes.