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‘The focus of both China and India seems to be on actual sitting members of Parliament’: Former CSIS executive manager on how foreign powers recruit MPs and senators

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A sign for the Canadian Security Intelligence Service building is shown in Ottawa, Tuesday, May 14, 2013. Newly released memos show Canada’s spy agency revealed its interest in people to foreign partners in two cases after receiving assurances the individuals would not be tortured, a practice human rights advocates say shirks the law and puts vulnerable detainees at risk. Sean Kilpatrick/The Canadian Press

Last week, a bombshell report on foreign interference from the National Security and Intelligence Committee of Parliamentarians (NSICOP) shed further light on the widespread efforts of states like China and India to meddle in Canada’s domestic affairs.

The nearly 100-page partially redacted report was compiled after the committee, which includes members from all the major parties with high-level security clearance, reviewed intelligence assembled by 10 federal bodies, including the Canadian Security Intelligence Service (CSIS), the RCMP, the Department of Justice, and Elections Canada.

The report alleges that unnamed sitting and former parliamentarians (MPs and senators) have wittingly or semi-wittingly accepted money from foreign states or their proxies, handed over confidential information about their colleagues to foreign diplomatic or intelligence officials, followed the orders of those foreign officials to sway the opinions of their peers, and communicated regularly with foreign missions during elections to gain support from desirable groups.

The Hub’s managing editor Harrison Lowman reached out to Dan Stanton, former CSIS executive manager and an intelligence officer of 32 years, who led the intelligence agency’s China program from 2009 to 2013, to better understand what the interference involving parliamentarians looks like in practice.

HARRISON LOWMAN: What makes this latest development involving the findings of the NSCICOP report “new”?

DAN STANTON: I remember when I was running [CSIS’] China program back from 2009 to 2013, we did some reporting on foreign interference, which was ignored by the government. But the interference wasn’t as specific, tailored, and sophisticated as now in terms of the involvement of elected officials. A lot of it was diaspora community targeting. But what’s happened since then, and I imagine, since my retirement, is the focus of both China and India seems to be on the actual sitting members of Parliament.

As we’ve seen from the two reviews, and the Hogue Inquiry, hostile actors are actually getting involved in nomination ridings and things like that. So that stuff is new. This is what happens when you neglect the foreign interference threat. It just gets a little bolder and then you get higher stakes like this.

So for example, an MP, or former MP, who may have a relationship with a hostile intelligence service, that is new. We haven’t seen that since [Canadian MP and spy] Fred Rose in 1946 with the Soviets. We’re now seeing the manifestations of the lethargy and neglect this government has had coming out in these leaks and reviews.

HARRISON LOWMAN: So is the idea that if you give these hostile foreign actors the opportunity and space to interfere, they will fill it?

DAN STANTON: Yeah, exactly.

…Although we have to be fair. It’s very nuanced. It’s not trench coats and fedoras. It’s very grey. But, it’s still a threat, and it still meets the threshold for CSIS to investigate it and it has to be clandestine. And it is still subject to the law. It’s just not as black and white as other threats.

HARRISON LOWMAN: I think when a lot of people hear about hostile foreign governments looking for someone who can divulge key government information they picture them cultivating a high-ranking cabinet minister. But I assume that isn’t always the case. It could be a low-level backbencher who’s just a “pair of ears” on Parliament Hill and in caucus meetings, right?

DAN STANTON: Yeah, that’s what spies are. Some of the most effective spies in the history of espionage never stole a file or report. A lot of agents working in West Germany for East Germany were executive assistants and things like that.

They’re not running out in a park with files, they’re just sitting there listening. And that can do a lot of damage, and maybe in a very subtle way, shift the policy of a particular party on something.

It’s not whether they’re effective at doing it, it’s the intention, right? It’s just the fact that you have someone in there who’s going to be very favourable to that foreign state. And they’re not transparent about the relationship.

HARRISON LOWMAN: It’s even more troubling when you think about hostile actors who are willing to play the long game. You can imagine them recruiting someone from a young age—I think of the movie The Departed when the criminals groomed their spy as he entered the police academy. Then, by the time their recruit is in some high-ranking position, they can really take out their investment.

DAN STANTON: Absolutely. And that’s the thing. I have a lot of experience with Russians. In 2009 there were 10 “Illegals” who were deep-cover SVR [Russia’s foreign intelligence service] sleeper agents in North America. Two of them posed as Canadians. They were arrested in the United States. And that’s where the show The Americans came from.

One of the spies was at Harvard Kennedy School and was having Scotch parties at home. And one of the people that used to come to the parties, Felipe Calderon, eventually became the president of Mexico. The other one had developed really good contacts, one of whom eventually became Hillary Clinton’s assistant.

So instead of being caught committing espionage, which is messy, and involves treason and people going to jail or getting shot, you just try to get close to people who someday may be in a position of influence.

HARRISON LOWMAN: The NSICOP report talks about “pervasive and sustained foreign interference.” Can you explain to me why these hostile foreign countries bother with Canada? Why do they devote so much time and resources to meddle specifically in Canadian affairs?

DAN STANTON: They’re trying to get influence. They’re trying to get people that are going to be in positions of authority, policymaking, years from now. And try to get access to those people. They’re also targeting as we know, think tanks, universities, and journalists. So, it’s a matter of getting people, either witting or unwitting, to carry out what will be the favourable policy ends of that state.

In the case of India, they deal with the fact that the Liberal Party I guess is very close to the Sikh population. They probably see the Conservatives as more sensitive to their interests. We’ve seen this when the inquiry came out. So, they may be targeting Conservatives to see if they get the right people in that party.

And then the People’s Republic of China. We know from CSIS reporting they had a strategic plan in terms of having the Liberals elected and a Liberal majority. And they have tried to bear influence on that, including nomination ridings like Don Valley North. For China, it’s all just part of a grand scheme where they want to have influence around the world. And they’ll either steal the technology, or buy the land and the port, or influence the politicians.

HARRISON LOWMAN: What do you think these hostile state actors, who are behind this interference, are thinking right now?

DAN STANTON: I guess they’re kind of blown away by how open Canada is.

…This information that’s coming out is not like the crown jewels, of spying, you know what I mean? It’s what we Canadians call “foreign interference.” But a fair bit of it can very well be what China or India considers as just “a normal day at the office”—what their diplomats do. They don’t say, “We have a foreign interference case in Canada.” That’s our label for it. So, some of them may be a bit amused and they’re probably used to getting trashed now in the media over all this anyway. I don’t think it’s in any way injurious to the bigger relationships with these countries.

HARRISON LOWMAN: Just lastly, how do you think our allies like the Five Eyes intelligence alliance are viewing this?

DAN STANTON: I have to tell you, in all frankness, it’s not a big deal for them. I spent most of my life in counterintelligence, with real serious stuff like intelligence agencies and espionage. The foreign interference is not a big deal. It’s a big, big deal politically. In terms of intelligence, the stuff that’s been leaked has been damaging, no doubt, but it’s not like President Biden is sitting by his phone following the inquiry. It really isn’t.

I dealt with nine of the intelligence agencies within Five Eyes. They have bigger fish to fry than Canada’s little domestic foreign interference investigations. I can tell you that. I know people probably think I’m being flippant, but it’s not. When you look at all the damaging leakers they’ve had in the last couple of years—and they’ve been pretty heavy, especially in the States—and all the big espionage cases, this is not a big deal, for them.

This interview has been edited and condensed.

Rate cut too little, too late to avoid consequences of Canadians’ high mortgage renewals says experts, Bank of Canada data

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A person walks past multiple for-sale and sold real estate signs in Mississauga, Ont., on Wednesday, May 24, 2023. The majority of mortgage holders who scooped properties during the Bank of Canada’s low will feel the intensity of rising renewal costs. Nathan Denette/The Canadian Press.

The Bank of Canada’s 0.25 percentage point interest rate reduction will have a minimal immediate impact on Canadians’ mortgage spending, but experts said increased spending on mortgages could seriously limit their discretionary spending and hurt the economy.

Last week, the Bank of Canada announced its first interest rate cut in four years to 4.75 percent. In July 2023, Canadian overnight interest rates rose to a high of 5 percent from 2020’s low of 0.25 percent.

The Bank struck out alone in its rate cut decision, as Canada’s labour market has tightened and inflation has moved back towards its target rate. Expectations are unanimous that the U.S. Federal Reserve will maintain its 5.5 percent interest rate this summer.

The majority of bank mortgage holders in Canada, who signed their first mortgage rates in or around 2020’s low policy interest rate, will renew with mortgage rates that are significantly higher.

“Even if it’s a quarter point, it’s not going to materially affect (the Bank of Canada), the macroeconomy, or even individual household decision making,” director of Canada economics at Oxford Economics Tony Stillo told The Hub, commenting immediately before the rate decision.

Nevertheless, given their impact on Canadians’ mortgage financing and the economy, Stillo said the Bank of Canada should be cutting its rates.

“We’ve been a little more bearish on the economy. There’s a softer patch to go through the middle of the year, and part of that is mortgage renewals at higher rates,” he said.

Because of the past year’s high interest rates, the median of all Canadian mortgage renewals will rise 30 percent by 2026. Canadians holding variable-rate mortgages with fixed payments are in the worst situation of all, with a median renewal increase of 60 percent the same year, according to the Bank of Canada’s Financial Stability Report for 2024, released last month. Nearly a quarter (23 percent) of Canadian mortgage holders have a variable rate while 69 percent are fixed, according to the Canadian Mortgage and Housing Corporation.

“The economy had been more vulnerable to high interest rates because of our high indebtedness of households and our heavy reliance on interest-sensitive housing,” explained Stillo.

Canadians with fixed mortgages secured over the past three years, when house prices peaked and interest rates were lower, will have their highest renewals this year, as interest rates are expected to drop further in months and years ahead, described Stillo. That’s why their payments will peak this year before declining.

Holders of variable mortgages are far worse off when it comes to future payment costs for two reasons. First, they’ve seen their payments rise with the soaring interest rate over the past four years. Second is negative amortisation accrued by many of those holders—a period of time in which interest payments are no longer enough to cover interest.

Rising interest rates have required variable mortgage holders with fixed payments to annually increase their fixed monthly payments, causing many to make insufficient payments resulting in negative amortisation.

In February, the Bank of Montreal, Toronto-Dominion Bank, and Canadian Imperial Bank of Commerce had a combined $94 billion of residential loans in negative amortisation as reported by the Globe and Mail. If not paid off monthly, their negative amortisation is added to their principal and drives up future mortgage renewals even further.

“If we see interest rates come down, that just means when they do renew, it’s that much more affordable,” said Stillo.

Likewise, the share of new mortgage holders whose payments require more than 25 percent of their income has risen significantly, along with interest rates, since the end of 2021.

In the fourth quarter of 2021, when the overnight interest rate averaged 1.5 percent, only 12.9 percent of new mortgages required that proportion of Canadians’ income. By the third quarter of 2023, while interest rates held at five percent, 34 percent of new mortgages required more than 25 percent of the mortgage holders’ incomes.

The negative effects of the past year’s interest rate climb are felt most intensely by low-to-medium-income households.

“They’re squeezed from higher debt service costs, they’re squeezed from higher prices and costs for goods and services…They may be living paycheque to paycheque already. And they’re ability to take on more debt is also more constrained,” said Stillo. He added the most dire cases of financial strain will see some selling their homes. The rising share of Canadians taking non-bank mortgages has rung similar alarm bells.

A worker rolls winter signs past the Bank of Canada, Wednesday, April 10, 2024 in Ottawa. Adrian Wyld/The Canadian Press

In the grand view, low-to-medium income mortgages could reach a combined $4 billion in 2024.

“That’s about half a percent of lower-income households current consumption,” said Stillo. In December 2023, private consumption accounted for 54.7 percent of Canada’s GDP.

“That’s one of the key drivers of why we think there’s going to be a shallow recession…weaker consumption,” he said.

Oxford Economics forecasts a moderate recession in the second and third quarters of this year. They forecast that the Bank of Canada will cut the policy interest rate to 4.25 percent by December 2024.

“Higher income households have the income capacity, excess savings from the pandemic, and the ability to take on more debt. So they can keep their spending profiles largely intact,” said Stillo. He said this will help them weather the coming year’s higher mortgage renewals.