Canada to Lobby G7 Nations to Join New Defence Bank, Foreign Minister Says

Canada Proposes New Defence Bank to G7 for Support of Small Defence Firms

Canada's Initiative for a Defence and Resilience Bank

By John Irish

VAUX-DE-CERNAY, France, March 26 (Reuters) - Canada will pitch plans for a new defence bank to G7 nations, urging them to join an initiative to provide critical financing for small and medium‑sized defence firms that struggle to access capital, Foreign Minister Anita Anand told Reuters on Thursday.

Foreign ministers from the world's leading Western democracies are meeting in France on March 26-27 against the backdrop of wars in Iran and Ukraine, economic uncertainty, and mounting unease over unpredictable U.S. foreign policy.

Background and Motivation

Ottawa has been leading the push in recent months for a defence and resilience bank (DSRB) as part of Prime Minister Mark Carney's effort to bolster co-operation between NATO members and other ​allies. Canada has been hosting meetings in Montreal to establish a charter for the multilateral financial institution.

"The capital available is going to depend on the number of countries that participate, and Canada is certainly advocating for more and more countries to come on board, and I will be presenting such an argument here at the G7 foreign ministers' (meeting)," Anand told Reuters at the meeting.

Financing for Small and Medium Firms

Competing Initiatives and International Response

Montreal is lobbying for the DSRB to be headquartered there, but it is one of several competing initiatives aiming to channel more private cash into rearming nations.

Major European nations have yet to embrace the Canadian initiative. In December, Germany turned down the idea of a new multilateral defence bank.

And earlier this week, Britain announced ⁠it ​planned to team up with the Netherlands and Finland in a separate scheme ​to drum up more private finance for defence equipment.

Challenges for Small and Medium Enterprises

Anand said many defence firms were small or ​medium-sized enterprises that do not currently have the necessary capital to ​meet the ⁠surge in demand for weapons and other military kit.

That was not something necessarily taken into consideration in other initiatives such as the European Union's 150 billion euro ($173 billion) SAFE loans programme, she said.

"This bank is going to be a pooling mechanism for capital for these small and medium-sized enterprises in particular," she said.

Next Steps for the Defence Bank

Once the charter of the new bank is completed, decisions will be made on the amount of capital and the way in which the capital is dispersed, Anand said.

"The talks are going to be ongoing through the spring, so additional countries that want to come forward, there is opportunity, and I encourage them to join us in Montreal," she said, declining to identify countries that had shown interest.

Defence Sector Learning Lessons from Ukraine

Lessons from the Ukraine Conflict

Anand said lessons had been learnt from the start of the war in Ukraine in 2022.

"We saw that there was a need for interoperability and there was a need for rapid scale-up in procurement and supply of military equipment. That's what the Defence Bank is going to address," she said.

Canada's Ongoing Support for Ukraine

Canada has provided C$25.5 billion ($18.5 billion) in aid to Ukraine.

Anand said Canada would provide additional support from the private and public sector, including by sourcing electricity generators ahead of next winter.

G7's Role and Continued Support

She said it was vital that the G7 reiterate its support in terms of sanctions on Russia as well as military and economic aid.

"The geographical boundaries of Ukraine and the decisions relating to its territory are Ukraine's alone to make, full stop," she said when asked about the possibility of Kyiv being forced into a bad deal.

($1 = 0.8657 euros)

(Reporting by John Irish; editing by Andrew Gray and Sharon Singleton)