Tax & Trade Blog
Canada Vows Fresh Sanctions on Russia over Ukraine
On February 22, 2022, Prime Minister Justin Trudeau announced new sanctions on Russia in response to Russia’s escalation of the conflict in Ukraine — lock-step with the positions taken by other Western world leaders.
More sanctions against Russia and particular members of its government are also expected to follow in light of last evening’s commencement of the Russian war in Ukraine, again in concert with other members of the international community.
The February 22nd measures follow Russia’s recognition of the independence of the Donetsk and Luhansk regions of Ukraine as “so-called independent states”, which has been characterized as a “brazen violation of Ukraine’s sovereignty, territorial integrity and independence, and demonstrates a blatant disregard for international law”, and Russian double-speak on its intention to send in “peace-keepers”.
The new measures, to be implemented through the Special Economic Measures (Russia) Regulations, and the Special Economic Measures (Ukraine) Regulations under the Special Economic Measures Act, are expected to:
- Impose specific economic restrictions on members of the Russian State Duma (the lower house legislature) who voted in favour of recognizing the breakaway republics (likely including the freezing of Canadian assets and dealings bans);
- Impose a ‘dealings ban’ with respect to the Donetsk and Luhansk regions, which will prevent Canadians from engaging in certain financial transactions in those areas (mirroring similar restrictions which were imposed on Crimea after Russia annexed the territory in 2014);
- Prohibit Canadians from engaging in “direct and indirect dealings” in Russian sovereign debt (i.e., purchasing Russian government bonds); and
- Prohibit Canadians from dealing with two Russian state banks, likely the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) (a military bank) and Promsvyazbank Public Joint Stock Company (PSB) (which would follow US sanctions on those institutions announced this week).
These measures follow the current sanctions already in place, which levy similar restrictions on hundreds of specifically designated individuals and entities.
The sanctions also coincide with Canada’s decision to increase its military presence in Eastern Europe with up to an additional 460 personnel designated for deployment in support of NATO allies, including naval and artillery assets.
Canada’s Foreign Affairs Minister, Melanie Joly, further indicated that these sanctions were a part of a ‘unified exercise’ among western allies, designed to prevent any gaps in sanctions.
Trudeau’s announcement concluded that: “there is still time for Russia to choose de-escalation and diplomacy, but the window to do so is closing. These measures will apply further pressure on Russian leadership and extend greater support to our allies and partners”.
“The Canadian government’s current position is that it will “continue working with our allies and partners to impose additional hard-hitting economic measures that will inflict severe costs on Russia if it does not cease its unacceptable aggression against Ukraine.”
Though just announced, the sanctions have not yet been promulgated through the regulations but are expected to be made effective within days.
Businesses should ready themselves to be compliant with the measures and remain on the lookout for additional sanctions — which are very likely to follow given the escalation of the conflict and rapidly evolving geopolitical situation.
Further sanctions will undoubtedly occur, and traders with Russian or targeted persons need to be aware of their obligations.
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