Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2022-27

Canada Gazette, Part II, Volume 156, Number 6

Registration
SOR/2022-27 February 24, 2022

SPECIAL ECONOMIC MEASURES ACT

P.C. 2022-173 February 24, 2022

Whereas the Governor in Council is of the opinion that the actions of the Russian Federation constitute a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis;

And whereas the Governor in Council is also of the opinion that gross and systematic human rights violations have been committed in the Russian Federation;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, pursuant to subsections 4(1) footnote a, (1.1) footnote b, (2) and (3) of the Special Economic Measures Act footnote c, makes the annexed Regulations Amending the Special Economic Measures (Russia) Regulations.

Regulations Amending the Special Economic Measures (Russia) Regulations

Amendments

1 (1) The definitions Convention and pension in section 1 of the Special Economic Measures (Russia) Regulations footnote 1 are repealed.

(2) The definition designated person in section 1 of the Regulations is replaced by the following:

designated person
means a person who is in Russia, or is a national of Russia who does not ordinarily reside in Canada, and whose name is listed in either one of Schedules 1, 2, 3 or 3.1. (personne désignée)

2 Paragraphs 2(c) to (e) of the Regulations are replaced by the following:

3 Section 2.1 of the Regulations is replaced by the following:

Schedules 2, 3 and 3.1

2.1 A person whose name is listed in Schedule 2, 3 or 3.1 is a person in respect of whom the Governor in Council, on the recommendation of the Minister, is satisfied that there are reasonable grounds to believe is

4 (1) Section 3.1 of the Regulations is amended by adding the following after subsection (1.1):

New debt financing

(1.2) It is prohibited for any person in Canada and any Canadian outside Canada to transact in, provide financing for or otherwise deal in new debt, directly or indirectly, including bonds, loans, debentures, extensions of credit, loan guarantees, letters of credit, bank drafts, bankers’ acceptances, discount notes, treasury bills, commercial paper and other similar instruments, issued by a designated person listed in Schedule 3.1 or in relation to

(2) Subsection 3.1(2) of the Regulations is replaced by the following:

Non-application

(2) Subsections (1) to (1.2) do not apply if the activities referred to in those subsections were undertaken before the designated person was listed in Schedule 2, 3 or 3.1.

5 Paragraphs 4(b) and (c) of the Regulations are replaced by the following:

6 (1) Subsection 8(1) of the Regulations is replaced by the following:

Application to no longer be designated person

8 (1) A designated person may apply in writing to the Minister to have their name removed from Schedule 1, 2, 3 or 3.1.

(2) Subsection 8(2) of the English version of the Regulations is replaced by the following:

Recommendation

(2) On receipt of the application, the Minister must decide whether there are reasonable grounds to recommend to the Governor in Council that the applicant’s name be removed from Schedule 1, 2, 3 or 3.1.

7 Part 1 of Schedule 1 to the Regulations is amended by adding the following after item 120:

8 Part 2 of Schedule 1 to the Regulations is amended by adding the following after item 71:

9 Item 2 of Schedule 2 to the Regulations is repealed.

10 The Regulations are amended by adding, after Schedule 3, the Schedule 3.1 set out in the schedule to these Regulations.

Application Before Publication

11 For the purpose of paragraph 11(2)(a) of the Statutory Instruments Act, these Regulations apply according to their terms before they are published in the Canada Gazette.

Coming into Force

12 These Regulations come into force on the day on which they are registered.

SCHEDULE

(Section 10)

SCHEDULE 3.1

(Sections 1, 2.1, 3.1 and 8)

Entities

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Russian Federation continues to violate the sovereignty and territorial integrity of Ukraine.

Background

In November 2013, the refusal of then Ukrainian President Viktor Yanukovych to sign a landmark association agreement with the European Union (EU) set off major protests in Kyiv, leading to the fall of his government. In February 2014, Russian forces illegally invaded and occupied the Crimean peninsula of Ukraine. Following an unconstitutional “referendum” on March 16, 2014, Russian President Vladimir Putin signed a treaty purporting to incorporate Crimea into the Russian Federation on March 18, 2014. Canada, along with the international community, continues to condemn this illegal occupation and attempted annexation of Crimea.

In the wake of the annexation, Russian-backed militants quickly seized control of significant portions of the Donetsk and Luhansk regions of eastern Ukraine, declaring the creation of the so-called Donetsk and Luhansk “People’s Republics.” Fraudulent “independence referendums,” initiated by pro-Russian separatists, were held on May 11, 2014, but gained no international recognition. Peace agreements were reached at talks held in Minsk, Belarus, in September 2014 and in February 2015 (the Minsk agreements). Since the illegal annexation of Crimea, Russia has also continued to sponsor violent pro-Russian separatist groups in the Donetsk and Luhansk regions of Ukraine.

Acting in coordination with the United States (U.S.) and the EU, Canada found that the illegal annexation of Crimea by the Russian Federation constitutes a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis. As a result, the Special Economic Measures (Ukraine) Regulations (the Ukraine Regulations) and the Special Economic Measures (Russia) Regulations (the Russia Regulations) were approved on March 17, 2014. Both regulations impose dealings prohibitions (an effective asset freeze) on designated individuals and entities. Any person in Canada and Canadians outside Canada are thereby prohibited from dealing in the property of, entering into transactions with, providing services to, or otherwise making goods available to listed persons. Amendments to the Russia Regulations were made on March 19 and 21, April 28, May 4 and 12, June 21, July 24, August 6, September 16, and December 19, 2014; on February 17 and June 29, 2015; on March 18, 2016; on March 15, 2019; and on March 21 and 29, 2021. On March 21, 2021, the Russia Regulations were amended to add, for the first time, additional listings related to gross and systematic human rights violations in Russia. Amendments to the Ukraine Regulations were made on March 19, April 12, May 12, June 21, July 11, July 24, August 6, and December 19, 2014; on February 17 and June 29, 2015; on March 18 and November 28, 2016; on March 4 and 15, and June 25, 2019; on January 29, 2020; and on March 29, 2021.

The Special Economic Measures (Ukraine) Permit Authorization Order and the Special Economic Measures (Russia) Permit Authorization Order, which came into force on March 17, 2014, authorize the Minister of Foreign Affairs to issue to any person in Canada and Canadian outside Canada a permit to carry out a specified activity or transaction, or any class of activity or transaction, that is otherwise prohibited pursuant to the Ukraine Regulations and the Russia Regulations.

On February 15, 2022, the Russian Duma (equivalent to the Canadian parliament) voted to ask President Putin to recognize the so-called Luhansk and Donetsk People’s Republics in eastern Ukraine, violating the Minsk agreements and Ukraine’s sovereignty. On February 18, 2022, Russia-backed so-called authorities ordered the evacuation of women and children from the region, as well as the conscription of men aged 18 to 55. On February 21, 2022, following a meeting of the Russian Security Council, President Putin signed decrees recognizing the “independence” and “sovereignty” of the so-called Luhansk People’s Republic (LNR) and Donetsk People’s Republic (DNR). This step is a blatant violation of Ukraine’s sovereignty and territorial integrity, international law, and the Minsk agreements that were intended to bring about a peaceful resolution to the conflict in eastern Ukraine. Immediately following this, President Putin ordered Russian forces to perform peacekeeping functions in the so-called LNR and DNR regions. On February 22, 2022, Russia’s Duma gave President Putin permission to use military force outside the country. Uniformed Russian troops and armoured vehicles have begun moving into the territories for the first time under official orders.

This follows a significant build-up of Russian troops (roughly 150 000–190 000), military equipment, and military capabilities in and around Ukraine since fall of 2021, following months of Russian escalatory behaviour. Russia has also been conducting hybrid campaigns against Ukraine. This aggression directly threatens and imposes significant costs on Ukraine. It is also a blatant violation of the Minsk agreements that were intended to bring about a peaceful resolution to the conflict in the regions of Donetsk and Luhansk. Russia’s overall relationships with Ukraine, the U.S., and the North Atlantic Treaty Organization (NATO) have also deteriorated, which has led to heightened tensions. Russia is committed to blocking Ukraine’s Euro-Atlantic aspirations, as it perceives this as a threat to its own security.

Since the beginning of the current crisis, Canada and the international community have been calling on Russia to de-escalate, pursue diplomatic channels, and demonstrate transparency in military activities. Diplomatic negotiations have been taking place along several tracks, including via (1) United States–Russia bilateral talks (e.g. the Strategic Stability Dialogue); (2) NATO; (3) the Organization for Security and Cooperation in Europe (OSCE); and (4) the Normandy Four format (Ukraine, Russia, Germany, France) for the implementation of the Minsk agreements.

On February 21, 2022, G7 Foreign Affairs ministers released a statement condemning Russian recognition of the so-called LNR and DNR regions and stated that they were preparing to step up restrictive measures responding to Russia’s actions, while reaffirming their unwavering commitment to Ukraine’s sovereignty and territorial integrity. G7 Foreign Affairs ministers also reconfirmed their support for the full implementation of the Minsk agreements to end the conflict in eastern Ukraine. This follows a similar statement made in December 2021, and one by NATO Foreign Affairs ministers in January 2022.

Since 2014, Russia has continuously violated Ukraine’s sovereignty and territorial integrity, extending to its territorial sea. In eastern Ukraine, Russia continues to support, fund, arm, and back pro-Russia militant groups, and implement its policy of forced “passportization” of Ukrainian residents. In September 2021, Russia implemented a campaign of mass mobilization of Ukrainian residents in non–government-controlled territories to vote in Russia’s Duma elections, which is a clear violation of the Minsk agreements. Russia continues to consolidate its control over illegally occupied Crimea, through the forced conscription of more than 28 000 residents of Crimea, the militarization of education of minors, forced labour and imprisonment for draft evasion, and the disruption of maritime traffic and trade in the Sea of Azov through the Kerch Strait. In October 2021, Russia included Crimean residents in its population census, which is a further attempt to legitimate its attempted annexation of Crimea.

Since 2014, Canada has provided Ukraine with more than $890 million in multifaceted assistance to support Ukraine’s security, prosperity, and reform objectives. Canada is currently considering a number of potential response options to support Ukraine and deter Russian aggression, in close coordination with Canada’s allies and partners.

On January 27, 2022, Canada announced the extension and expansion of Operation UNIFIER, Canada’s non-combat military training and capacity-building mission to Ukraine. The renewal until March 2025 will support ongoing capacity building of Ukraine’s security forces, and also has the capacity to double the mission footprint from 200 to 400 Canadian Armed Forces trainers. As part of the Operation UNIFIER extension, Canada also announced enhanced diplomatic resources for Global Affairs Canada headquarters and the Canadian embassy in Kyiv to support a resilient and democratic Ukraine. In addition, Canada announced a further $50 million in international assistance for Ukraine, including $35 million in development and $15 million in humanitarian funding. This assistance is in addition to the sovereign loan of up to $120 million offered to Ukraine on January 21, 2022, to support its economic resilience and governance reform efforts.

The duration of sanctions by Canada and like-minded partners has been explicitly linked to the complete implementation of the Minsk agreements by all parties, and the respect for Ukraine’s sovereignty and territorial integrity, within its internationally recognized borders, which includes Crimea, as well as Ukraine’s territorial sea. The U.S., the United Kingdom (U.K.), Australia, and the EU have continued to update their sanction regimes against individuals and entities in both Ukraine and Russia.

The EU has already indicated they would impose sanctions in response to the decree signed by President Putin on February 21, 2022, to recognize the “independence” and “sovereignty” of the so-called DNR and LNR regions. The U.S. announced sanctions packages on February 21 and 22, 2022, while the U.K. announced the listing of three influential individuals and five Russian banks (Bank Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank) on February 22, 2022.

Objectives

  1. Impose costs on Russia for its official recognition of the independence and sovereignty of the so-called DNR and LNR regions.
  2. Stress that Canada does not recognize the independence and sovereignty of the so-called LNR and DNR, as they are integral parts of Ukraine.
  3. Align Canada’s actions with those taken by international partners to underscore continued unity with Canada’s allies and partners in responding to Russia’s actions in Ukraine.
  4. Retain the possibility of additional sanctions in the event of further Russian aggression, as a deterrent measure.

Description

The Regulations Amending the Special Economic Measures (Russia) Regulations (the amendments) add 351 new individuals and 4 new entities to the Russia Regulations. All 351 individuals and one of these new entities are being added to Schedule 1 of the Russia Regulations, and are subject to a broad dealings ban. The other three new entities are being added to a new Schedule 3.1 of the Russia Regulations, which is tied to new prohibitions related to dealing in sovereign debt issued by these entities. In addition, one entity is being moved from Schedule 2 to Schedule 1 to broaden the prohibitions imposed on this entity. New language is also being added to the Russia Regulations, under section 2, to expand the criteria under which individuals and entities can be listed.

Regulatory development

Consultation

Global Affairs Canada engages regularly with relevant stakeholders, including civil society organizations and cultural communities and other like-minded governments regarding Canada’s approach to sanctions implementation.

With respect to the amendments, public consultation would not have been appropriate, as publicizing the names of the listed persons targeted by sanctions would have likely resulted in asset flight prior to the coming into force of the amendments.

Modern treaty obligations and Indigenous engagement and consultation

An initial assessment of the geographical scope of the amendments was conducted and did not identify any modern treaty obligations, as the amendments do not take effect in a modern treaty area.

Instrument choice

Regulations are the sole method to enact sanctions in Canada. No other instrument could be considered.

Regulatory analysis

Benefits and costs

Sanctions targeting specific persons have less impact on Canadian businesses than traditional broad-based economic sanctions, and the amendments will have limited impact on the citizens of the country of the listed persons. It is likely that the individuals and entities listed have limited linkages with Canada, and therefore do not have business dealings that are significant to the Canadian economy.

Canadian banks and financial institutions are required to comply with sanctions. They will do so by adding the newly listed individuals to their existing monitoring systems, which may result in a minor compliance cost.

The amendments will create additional costs for businesses seeking permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited.

Small business lens

The amendments potentially create additional compliance costs for small businesses seeking permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. However, costs will likely be low as it is unlikely that Canadian small businesses have or will have dealings with the newly listed individuals and entities. No significant loss of opportunities for small businesses is expected as a result of the amendments.

One-for-one rule

As there are no administrative costs associated with these regulatory amendments, the one-for-one rule does not apply.

Regulatory cooperation and alignment

While the amendments are not related to a work plan or commitment under a formal regulatory cooperation forum, they align with actions taken by like-minded partners.

Strategic environmental assessment

The amendments are unlikely to result in important environmental effects. In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

The subject of economic sanctions has previously been assessed for effects on gender and diversity. Although intended to facilitate a change in behaviour through economic pressure on individuals in foreign states, sanctions under the Special Economic Measures Act can nevertheless have an unintended impact on certain vulnerable groups and individuals. Rather than affecting Russia as a whole, these targeted sanctions impact individuals believed to be engaged in activities that directly or indirectly support, provide funding for or contribute to a violation of the sovereignty or territorial integrity of Ukraine. Therefore, these sanctions are unlikely to have a significant impact on vulnerable groups, as compared to traditional broad-based economic sanctions directed toward a state, and limit the collateral effects to those dependent on those targeted individuals.

Rationale

The amendments are in direct response to the Russian Security Council vote and presidential signature of a decree on February 21, 2022, where Russia recognized the independence and territorial integrity of the so-called LNR and DNR regions. Following this, Russian troops moved into eastern Ukraine, in the so-called LNR and DNR regions. This was confirmed by the EU’s High Representative of the European Union for Foreign Affairs and Security Policy. In coordination with actions being taken by Canada’s allies, the amendments seek to impose a direct economic cost on Russia, and signal Canada’s strong condemnation of Russia’s latest violations of Ukraine’s territorial integrity and sovereignty.

Implementation, compliance and enforcement, and service standards

The names of the listed individuals and entities will be available online for financial institutions to review and will also be added to the Consolidated Canadian Autonomous Sanctions List. This will help to facilitate compliance with the amendments.

Canada’s sanction regulations are enforced by the Royal Canadian Mounted Police and the Canada Border Services Agency. In accordance with section 8 of the Special Economic Measures Act, every person who knowingly contravenes or fails to comply with the Special Economic Measures (Russia) Regulations is liable, upon summary conviction, to a fine of not more than $25,000 or to imprisonment for a term of not more than one year, or to both; or, upon conviction on indictment, to imprisonment for a term of not more than five years.

Contact

Andrew Turner
Director
Eastern Europe and Eurasia Relations Division
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343‑203‑3603
Email: Andrew.Turner@international.gc.ca