Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2023-32
Canada Gazette, Part II, Volume 157, Number 6
SOR/2023-32 February 23, 2023
SPECIAL ECONOMIC MEASURES ACT
P.C. 2023-176 February 22, 2023
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 in a serious international crisis;
Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, makes the annexed Regulations Amending the Special Economic Measures (Russia) Regulations under subsections 4(1)footnote a, (1.1)footnote b, (2)footnote c and (3) of the Special Economic Measures Act footnote d.
Regulations Amending the Special Economic Measures (Russia) Regulations
1 The Special Economic Measures (Russia) Regulations footnote 1 are amended by adding the following after section 3.12:
Arms and related material — import
3.13 It is prohibited for any person in Canada and any Canadian outside Canada to import, purchase or acquire from Russia or from any person in Russia any type of weapon, ammunition, military vehicle or military or paramilitary equipment, or a spare part for any of those goods.
2 Section 5 of the Regulations is replaced by the following:
Assisting in prohibited activities
5 It is prohibited for any person in Canada and any Canadian outside Canada to knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, any activity prohibited by sections 3 to 3.13.
3 Part 1 of Schedule 1 to the Regulations is amended by adding the following in numerical order:
- 1111 Alexei Alexandrovich MORDASHOV (born September 26, 1965)
- 1112 Marina Alexandrovna MORDASHOVA (born in 1980)
- 1113 Ilya Alekseevich MORDASHOV (born on January 15, 1986)
- 1114 Kirill Alekseevich MORDASHOV (born in September 1999)
- 1115 Nikita Alekseevich MORDASHOV (born on December 16, 2000)
- 1116 Mikhail Feliksovich SHEBAKPOLSKIY (born on August 5, 1958)
- 1117 Sergey Nikolayevich ARTEMYEV (born on August 9, 1982)
4 Part 2 of Schedule 1 to the Regulations is amended by adding the following in numerical order:
- 280 Multiclet Corporation
- 281 Rzhanov Institute of Semiconductor Physics Siberian Branch of Russian Academy of Sciences
- 282 NIIHIT JSC
- 283 Research and Production Company Optolink
- 284 Scientific and Production Association Strela
- 285 Yunarmy
- 286 Russian Machines JSC
- 287 Research and Production Association named after S.A. Lavochkina JSC
- 288 Avtomobilnij Zavod Ural
- 289 Gruppa Impuls
- 290 Luch Design Bureau JSC
- 291 Aeropribor Voskhod JSC
- 292 Energiya JSC
- 293 NPO Novator
- 294 Machine Building Company “Vityaz”
- 295 Zavolzhskij Zavod Gusenichnyh Tyagachej
- 296 Uralvagonzavod
- 297 Central Research Institute “BUREVESTNIK”
- 298 A.E. Nudelman Design Bureau of Precision Machine Building JSC
- 299 Scientific and Production Association Russian Basic Information Technology JSC
- 300 Specialnoe Konstruktorskoe Byuro
- 301 RS-LIZING
- 302 ENICS JSC
- 303 Vostochnaya Verf JSC
- 304 Kazan Optical and Mechanical Plant JSC
- 305 V.A. Degtyarev Plant
- 306 Izhevsk Electromechanical Plant Kupol JSC
- 307 Tula Plant JSC
- 308 EGO-HOLDING
- 309 Bryanskij Avtomobilnyj Zavod
- 310 Volgograd Machine Building Company VGTZ LLC
- 311 RM-Terex LLC
- 312 Special Mechanical Building and Metallurgy “Motovilihinskie Zavody”
- 313 Kommercheskie Avtomobili - Gruppa Gaz LLC
- 314 Obedinennaya Mashinostroitelnaya Gruppa
- 315 Scientific and Technical text-center Zaslon JSC
- 316 Federal State Financed Institution of Science Higher Education Institution Spectroscopy of the Russian Federation Academy of Sciences
- 317 Research text-center Elins JSC
- 318 Additive Technologies text-center JSC
- 319 International text-center for Quantum Optics and Quantum Technologies LLC
- 320 Production Association Sever JSC
- 321 Federal Joint Venture Quantum Technologies
- 322 Federal Institute for Scientific Research Vychislitelnykh Kompleksov named after M.A. Kartseva JSC
- 323 L.D. Landau Institute for Theoretical Physics - Russian Academy of Sciences (RAS)
- 324 Valiev Institute of Physics and Technology of Russian Academy of Sciences
- 325 Lebedev Physical Institute
- 326 Aquarius
- 327 YADRO
- 328 The Federal Research text-center Institute of Applied Physics of the Russian Academy of Sciences
- 329 Element JSC
5 Schedule 5 to the Regulations is amended by replacing the reference after the heading “SCHEDULE 5” with the following:
(Subsections 3.05(1) and 3.12(1))
6 Schedule 7 to the Regulations is amended by adding the following after item 6:
Harmonized Commodity Description and Coding System code
Chemical elements doped for use in electronics, in the form of discs, wafers or similar forms; chemical compounds doped for use in electronics
Application Before Publication
7 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
8 These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
The Russian Federation continues to commit gross and systematic human rights violations in Russia. This domestic oppression is closely linked to Russia’s aggression in Ukraine.
Following Russia’s illegal occupation and attempted annexation of Crimea in March 2014, the Canadian government, in tandem with partners and allies, enacted sanctions through the Special Economic Measures (Russia) Regulations (the Regulations) under the Special Economic Measures Act (SEMA). The Regulations impose dealings prohibitions (an effective asset freeze) on designated individuals and entities in Russia and Ukraine supporting or enabling Russia’s violation of Ukraine’s sovereignty. 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.
In late fall of 2021, after months of escalatory behaviour, Russia began amassing troops, military equipment and military capabilities on Ukraine’s borders and around Ukraine. The build-up lasted into February 2022, eventually totalling 150 000–190 000 troops. On February 15, 2022, the Russian Duma (equivalent to the Canadian House of Commons) voted to ask President Putin to recognize the so-called “Luhansk People’s Republic” and “Donetsk People’s Republic” in eastern Ukraine, further violating Ukraine’s sovereignty as well as the Minsk agreements intended to bring about a peaceful resolution to the conflict in eastern Ukraine. 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 20, 2022, Russia extended a joint military exercise with Belarus and announced that Russian troops would not leave Belarus. 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” (LPR) and “Donetsk People’s Republic” (DPR). Immediately following this, President Putin ordered Russian forces to perform “peacekeeping functions” in the so-called LPR and DPR regions. He also expressly abandoned the Minsk agreements, declaring them “non-existent.” On February 22, 2022, Russia’s Duma granted President Putin permission to use military force outside the country. Uniformed Russian troops and armoured vehicles then moved into the Donetsk and Luhansk regions for the first time under official orders. On February 24, 2022, President Putin announced a “special military operation” as Russian forces launched a full-scale invasion of Ukraine. The invasion began with targeted strikes on key Ukrainian military infrastructure and the incursion of Russian forces into Ukraine in the north from Russia and Belarus, in the east from Russia and the so-called LPR and DPR regions, and in the south from Crimea.
The deterioration of Russia’s relations with Ukraine has paralleled the worsening of its relations with the United States (U.S.) and the North Atlantic Treaty Organization (NATO), which has led to heightened tensions.
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 LPR and DPR regions and stating that they were preparing to step up restrictive measures to respond to Russia’s actions, while reaffirming their unwavering commitment to Ukraine’s sovereignty and territorial integrity. G7 Foreign Affairs ministers and NATO leaders continue to be united in promising significant consequences for Russia.
In September 2022, a report by the OSCE’s Office for Democratic Institutions and Human Rights drew a direct link between systematic human rights violations and repression inside Russia, and its war of aggression against Ukraine. Also in September 2022, the Office of the United Nations High Commissioner for Human Rights (OHCHR) expressed concerns about the large number of people arrested for protesting the partial mobilization of troops in the context of the Russian invasion of Ukraine, calling for the immediate release of those arbitrarily detained.
Canada continues to strongly condemn Russia’s behaviour toward Ukraine. Canada has announced several contributions to support Ukraine, including humanitarian, development, resilience, security, human rights and stabilization programming in Ukraine totalling over $600 million since January 2022. To support Ukraine’s economic resilience, Canada also offered up to $1.45 billion in additional loan resources to the Ukrainian government through a new Administered Account for Ukraine at the International Monetary Fund (IMF), which have been fully disbursed.
Canada also sent weapons such as rocket launchers, hand grenades, anti-armour weapons, and ammunition to support Ukraine. These contributions are in addition to more than $57 million in military equipment that Canada has provided Ukraine from 2015 to 2021, and the expansion of Canada’s commitment to Operation REASSURANCE, the Canadian Armed Forces’ contribution to NATO assurance and deterrence measures in Central and Eastern Europe.
Since February 24, 2022, the Government of Canada has enacted a number of punitive measures, and imposed severe extensive economic sanctions, against Russia for its war of aggression against Ukraine. Since the start of the crisis, under SEMA, Canada has sanctioned over 1 500 individuals and entities in Russia, Belarus, and Ukraine. This includes senior members of the Russian government, including President Putin and members of the Duma, the Federation Council and the Security Council, military officials and oligarchs (namely Roman Abramovich, the Rotenberg brothers, Oleg Deripaska, Alisher Usmanov, Gennady Timchenko, Yevgeny Prigozhin), and their family members.
Canada also targeted Russia’s ability to access the global financial system, raise or transfer funds, and maintain funds in Canadian dollars by sanctioning several core Russian financial institutions, including Sberbank, VTB, and VEB, as well as the Central Bank of Russia, the Ministry of Finance and the National Wealth Fund. Canada also successfully advocated for the removal of several Russian banks from the SWIFT payment system.
Furthermore, Canada implemented measures to pressure the Russian economy and limit Russia’s trade with and from Canada. Russia’s economy depends heavily on the energy sector. Therefore, Canada moved ahead with a prohibition on the import of three distinct types of oil products, including crude oil, from Russia. Canada revoked Russia’s “most favoured nation” status, applying a 35% tariff on most imports from Russia. In response to Belarus’s support to Russia, Canada also revoked Belarus’s “most favoured nation” status.
Finally, Canada stopped the issuance of new permit applications and cancelled valid permits for exporting controlled military, strategic, and dual-use items to Russia, with exceptions for critical medical supply chains and humanitarian assistance.
These amendments to the Regulations build upon Canada’s existing sanctions by further impeding Russian dealings with Canada. These measures are being taken in coordination with partners, including in the U.S., the United Kingdom (U.K.), the European Union (EU), Australia and Japan.
Conditions for imposing and lifting sanctions
Pursuant to SEMA, the Governor in Council may impose economic and other sanctions against foreign states, entities and individuals when, among other circumstances, a person has participated in gross and systematic human rights violations in Russia.
The duration of sanctions by Canada and like-minded partners has been explicitly linked to the peaceful resolution of the conflict and the respect for Ukraine’s sovereignty and territorial integrity within its internationally recognized borders, including Crimea, as well as Ukraine’s territorial sea. The U.S., the U.K., the EU and Australia have continued to update their sanction regimes against individuals and entities in both Ukraine and Russia.
- 1. Impose further costs on Russia for its aggression and attack on Ukraine.
- 2. Impose further costs on those individuals and entities with expertise in Russia’s defence and weapons industry.
- 3. Maintain the alignment of Canada’s measures with those taken by its international partners to underscore continued unity with Canada’s allies and partners in responding to Russia’s ongoing actions in Ukraine.
- 4. Ensure Canada does not export to Russia goods that could be used in the manufacture of weapons.
The Regulations Amending the Special Economic Measures (Russia) Regulations (the amendments) add 7 individuals and 50 entities to Schedule 1 of the Regulations, thereby subjecting them to a broad dealings ban. The individuals are senior managers in Russia’s leading defence companies as well as a Russian oligarch and his family who has been sanctioned by Canada’s allies. The entities are private and state-owned enterprises in Russia’s defence industry with specializations in areas such as digital and cyber capabilities for military purposes, radar and reconnaissance, rocket and missile systems, armaments and machinery, including the production of battle tanks. These entities have been identified by external defence experts as playing a critical role in Russia’s acts of aggression in Ukraine and/or have been sanctioned by Canada’s allies, specifically the United States. The amendments also add an export prohibition on certain chemicals primed for use in electronic devices that could be used in weapons, as well as impose a ban on importing, purchasing, acquiring or shipping any and all Russian arms, ammunition and other weapons, including hunting knives and air rifles into Canada.
Global Affairs Canada engages regularly with relevant stakeholders, including civil society organizations, cultural communities and other like-minded governments, regarding Canada’s approach to sanctions implementation. Global Affairs Canada research also draws from analysis from pro-democracy movements inside and outside of Russia.
With respect to the amendments targeting individuals and entities, public consultation would not be appropriate, given the risk of asset flight and the urgency to impose these measures in response to the ongoing breach of international peace and security in Ukraine.
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.
Regulations are the sole method to enact sanctions in Canada. No other instrument could be considered.
Benefits and costs
Sanctions targeting specific individuals and entities have less impact on Canadian businesses than traditional broad-based economic sanctions, and have limited impact on the citizens of the country of the listed individuals and entities. It is likely that the newly listed individuals and entities 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 and entities to their existing monitoring systems, which may result in a minor compliance cost.
The amendments could 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
Likewise, the amendments could create additional 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.
The permitting process for businesses meets the definition of “administrative burden” in the Red Tape Reduction Act and would need to be calculated and offset within 24 months. However, the amendments address an emergency circumstance and are therefore exempt from the requirement to offset administrative burden and regulatory titles under the one-for-one rule.
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 Canada’s allies.
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 and entities in foreign states, sanctions under SEMA 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 and entities.
The amendments seek to impose a direct economic cost on Russia and signal Canada’s strong condemnation of Russia’s violation of Ukraine’s sovereignty and territorial integrity. They aim to impose further costs specifically on Russia’s defence industry, making it more difficult and expensive to deploy military technology in support of Russia’s aggression in Ukraine. They also seek to limit any profits Russian weapons manufacturers could obtain through sales in Canada, and add an export prohibition on certain chemicals primed for use in electronic devices that could be used in weapons. These sanctions demonstrate Canada’s solidarity with like-minded countries, which are imposing similar restrictions.
Implementation, compliance and enforcement, and service standards
The amendments come into force on the day on which they are registered.
The names of the listed individuals and entities will be available online for financial institutions to review, and will be added to the Consolidated Canadian Autonomous Sanctions List. This will help to facilitate compliance with the Regulations.
Canada’s sanctions regulations are enforced by the Royal Canadian Mounted Police and the Canada Border Services Agency (CBSA). In accordance with section 8 of SEMA, every person who knowingly contravenes or fails to comply with the 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.
The CBSA has enforcement authorities under SEMA and the Customs Act, and will play a role in the enforcement of these sanctions.
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