On February 22, 2022, the Government of Canada announced that it was enacting new sanctions against Russia, one day after Russian President Vladimir Putin sent Russian troops into Donetsk and Luhansk (two separatist regions in Eastern Ukraine) and Russia’s Parliament (“Russian State Duma”) formally recognized the independence of Donetsk and Luhansk.
The new sanctions under the Special Economic Measures (Russia) Regulations (the “Russia Regulations”) and the Special Economic Measures (Ukraine) Regulations include:
- Restrictions on members of the Russian State Duma who voted for the decision to recognize the independence of the Donetsk and Luhansk;
- A direct and indirect dealings ban on the non-Ukrainian government-controlled areas of Donetsk and Luhansk, prohibiting Canadians from engaging in specific transactions and activities in these regions;
- New prohibitions on direct and indirect dealings in Russian sovereign debt; and
- Sanctions on two significant Russian financial institutions, Promsvyazbank (“PSB”), which finances Russia’s military, and Vnesheconombank (“VEB”), Russia’s development corporation, targeting Russia’s ability to fund its activities to destabilize Ukraine.
Since 2014, the Russia Regulations have been aimed at responding to Russia’s ongoing violations of Ukraine’s sovereignty and territorial integrity and human rights violations in Russia. These new sanctions are another layer of sanctions Canada has been imposing on Russia since 2014 pursuant to the Special Economic Measures Act (“SEMA”). Under SEMA, the Government of Canada is authorized to impose sanctions on foreign jurisdictions and persons where it is of the opinion that a breach of international peace and security has occurred that has resulted in or is likely to result in a serious international crisis.
The effect of sanctions under SEMA is to prevent any person in Canada (individuals and corporate entities) and any Canadian outside Canada (including Canadian citizens and Canadian corporations or businesses with activities abroad) from directly or indirectly participating, causing, facilitating, or assisting with certain dealings involving a specified foreign jurisdiction and/or specified persons. Typically, SEMA targets dealings involving property of persons designated under a special regulation, as well as financial or other related services relating to restricted dealings.
Canada’s most recent sanctions against Russia are in coordination with several allies and part of a broader diplomatic effort to target Russia after its most recent escalation in Ukraine. On the same day as Canada, the United States, the United Kingdom, and the European Union also imposed a further range of sanctions on Russia.
Canada and its allies have described their most recent sanctions as the first round of penalties against Russia, which will increase proportionally with Russian escalation in Ukraine.
Given confirmed reports that Russia has begun a broader attack on Ukraine, one can expect further sanctions are on the way. Further sanctions may include restrictions on Russian oil and gas exports, travel bans against Russian individuals, further penalties against Russian economic entities and financial institutions, including the seizure of Russian assets located in sanctioning jurisdictions, and additional limits on Russian institutions’ access to global financial services.
As the Russia-Ukraine conflict continues to develop, we will be updating this post to track Canada’s and allies’ responses as they are announced.
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