Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2023-14

Canada Gazette, Part II, Volume 157, Number 4

Registration
SOR/2023-14 February 2, 2023

SPECIAL ECONOMIC MEASURES ACT

P.C. 2023-41 February 2, 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

Amendments

1 Subsection 3.12(2) of the Special Economic Measures (Russia) Regulations footnote 1 is replaced by the following:

Non-application — goods on ship

(2) Subsection (1) does not apply in respect of services provided in relation to

2 Part 1 of Schedule 1 to the Regulations is amended by adding the following in numerical order:

3 Part 2 of Schedule 1 to the Regulations is amended by adding the following in numerical order:

4 Schedule 5 to the Regulations is amended by replacing the references after the heading “SCHEDULE 5” with the following:

(Subsections 3.05(1) and 3.12(1) and (2))

Application Before Publication

5 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

6 (1) These Regulations, except section 1, come into force on the day on which they are registered.

(2) Section 1 comes into force on February 5, 2023.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Disinformation operations are an integral part of the Russian Federation’s continuing illegal invasion of Ukraine. Russian disinformation actors actively contribute to undermining Ukraine’s sovereignty and territorial integrity.

Background

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). These sanctions 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 massing 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 of 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.

International response

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 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’s response

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.

In an effort to further limit Russian revenues while also preserving stability in the global oil market, Canada, as part of the G7+ Price Cap Coalition (“the Coalition”), imposed a prohibition on the provision of several services related to the maritime transport of Russian crude oil, unless the oil is purchased at or below a price determined by the Coalition. This “price cap” on crude oil entered into force on December 5, 2022. Canada also agreed, as part of the Coalition, to implement a similar price cap on Russian petroleum products as of February 5, 2023.

Canada is concerned with Russia’s use of disinformation surrounding its invasion of Ukraine. Since February 2022, Canada has sanctioned 54 individuals and entities that are complicit in the spreading of Russian disinformation. They aid the Russian regime in undermining state sovereignty. They are also responsible for spreading false narratives that serve as pretexts for the Russian regime’s illegal war. Canada has also created a dedicated team to increase Canada’s capacity to understand, monitor and detect Russian and other state-sponsored disinformation. Canada dedicates resources to uncover Russia’s false claims about its invasion of Ukraine and dispel them with facts. In addition, in 2022, the Canadian Radio-television and Telecommunications Commission removed RT and RT France from Canadian airwaves.

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.

Objective

  1. Impose further costs on Russia for its aggression and attack on Ukraine.
  2. Target and impose further costs on those individuals and entities engaged in disinformation operations that seek to legitimize Russia’s attacks against Ukrainian territory and sovereignty.
  3. Align Canada’s measures with those taken by international partners in the area of disinformation.
  4. Ensure that Canada remains fully coordinated with other members of the Coalition in imposing a brief exception period for the implementation of the negotiated price cap on Russian petroleum products, which other members of the Coalition are implementing in their respective jurisdictions.

Description

Proposed amendments to the Regulations add 38 individuals and 16 entities to Schedule 1 of the Regulations, who are subject to a broad dealings ban. The individuals are media pundits, “journalists,” researchers and cultural icons. They have actively disseminated Russian disinformation and propaganda about the ongoing invasion of Ukraine, stretching back to the invasion and illegal occupation of Crimea. A number of these individuals are Russian cultural icons who have used their popularity to boost Russian disinformation and propaganda and build the popularity of Russia’s political leaders and oligarchs. The entities are arms-length and state-owned entities that host and support various platforms used for disseminating Russian disinformation, including mass media, journals and websites.

The amendments also update section 3.12 of the Regulations to include a new exception for the price cap on petroleum products, which enters into force as of February 5, 2023. The exception ensures that Russian petroleum products (goods referred to in item 2 of Schedule 5 of the Regulations), which were loaded onto a vessel at the port of loading prior to February 5, 2023, and unloaded at the port of destination prior to April 1, 2023, are exempt from the service prohibition outlined in subsection 3.12(1) of the Regulations.

Regulatory development

Consultation

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 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.

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 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.

One-for-one rule

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 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 and entities.

Rationale

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 expose Russian disinformation and propaganda actors and impose costs on them. Disinformation and propaganda operations are an integral part of Russia’s ongoing violation of Ukrainian sovereignty and territorial integrity. The amendments also close gaps between Canada’s sanctions regime and those of Canada’s allies and partners.

The inclusion of a new exception to subsection 3.12(1) of the Regulations, related to the price cap on Russian petroleum products, ensures that Canada upholds its responsibilities as a member of the Coalition to align its measures with other Coalition members, who are also implementing this exception into their respective jurisdictions. Canada previously implemented a similar exception related to the price cap on Russian crude oil, with the same underlying rationale.

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 the 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.

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