Today, Canada published a number of changes to its sanctions measures against Russia, which include asset freezes and travel bans against certain officials in the Russian Armed Forces and restrictions on dealing with additional Russian arms manufacturers and one financial institution. The measures also expand the existing debt restrictions applicable to dealings with certain listed Russian entities and target Sberbank, Russia’s largest lender with equity and debt financing restrictions. Russian entities have also been removed from Canada’s sanctions lists. These changes are effective as of September 16, 2014.
Canadians engaged in cross-border business activities should be updating their screening systems and compliance process and procedures to reflect these latest developments and ensure that they remain compliant with Canada’s economic sanctions regime.
An unofficial version of these most recent amendments Special Economic Measures (Russia) Regulations (Russia Regulations) can be found at www.international.gc.ca.
More Designated Persons
Under its economic sanctions regime, Canada has listed over 2,000 companies and individuals as “designated persons” with whom Canadian companies and individuals and persons in Canada are prohibited in engaging in a wide range of activities regardless of the country in which they arise.
In the case of Canada’s sanctions against Russia, there are broad prohibitions regarding dealings with companies and individuals listed under Schedule 1 of the Russia Regulations. These include prohibitions against:
- dealing in any property, wherever situated, held by or on behalf of a designated person;
- entering into or facilitating, directly or indirectly, any transaction related to such dealings;
- providing any financial or other related service in respect of such dealings;
- making any goods, wherever situated, available to a designated person; and
- providing any financial or related service to or for the benefit of a designated person.
Further, you are required to immediately report to the RCMP if: you are in possession or control of property you have reason to believe is owned or controlled, directly or indirectly, by such a designated person or by an entity owned or controlled by such a designated person; or you have any information about a transaction or proposed transaction in respect of such property.
In addition to adding four senior officials in the Russian armed forces, the amendments also add the following entities to Schedule 1 of the Russia Regulations:
Expansion of Debt Transaction Restrictions and Addition of Sberbank
- OJSC Dolgoprudny Research Production Enterprise (DNPP)
- JSC Kalinin Machine-Building Plant (MZiK)
- Mitischinskii Machine-Building Plant OAO (MMZ)
- V. Tikhomirov Scientific Research Institute of Instrument Design (NIIP); and
- Marine Scientific Research Institute of Radioelectronics “Altair” (MNIIRE “Altair”)
Under the debt financing restrictions, initially brought into force on July 24, 2014, any person in Canada and any Canadian outside Canada is prohibited from transacting in, providing or otherwise dealing in a loan, bond or debenture of longer than 90 days’ maturity in relation to the designated persons listed on Schedules 2 and 3 of the Russia Regulations, their property or any interests or rights in their property.
The amendments significantly expand the debt restrictions for Schedule 2 entities to include loans, bonds and debentures having a maturity of longer than 30 rather than 90 days.
Sberbank has also been added to Schedule 2 as a result of these amendments and is now subject to these expanded debt restrictions as well as the existing capital funding and equity restrictions. The other Schedule 2 entities subject to these debt and equity restrictions are Gazprombank, VEB, VTB Bank, Bank of Moscow, and Russian Agricultural Bank (Rosselkhozbank).
Entities listed under Schedule 3, currently only OAO Novatek, remain subject to the 90 day debt financing limitation - i.e, persons in Canada and Canadians outside Canada are prohibited from in engaging in any dealings in a loan, bond or debenture of longer than 90 days’ maturity in relation to a designated person listed on Schedule 3 or their property or interests or rights in their property.
Removal of Entities from Canada’s Sanctions List
The amendments published today also remove two Russian banks – Expobank and Rosenergobank – from Schedule 1 of the Russia Regulations. These two banks had been listed as designated persons since April 28, 2014. Accordingly, persons in Canada and Canadians outside Canada are now permitted to engage in business dealings with these banks.
No Export Control Measures on Energy Sector …Yet
In a written statement of August 6, 2014, Canada’s Prime Minister Stephen Harper stated that Canada is “committed to imposing the necessary regulations to enact export restrictions on technologies used in Russia’s oil exploration and extraction sector” and that these would be implemented in unison with other allied countries.
However, Canada has yet to adopt any such restrictions in the energy sector. Both the U.S. and the EU have already implemented new restrictions on the export of energy sector related goods and further expanded those measures in their most recent rounds of sanctions.
It is also important to keep in mind that there are significant differences between Canada’s lists of designated persons and those of the United States and European Union. For example, Rosneft appears on the U.S. Sectoral Sanctions Identifications List and is also subject to recently implemented U.S. energy sector export controls. In contrast, Canada has not listed Rosneft on any of its sanctions lists.