New sanctions against Russia expand supply and sourcing prohibitions and further target the financial services sector
Canada has implemented another two rounds of sanctions against Russia. These latest amendments to the Special Economic Measures (Russia) Regulations (“Russia Regulations”) came into force on May 18 and May 27, 2022. The respective Regulations can be found on the Canadian Sanctions web page here and here (“Regulations”). In its May 20, 2022 news release, Global Affairs Canada states that the newly adopted measures, including further expansion of the sanctioned persons list and bans on luxury goods and goods that could be used in the manufacture of weapons, are aimed at maintaining pressure on the Russian regime until it is no longer able to wage war, and mitigating the potential for Russian oligarchs to circumvent sanctions.
36 individuals added to the sanctioned persons list
The list of sanctioned persons in Schedule 1 of the Russia Regulations has been expanded with the addition of 36 individuals and four entities. The entities, all operating in Russia’s financial services sector, are:
- Management Company of the Russian Direct Investment Fund JSC
- RVC Management Company LLC
- Russian Agricultural Bank JSC
- Investtradebank JSC
The new group of designated individuals is mostly comprised of Russian pro-Kremlin oligarchs, including their wives, children, ex-wives, and in-laws. Notably, Canada listed Alina Kabaeva, who is reportedly the girlfriend of Vladimir Putin. It also targets family members of Vladimir Putin’s closest ally Gennady Timchenko, including Mr. Timchenko’s wife, two daughters, and his son-in-law. Several family members of Mikhail Fridman are also listed. Further, the new list includes several Sberbank, VTB, and Gazprombank executives.
The Russia Regulations prohibit a very wide range of activities involving listed individuals and entities, including dealings in property owned, held or controlled by or on behalf of listed persons, directly or indirectly facilitating transactions related to such dealings, and providing financial or related services for the benefit of listed persons.
Bans on luxury goods
The new provisions prohibit any persons in Canada or Canadians outside Canada from exporting, selling, supplying, or shipping goods referred to in Part 1 of Schedule 6, wherever situated, to Russia or to any person in Russia. They also prohibit persons in Canada and Canadians outside Canada from importing, purchasing or acquiring goods referred to in Part 2 of Schedule 6, wherever situated, from Russia or from any person in Russia. These prohibitions will take effect 60 days after they come into force, i.e., by July 17, 2022.
Importantly, the scope of these prohibitions are not limited to imports into and exports from Canada. They also apply to the supply or sourcing of these products anywhere in the world to or from “Russia or any person in Russia”.
There is an exception for personal effects taken by individuals leaving Canada for Russia as well as individuals leaving Russia that are solely for their and their immediate families’ use.
We note that the lists of so-called “luxury” goods that are banned for supply and sourcing purposes are not identical, with the sourcing list being significantly shorter than the supply list (26 entries versus 257 entries respectively). The items on the sourcing ban list encompass mostly seafood items including caviar, liquor (including vodka), and diamonds. The items on the supply ban list are comprised of broader categories of goods, including alcoholic beverages, tobacco and cigarettes, cosmetics, handbags, fur skins, fabrics such as silk, textile products including carpets, sportswear, footwear, luxury clothing and accessories, jewelry, kitchenware, vehicles and art.
The supply and sourcing ban on these goods to and from Russia could potentially have a noticeable impact on affected industries. Global Affairs Canada estimates that together the banned categories represented trade in $75.7 million worth of goods in 2021, and this does not appear to account for any supply or sourcing activities by Canadians in addition to imports into or exports from Canada.
These bans bring Canadian sanctions closer in line with those of the United States and the European Union, both of which banned exports of luxury goods to Russia and import of certain items from Russia in March 2022 (see EU Regulation 2022/428 and US Executive Order 14068).
Ban on supply of goods that could be used for manufacture of weapons
The Russia Regulations also contain a broad supply prohibition on various goods that could be used for weapons manufacturing. The export, sale, supply, or shipment of any good referred to in Schedule 7, wherever situated, to Russia or to any person in Russia is now prohibited.
Schedule 7 lists 60 diverse categories of goods, including medical devices such as X-rays or artificial respiration or other therapeutic respiration apparatuses, measuring instruments, photographic equipment, thermostats, ships, boats and floating structures, unmanned aircrafts, vehicles, electrical machinery, industrial robots, equipment used in construction, metals and scrap metals, pumps, etc. Notably, it does not appear necessary that these items be specially designed for weapons production or military use in order to be subject to the supply ban. Accordingly, suppliers of any of the listed goods should be carefully reviewing these requirements before shipping to Russia or persons operating in or from Russia.
This list should not be confused with the restricted goods and technologies set out in the Restricted Goods and Technologies List adopted in March 24, 2022. That list also prohibits the supply of a broad range of uncontrolled items, including those in the areas of electronics, computers, telecommunications, navigation and avionics, and marine and aerospace items from export to Russia (see our previous alert on this topic here).
Continue to monitor developments
As Russia’s invasion of Ukraine appears to continue without abatement, we anticipate further expansion of the Russian sanctions programs of both Canada and its allies. We continue to closely monitor these developments. We also anticipate that the Canadian government will release long-awaited guidance on the existing sanctions measures.