Canada imposes new sanctions on key sectors of Russian economy
Canada has recently adopted a new round of economic sanctions in response to Russia’s actions in Ukraine, by way of a new amending regulation (SOR 2022-125) adopted under the Special Economic Measures Act (SC 1992, c. 17) on June 7th, 2022.
The new measures essentially aim to strike at the Russian oil, gas, mining and chemical industries, which represent an important portion of its economy and a significant source of revenues for the Russian State.
The scope of prohibited services is quite broad, and includes not only “on-site” services such as construction, transportation, repairs, storage, and equipment leasing, but also technical and professional services such as marketing, research and development, accounting, management, advertising, and other advisory services which may be rendered from anywhere in the world.
These new prohibitions are broader in scope than those relating to the assets freeze and dealings ban, as they apply to any person in Russia, as opposed to being limited to specifically listed persons.
Industry sectors targeted by these new measure include oil and gas, chemicals, and mining in general. The prohibitions on mining and chemicals are sector-wide and are not limited to certain products or categories of products.
Four elements must be present in order for this new prohibition to apply, namely:
1) the service provider must be a Canadian or a person in Canada;
2) the service must be provided to Russia or a person in Russia;
3) the service must be listed in Schedule 8, Par 1, and
4) the service must be provided in relation to an industry listed in Schedule 8, Part 2.
It is important to note that these four criteria are cumulative.
This latest development represents a new approach for Canadian sanctions and could have significant consequences. Any Canadian business offering services in the energy, mining and chemicals sectors internationally, regardless of the jurisdiction it operates from, should immediately review ongoing activities in order to ensure that no prohibited services are being provided to Russia or to persons in Russia.
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