Services Ban for Russia’s Oil, Gas, Chemical Sectors

Summary#

These are final rules (SOR/2022-125) that change the Special Economic Measures (Russia) Regulations. They ban exporting a list of services to Russia’s oil, gas and chemical sectors and broaden the prohibition on helping others to do banned activities. The rules were registered and came into force on June 7, 2022 and were published in the Canada Gazette on June 22, 2022.

What it does#

• Adds a new ban (listed as Schedule 8) that stops people in Canada and Canadians outside Canada from providing certain services to Russia or to people in Russia, when those services relate to specified industries.
• Expands the prohibition on assisting to make it illegal to knowingly cause, facilitate, or assist in activities already banned by the Regulations.
• Lists more than 28 types of services (for example: engineering, construction, computer services, management consulting, accounting, advertising, technical testing, bulk storage, transportation and leasing) tied to industries including oil and gas, mining and chemicals.
• The ban is aimed at services connected to specific industry codes set out in the new Schedule 8.

Who's affected#

• Canadian companies and workers who sell professional and technical services abroad, especially those that work with the oil, gas, chemical and related mining and manufacturing sectors.
• Businesses that export services such as engineering, construction, R&D, computer services, accounting, management consulting, advertising, transport, storage or equipment leasing.
• Canadians working or doing business outside Canada who would otherwise provide these services to clients in Russia.
• Importantly, enforcement targets both people physically in Canada and Canadians abroad. It is less clear from the text which individual firms will be directly affected without checking whether their services match the detailed list in Schedule 8.

Why it matters#

• The change prevents many kinds of professional and technical service work from supporting Russia’s oil, gas and chemical industries. That can stop or slow projects that rely on Canadian expertise or services.
• The government estimates these types of service exports to Russia were about $124 million in 2018, so the rule can have measurable commercial impact for affected suppliers.
• The rules are part of Canada’s wider sanctions response to Russia’s invasion of Ukraine and are coordinated with allied countries. Enforcement involves the Royal Canadian Mounted Police and the Canada Border Services Agency (CBSA).
• Penalties for knowingly breaking the rules include a fine of up to $25,000 and/or jail up to one year on summary conviction, and up to five years’ imprisonment on indictment.