Foreign Affairs Committee on June 1st, 2023

[The Chair, Liberal, Ali Ehsassi]

Thank you, Mr. Lévêque.

Next, we will go to Mr. Bergeron.

You have six minutes, sir.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you, Mr. Chair.

I thank the witnesses for being here today. I also want to thank them for enlightening us, as well as sharing their experience and knowledge.

According to an article published on March 21, Minister Joly stated that western sanctions in response to Russia's invasion of Ukraine are having an impact, because the world is seeing the “effects on society and how much we're seeing potential regime change in Russia”. She had made that statement previously, in early March. She also said that Canada should isolate Russia “economically, politically and diplomatically”.

Mr. Lévêque, a few moments ago, you said that the Russian economy has shrunk. However, in its April 2023 update, the International Monetary Fund forecast growth of 0.7% for Russia, which is higher than the forecasts for the U.K. or Germany and equivalent to that for France or Italy.

Are sanctions truly affecting the Russian economy?

Doesn't such a forecast about the state of the Russian economy demonstrate that Russia is managing to circumvent sanctions with the support of other countries?

According to one of the recommendations made by the Senate committee, our objectives should be more clearly outlined. What are they?

[Alexandre Lévêque]

Thank you for those questions.

You're correct. We have also seen the statistics published by the International Monetary Fund.

In my opinion, we need to compare current forecasts of Russia's economic growth with pre-invasion forecasts. In the absence of that invasion and the imposition of such harsh sanctions, Russia's economic growth would have been much higher than 0.7%, as is currently projected.

Are sanctions the fatal blow? Not necessarily. Did they hurt the Russian economy? There's no doubt about that.

That said, it's important to consider which economic sectors were most affected. The purpose of sanctions is not just to shrink Russia's economy, but also to disrupt those sectors most likely to hurt Ukraine.

To go back to what I was saying a few moments ago, I think we need to knock out as many value chains as possible, meaning those refined technological components that can wind up in Russia's weapons supply chain.

Does Russia have strategies to evade sanctions? There's no doubt about that, and that's one of the reasons why it's still able to fund its war.

Russia is a country that exports a huge number of energy products, such as oil and gas. However, not all countries in the world engaging in trade with Russia have an autonomous sanctions regime or would consider implementing one.

We can be very effective only once sanctions are universal, which is why it's important to ensure that we coordinate with our partners and put pressure on countries we maintain diplomatic relations with, countries that don't necessarily have autonomous sanctions regimes but that we have some influence over.

Finally, our objective with regard to Russia remains unchanged. We want to limit the country's capacity to fund its war, diplomatically isolate it and, ultimately, hold it responsible for the damage it's done. That's one of the reasons why our new seizure and forfeiture regime is so unique, and it gives us opportunities to pursue that objective.

[Stéphane Bergeron, Bloc, Montarville, QC]

Indeed, in 2022, Canada became the first G7 country to include legislation on asset seizure in its sanctions regime. It's probably also the first to follow the recommendation to that effect formulated by the Parliamentary Assembly of the Council of Europe.

I must point out that it's very difficult for us, as outside observers, to get a very clear idea of the extent to which the sanctions regimes are proving effective, and determine the real value of frozen and seized assets.

Our understanding is that the order to invoke the powers for asset seizure has been used only once, in relation to the $33 million in assets belonging to Roman Abramovich.

According to a press release from December 2022, Minister Joly was considering making a court application to forfeit the asset permanently to the Crown.

First, what's happening with that?

Second, why has this new seizure regime been used only once to date?

[Alexandre Lévêque]

Mr. Chair, I thank the member for his excellent questions.

Mr. Bergeron, you're correct. The estimated value of the bank account we believe is tied to Roman Abramovich is, indeed, $26 million U.S., which is equal to $33 million Canadian. It's the only asset that has officially been seized to date.

You asked me what's happening with that. I'll respond that it's new legislation. These are new measures, so there aren't any precedents yet. It's a complex undertaking, since it's the first.

The goal is to maximize the chances of success. Acting in haste, without a very carefully constructed legal case, probably wouldn't work in our favour if the judicial process failed and we weren't able to have the asset forfeited permanently. You're no doubt aware that Russian oligarchs are quite adept at hiding their assets. In this case, a number of international jurisdictions are requesting access to the account. International law and the laws of the respective countries come into play.

Why, to date, only one—

[The Chair, Liberal, Ali Ehsassi]

I'm afraid, Mr. Lévêque, that you're out of time. We're a minute and a half over. We're going to have to go to the next member.

[Alexandre Lévêque]

I apologize.

[The Chair, Liberal, Ali Ehsassi]

For the last member for this particular round, we now go to Ms. McPherson.

You have six minutes.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you very much, Mr. Chair.

Thank you to the witnesses for being here today and sharing their expertise with us.

This is a study I brought forward for this committee to look at in May of last year, so I'm glad we have begun doing this work. I think it's very important. I think we all understand the importance of having an effective, transparent, consistent and effectively enforced sanctions regime. Certainly, I don't feel confident that is the case. As we listened to some of the questions that came ahead of me.... The failure to implement some of those recommendations that came out of the 2017 report is problematic.

When committees do this work and come forward with recommendations—I know there are 19 recommendations that have come forward from the Senate review—and those recommendations aren't implemented, that gives me pause about whether or not the government is listening to the important work that parliamentary committees are doing.

One of the things we heard from the witnesses to date is the idea that sanctions are used as a signal and that sanctions are used to shame, I guess, those who are being sanctioned. I would put out there that without enforcement of the sanctions, that signal is very diminished. Without transparency and without consistency, that signal we are trying to send is greatly diminished.

The first question I have is with regard, again, to that 2017 study. The foreign affairs committee recommended that the Government of Canada “properly resource and reform the structures responsible for its sanctions regimes, in order to effectively impose sanctions on targeted states and persons”.

I'm wondering how many personnel in Global Affairs Canada are working on the sanctions policy and administration today, and how that has changed since 2017.

[Alexandre Lévêque]

Thank you for the question.

I will give you the number of people who work exclusively on sanctions and are dedicated to our little team, but it is important to realize that sanctions work at Global Affairs is really a matrix management kind of approach, because we work with the geographic leads and the legal folks. It's difficult to say—

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Perhaps it would be easier if you could tell us about the change, then. Have more been added since 2017? We know that was a recommendation. Has that happened?

[Alexandre Lévêque]

Pre-2017, there were maybe two or three individuals who did this full time. Post-creation of a dedicated unit, it was around 10 people. With the new announcement made last October by the Prime Minister to create a beefed-up structure for sanctions management—not just at GAC but, of course, in other departments as well—we will increase this significantly.

We've already increased by about 50% our staff exclusively dedicated to sanctions, and the goal is to multiply that two- or threefold in the coming months.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you.

Can you tell me why Russia isn't included in the area control list? As of today, only North Korea is on that list. Has the government considered adding Russia to this list? Would it be an extra layer of assurance that Canadian goods are not contributing to the illegal war in Ukraine?

[Alexandre Lévêque]

This is an important question, but unfortunately it falls under a different responsibility, which is the export control section. I would commit to you to come back to the committee with a written answer, but I would not be able to give you something that would be entirely accurate at this time.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you. A written answer would be great.

When I started, I talked a bit about consistency. We do know—and I'll just read it out to you—that the Senate recommended that the Government of Canada “should seek to be consistent in its global application of autonomous sanctions imposed in response to human rights violations.”

We have seen over the past several years that for Russia, Iran, Myanmar, Venezuela, Haiti and Sri Lanka, individuals from these countries have been sanctioned, but noticeably absent from our list are countries where clear human rights abuses are occurring, where there are extremists in government or where there have been threats to international peace and security. Of course, right now I'm thinking of Saudi Arabia in particular, but we've also heard from some Canadians who are calling for sanctions in other areas: for example, in Uganda, where we have seen their recent anti-LGBTQ2+ legislation, or in Israel, where we have seen illegal settlements happening.

I'm wondering if you could provide more clarity on how that happens. There is very little clarity for Canadians on the decision-making process in how sanctions are applied. They don't seem to be consistent at this point.

[Alexandre Lévêque]

We definitely took note of that recommendation in the Senate report. Of course, we're peeling through this very diligently, and it's definitely a recommendation we want to take on board to see how we can increase the consistency.

What I would say is that I would reverse the proposition on its head and say that sanctions are one of many tools we have in our tool kit to intervene, to signal or to have punitive impacts on countries. Really, the starting point is, what interests and vulnerabilities do we have in any given relationship? What is the series of tools at our disposal to have the greatest impact? That's where it starts.

Sanctions come in as one of the possible tools, and we are there to provide the support, the advice, the considerations and the potential ramifications when the geographic leads—the people responsible, let's say, for the bilateral relationship with Saudi Arabia or with Iran, etc.—look for additional tools to apply pressure.

On Saudi Arabia, I would say that we may not have a sanctions regime on the country itself, but we have imposed Magnitsky sanctions because of human rights violations due to the murder of Jamal Khashoggi a few years ago. It is an example of a tool we've used without listing the country as a whole. We've been very targeted and have listed the individuals who are believed to be culpable for that horrible murder.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Ali Ehsassi]

Thank you very much, Ms. McPherson.

We now go to the second round. For the second round, each member will be provided four minutes.

We start off with Mr. Epp.

You have four minutes.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here today.

I'm going to pick up on the theme of effectiveness. Obviously, that's one of the purposes of this study as well. On Russia's war machine, have there been any evaluations specific to that? I note that suicide drones have been sourced from Iran. I believe that in your opening comments you referenced some of the sanctions applied to players in Iran. They've also been getting ammunition from North Korea. I didn't hear “North Korea” in that opening list of sanctions. Can you comment on that?

[Alexandre Lévêque]

Yes, absolutely. Thank you for the question.

Yes, we are constantly assessing the impacts, not only because we want to make sure that what we're doing has the greatest possible impact, but also to see how we can adjust the tools to see which targets we can identify to weaken the war machine.

Of course, Russia does not have the most readily available data on its trade. It's not exactly an open government. The sources of information are complicated to obtain, but what I would say is that that's where the alliances with like-minded countries come in, and we have the United States, the United Kingdom, the European Union and a few others that collect information and look at trade flows. It's not just about looking at what dealings Russia has. It's about looking at the countries that we suspect are dealing with Russia and seeing if there are anomalies among those.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

You also talked about the unintended consequences of sanctions. Certainly Canadians are grappling with high food prices. One of the contributors there is the tariff that we apply to Russian fertilizers and Belarusian fertilizers. Has there been any analysis on the impact of that specific sanction on Russia versus the cost here to our own food systems? I note that our allies seem to have done an analysis and come to a different conclusion than we have.

[Alexandre Lévêque]

There was a clear determination that was made—and I believe this was announced publicly by the Prime Minister a number of months ago—that we would exclude from the shipping ban and from sanctioned goods anything that goes into food production, precisely because of the concern about the additional pressure it would have on food prices. That is explicitly not something we will prevent the trade of, Russian or Belarusian fertilizer.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

SEMA provides for those exceptions to be noted. We've discussed at this committee the Gazprom turbines before.

Are there any other exceptions that have been granted dealing specifically with Belarus and Russia, dealing with the war, that we are not aware of, excluding the two that we were just talking about?

[Alexandre Lévêque]

I would say that every case is unique. That's why permits are always assessed on a case-by-case basis. I would say, as a general rule of thumb, that what we look at when there are requests for exemptions, for permits or for confirmation of no prohibition is the significance of granting the permit for Canadian interests and safety and security versus the significance of not—

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Can you identify any specifics?