June 14th, 2024

Canada’s trade with Russia has plummeted since its invasion of Ukraine

By Dylan Robertson and Mia Rabson, The Canadian Press on February 23, 2023.

A man walks at an exhibition at the St. Petersburg International Gas Forum in St. Petersburg, Russia, Wednesday, Sept. 14, 2022, with a logo of Russian gas monopoly Gazprom in the background. Canada's trade with Russia plummeted in the first 10 months after Moscow's invasion of Ukraine a year ago, with Ottawa's economic measures barring the export of everything from forklifts to barbers' chairs. THE CANADIAN PRESS/AP-Dmitri Lovetsky

OTTAWA – Canada’s trade with Russia plummeted in the first 10 months after Moscow’s invasion of Ukraine a year ago, with Ottawa’s economic measures barring the export of everything from forklifts to barbers’ chairs.

Yet certain sectors have emerged largely unscathed by the restrictions, as businesses grapple with a constantly expanding list of restrictions and sanctions.

Industry Canada data show that between March and December 2022, the value of total imports from Russia plunged 78 per cent to $414 million, from $1.9 billion during the same eight-month period in 2021.

By November and December, Canadian imports from Russia had fallen 98 per cent compared to the year before. Over both months, the total value of imports from Russia was $9 million, compared to $433 million in the last two months of 2021.

The value of exports from Canada to Russia between March and December fell 91 per cent, dropping to $52 million in 2022 from $584 million in 2021.

“The Canadian footprint in Russia has collapsed,” said William Pellerin, an Ottawa-based trade lawyer with the firm McMillan LLP.

Federal data show Canada is still importing a significant amount of pneumatic tires, aviation turbine fuel and plywood. But only a handful of the top 25 products imported from Russia in both 2021 and 2022 saw an increase.

That includes nickel ores, which Canada tends to process for export, as well as ammonium nitrate, mostly used in fertilizer. The imports of both more than doubled in value between the two years, though Canada didn’t import either product after June 2022.

Pellerin said the fertilizer data reflect the annual cycle of farmers making purchases ahead of the spring sowing season. The purchases related to this year’s season will show up in later data, he said.

Ottawa imposed a 35 per cent tariff on Russian and Belarusian products in March, which it expects will yield $115 million in revenue that Canada plans to transfer to Ukraine.

The Liberals have said they accept that tariffs and restrictions have an impact on Canada’s economy, but they argue it’s worth taking a stance in support of international rules.

Canada is the only G7 country to include nitrogen fertilizer in its tariff regime, to the ire of Eastern Canadian growers, who say it unfairly drives up the cost of products at a time of high inflation.

About half a dozen products saw an increase in exports in 2022 versus 2021, but many of them saw most or all of that occur in January and February, before Canada imposed sanctions. For example, Canada exported $85 million in aircraft over 15,000 kg to Russia last year, all of it in February 2022.

As part of the firm’s complex regulatory solutions group, Pellerin said his clients include Canadian and international firms navigating sanctions on Russia, but not Russian themselves.

He said the drop in Canadian exports to Russia partially stem from a list of weapons-related goods that Ottawa banned for export in May, many of which don’t consist of actual weaponry.

The list includes motorcycles and surgical or veterinary furniture including “dentists’ chairs” as well as “barbers’ chairs and similar chairs, having rotating as well as both reclining and elevating movements.”

The list also includes cranes, X-ray equipment and forklift trucks, because such goods might be appropriated for military use. Canadian companies can only export these items if they secure a waiver.

“We’re displacing Canadian exports, and they’re being replaced by Chinese supply,” Pellerin argued.

He noted that trade in services have also taken a major hit, in particular for companies that help with mining operations in Canada and Russia, given their similar terrain.

Pellerin has also come across companies based in Dubai or Europe that have significant exchanges with Russians, and others in which Russian oligarchs have partial control or ownership.

“Not a week that goes by that we don’t kick up a rock and there is a sanctioned oligarch in some proposed business dealing that we can no longer do,” he said.

“What the average Canadian does not see is all the business that doesn’t get done with Russian parties as a result of Canadian sanctions – and frankly all the risk that is being borne by international businesses as a result.”

For example, Canadian companies might suddenly discover that they’ve been doing business for years with a firm that has minority Russian ownership, making it unclear whether they need a waiver to continue.

Canadian companies apply for these exemptions by making the case that the economic activity would not violate the intent of sanctions, and a cabinet minister signs off on the waivers.

Pellerin argues this makes the process “more political than is truly independent or legal” and notes there is very limited detail in the guidance Global Affairs Canada posts online, compared to that provided by allied countries.

The department gave no indication it would improve the level of detail it provides, with spokesman Grantly Franklin saying in an email that the waivers “are evaluated on a case-by-case basis, and we have a rigorous due diligence process in place.”

Pellerin said the sanctions team is “doing everything that they can on a shoestring operation,” with some exemptions taking months to process.

In the past year, Canada has sanctioned more than 1,600 people in relation with Russia’s war in Ukraine. Yet the government says it cannot determine how many more of its employees have been assigned to work on sanctions and exemptions.

“Hundreds of Global Affairs Canada employees may be contributing to the sanctions effort at any given time. For these reasons, it is not possible to specify the exact number of people working on sanctions at any given time,” Franklin wrote.

In 2021, Russia stood as Canada’s 28th most valuable trading partner, falling last year all the way to 53rd place.

Russia’s ambassador in Ottawa, Oleg Stepanov, lamented the drop in trade in an interview this month with state news agency RIA Novosti.

“Ottawa’s unfriendly actions have significantly affected the dynamics of bilateral trade,” he said in a Russian-language interview.

“We predict that the negative trend will continue this year.”

This report by The Canadian Press was first published Feb. 23, 2023.

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