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Economic sanctions mainly refer to any official policy—such as a tax or tariff—made in response to another country’s actions. Believe it or not, sanctions have been part of the global political arena for over 100 years. The economic historian Nicholas Mulder describes the emergence of sanctions in his recent book, The Economic Weapon: The Rise of Sanctions as a Tool of Modern War. In this book, Mulder points to the emergence of the “economic weapon” at the end of the first world war, when then-US president Woodrow Wilson called it “something more tremendous than war.”
Flash forward a century, and sanctions continue to be used by countries around the world. They are often used when another country’s actions warrant a calculated response without calling for an all-out war. When Russia attempted a full-scale invasion of Ukraine in 2022, Western countries united in targeting Russia with economic sanctions and supplying limited financial and military aid to Ukraine. Without engaging their militaries in the conflict, Western countries avoided escalating the war to a showdown between Russia and NATO member states. Instead, they chose to rock Russia’s currency by freezing Russia’s foreign exchange reserves and blocking wealthy Russians from accessing their assets abroad.
Canada’s Stake in the Sanctions Game
Canada has tried to play a large part in the recent global sanction campaign against Russia. Shortly after the start of Russia’s invasion, Ottawa announced new amendments to Canada’s Special Economic Measures Act (SEMA), which first placed economic sanctions on Russia in 2014 following the country’s invasion of Ukraine’s Crimean peninsula. Since the first set of changes to the law made on February 24, 2022 (the first day of Russia’s invasion), Ottawa has amended the sanctions measure 29 times. A recent change, made on March 10 this year, bans “the import of Russian steel and aluminum products” to Canada. Earlier amendments, such as those made on the anniversary of Russia’s invasion, specifically target individuals connected to Russia’s war effort. The list of individual sanctions now has over 1,600 targeted persons and organizations with whom Canadians cannot do business or provide financial services.
Canada’s new sanctions have made waves in the minds of experts and the lives of ordinary people alike. CBC recently reported on several Russian individuals living in Canada with no connection to the war who have seen their savings “frozen” in the aftermath of the conflict. Meanwhile, the war has forced Canada to adopt sanctions as a primary foreign policy tool. In addition to the 30 SEMA amendments, Canada has also played a leading role in the international Russian Elites, Proxies, and Oligarchs (REPO) Task Force, which has worked to freeze the assets of Russia’s wealthy elites across the globe in response to the war.
But Are They Working?
Skeptics of Canadian foreign policy are right to criticize Ottawa’s persistent sanctions. The obvious fact remains: Russia has not stopped its war in response to Western economic policies. The war has entered its second year, yet it has inspired debates on the effectiveness and purpose of sanctions in the modern global arena. Russian Studies departments at Columbia and New York Universities co-hosted a recent debate on how sanctions are changing the fates of Russian oligarchs globally.
The panel included Brooke Harrington, an economic sociologist at Dartmouth College, who pointed to several worrying instances. Her research highlighted a group of wealthy Russians targeted by Western sanctions who have avoided asset freezes with the help of Western wealth managers. Daniel Nielson, a government professor at the University of Texas – Austin, also noted the ease with which oligarchs and the Russian elite use workarounds to access the global financial market. Harrington suggested additional layers of sanction policy specifically targeting wealth managers, who often facilitate oligarchs’ sanction avoidance.
David Szakonyi, a political scientist at George Washington University, agreed with the previous two panellists that Russian oligarchs have adapted to new laws. His research confirms that individual sanctions have not dramatically slowed the war, but his findings reveal other reasons to sanction certain wealthy Russians. The use of sanctions, in his view, is turning into a question of how we deal with the dirty money of oligarchs and Russia’s elite. He sees the current outpouring of sanctions law from countries like Canada, the US, the UK, and other Western states as important in estimating corrupt wealth across the globe.
A New Direction
One example Szakonyi turned to in his research is the UK’s new Economic Crime Act, which the British Parliament passed after Russia invaded Ukraine last February. The policy involves a clause that forces greater transparency on the owners of the shell companies often used by Russia’s wealthy elite to purchase property in the UK. Szakonyi’s research found that this new level of transparency led to a dramatic drop in foreign property purchases since the start of the war. In other words, when the UK government forced oligarchs to own up to their shadowy purchases, they were less likely to buy British property.
While Canada is not home to as many of Russia’s elite as the UK is, we can still learn from the successes of our Commonwealth partners. As members of the REPO Task Force, Canada can weaponize this moment and lead the global economy toward greater transparency and effectiveness. While Ottawa has compiled a comprehensive list of individuals and organizations supporting Putin’s war efforts, the new policy will support our sanctions strategy. Pressuring the money managers of Russia’s wealthy, and emphasizing transparency in Canada’s ballooning real-estate market, will help cleanse the global financial system of shadowy purchasing methods. These strategies can also further isolate the uber-wealthy who support Putin’s war in Ukraine.
Canada has shown impressive commitment in its continued effort to name and shame those aiding Russia’s war. Although the conflict is already in its second year, the time has come for a new chapter of imaginative policymaking in Ottawa. Amendments specifically targeting money managers and the real estate market would likely have net-positive effects beyond the problem of dirty Russian money. These changes could ease Canada’s increasingly unaffordable housing market and isolate Canadian money managers who have helped Russia’s wealthy avoid punishment for the last year. New policies can also bring more leadership and demonstrate Canada’s global commitment to learning from and working with partners of the G7 and REPO Task Force. It seems, at least, Ottawa has nothing to lose.
Edited by Ashley Renz