Between 2009 and 2020, Moscow businessman Andrei Ovsyankin snapped up $3.7 million worth of Calgary real estate, including a unit in a glassy downtown condo tower and a suite in the East Village.
But now he is deeply indebted, and the money earned from the sale of his Alberta properties is poised to fall into the hands of a Russian bank Canada has sanctioned over its alleged role in the Ukraine war.
The province has seized the 10 properties, and the Alberta court has ordered them sold off to enforce a judgement requiring Ovsyankin to pay millions to a company allegedly controlled by Russia’s Gazprombank.
Gazprombank is the financial arm of Russia’s state energy giant, Gazprom. Accused of supporting Russia’s attempt to annex Ukraine, Gazprombank and its officers and affiliates have been placed on Canada’s sanctions list.
Despite the sanctions, there is no indication the governments of Canada or Alberta have taken action to stop Gazprombank from collecting the proceeds of the Calgary property sales, or that they are even aware of the matter.
The first test of Canadian measures to isolate President Vladimir Putin over his disastrous invasion of Ukraine, the case highlights the complexity of enforcing the sanctions, according to experts.
Global Affairs Canada said the government was “actively pursuing targets” of sanctions, and that “due diligence” was needed to seize assets, but did not respond to questions about the Calgary properties.
The Alberta government has not responded to questions from Global News about whether it would prevent the Russian company from collecting the millions expected to be earned from the sale of the properties.
The lawyer representing Angophora Holdings Ltd., the company trying to collect from Ovsyankin, declined to comment, as did Ovsyankin’s lawyer. Gazprombank did not respond to an email requesting comment.
“To be honest, we’re doing what we’ve always done on sanctions, which is we’re really good at press releases announcing the designation of people, which looks good — and we have a long way to go in terms of the capacity to monitor and enforce them and ensure that they’re complied with,” said University of Calgary law Prof. Michael Nesbitt.
The Ukrainian Canadian Congress said the case showed the gulf between the sweeping sanctions announced by the government of Prime Minister Justin Trudeau and their enforcement.
“I mean, we’ve implemented quite a lot of sanctions and we are more than happy to see those,” Orest Zakydalsky, a senior policy advisor at the congress, said in an interview in Toronto.
“But the second part of that is that, once implemented, they have to be enforced. And this case appears to highlight that that side of it right now is lacking in focus.”
He said the government had a duty to follow through on the sanctions it imposed. “And Gazprom is one of the biggest Russian companies. It’s known worldwide as a funder of the Russian war machine.”
“Gazprom certainly should be one of the top focuses in terms of both its scope and its impact, and the fact that it provides an enormous amount of revenue to the Russian state, which is then used to bomb and murder Ukrainians.”
Set up to serve Gazprom’s financial needs, Gazprombank is Russia’s third-largest bank. Its website said it “provides services to key sectors of the Russian economy,” including oil, gas and nuclear.
Its board members include Alexey Miller, the head of Gazprom and a Putin loyalist. Miller is also on Canada’s sanctions list, along with Gazprombank CEO Andrei Akimov and deputy chairs Alexander Sobol and Aleksei Bellous.
Ukrainian President Volodymyr Zelensky has alleged that Gazprombank “finances Russia’s anti-European policy.” NBC reported the company was processing salaries and combat bonuses for Russian troops in Ukraine, and was linked to purchases of military gear.
“Gazprombank is a critically important component of Russia’s kleptocracy that is used by the Russian government to process payments for Gazprom’s gas exports to Europe,” said Marcus Kolga, a senior fellow at the Macdonald-Laurier Institute.
“In the context of the Russian invasion of Ukraine, the Kremlin issues payment for its soldiers through Gazprombank. Gazprombank is just one of many Russian organizations that facilitate Vladimir Putin’s ability to make war.”
Russian kleptocrats and pro-Putin oligarchs have parked billions in Canada, Kolga said, and the government needed to expand its sanctions and enforcement regimes to intensify pressure on Putin.
University of Manitoba Prof. Andrea Charron said while Canada has been sanctioning at “unprecedented rates,” its legislation lacked clarity, which had created uncertainty.
“You can’t phone up Global Affairs Canada and say, ‘Please can you help me navigate this,’ because again, it’s considered legal advice and they’ve said they will not provide that.”
The international relations professor said the government needed to give advice and guidance to lawyers on how to interpret sanctions legislation so it could be applied as intended.
Read more: Canada to lay fresh sanctions against Russia, provide new aid for Ukraine: sources
Since 2011, Ovsyankin has operated the Alberta-registered company Nov Management and Supply Ltd.
Two years ago, the London Court of International Arbitration ordered him to pay $59.5 million to Angophora Holdings Ltd. due to alleged “corporate wrongdoing,” according to court documents.
When Angophora went after Ovsyankin’s Alberta assets, he argued in court that allowing the Russian company to collect the proceeds of the condo sales would violate Canada’s sanctions.
Angophora is a subsidiary of MIR Capital, an investment fund registered in Luxembourg as a joint venture owned by Gazprombank and the Italian bank Intesa Sanpaolo.
The Canadian sanctions, imposed on the grounds Gazprombank was facilitating the war against Ukraine, make it illegal to “deal in any property” owned or controlled by the company.
On Oct. 25, Justice Barbara Romaine of the Court of King’s Bench of Alberta ruled Ovsyankin had “established a strong prima facie case” that Angophora was controlled by Gazprombank.
But she said “the Russian sanctions were not meant to allow debtors to hold off their creditors.”
“While it is certainly true that it is in the public interest for the Russian Sanctions to be enforced, it would be contrary to the public interest to allow them to be used by a judgment debtor without any further recourse to delay a sale under execution properly authorized by a recognition and enforcement order,” the judge wrote.
Selling the properties would not breach the Russia sanctions, the judge wrote.
“However, before distribution of the proceeds, persons in Canada may wish to be satisfied that they are not in breach of the Russian Sanctions by further action. That, of course, is their decision.”
Canadian companies can apply to Global Affairs Canada’s Sanctions Policy and Operations Coordination Division for permits and certificates allowing them to conduct transactions that may violate Canada’s sanctions.
It remains unclear if that has happened in this case.
The RCMP said it had “effectively frozen” $121 million in assets and blocked $290 million worth of financial transactions under the Russian sanctions program since the Feb. 24 start of the invasion.
Legislation enacted by the Liberal government, which allows the courts to order the forfeiture of those assets to compensate Ukrainian war victims, has not yet been put to use.
Prof. Nesbitt, a national security law expert, said the case was the first to interpret the meaning of “control” in the context of sanctions. The term is not defined in Canada’s legislation.
“And so what happened in this case is the judge found a prima facie violation, which is to say a prima facie case of control, where the ownership was at 50% and the implicated company was involved in some of the management and operations of the company,” he said.
“So this was a great opportunity for the courts to finally make that clear. And although it won’t be binding going forward, it provides a little bit of clarity in that regard, I think, for the lawyers and businesses involved.”
Stewart.Bell@globalnews.ca