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Alberta

Russian billionaire couple claims Canadian sanctions are unjustified and unreasonable

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Russian billionaire Andrey Melnichenko and his wife Aleksandra want to be taken off Canada’s sanctions list, claiming in Federal Court they’ve been wrongfully labelled as “elites and close associates” of the Russian regime.

The Melnichenkos filed two applications in the Federal Court of Canada in late March, seeking to quash a decision to place them under sanctions related to the war in Ukraine.

Court documents obtained by The Canadian Press reveal that the pair have been fighting their inclusion on Canada’s list of “designated persons” under its Russian sanctions regime since October 2022.

Back in February, the Trudeau government announced amendments to the Special Economic Measures (Russia) Regulations, which included placing the Melnichenkos on a list of 122 sanctioned individuals tied to the government of Russian President Vladimir Putin.

The couple claim the Canadian government has failed to provide them with any evidence to justify their inclusion on the list.

The list includes Russian elites and policymakers thought to be “engaged in activities that directly or indirectly facilitate, support, provide funding for or contribute to a violation or attempted violation of the sovereignty or territorial integrity of Ukraine.”

“Mr. Melnichenko does not have, and has not had, any association with the Government of Russia or President Putin,” Andrey Melnichenko’s application states. “He left Russia 20 years ago and has resided in Switzerland for the past 13 years. There is no reasonable basis for the Minister to believe otherwise.”

His wife, a former model and Serbian pop singer, claims she’s been wrongly targeted by Canadian sanctions, since she has no ties to Russia and doesn’t have any involvement in companies founded by her husband.

The couple’s Canadian lawyers, Scott Hutchison and Eleni Loutas with Henein Hutchison Robitaille LLP in Toronto, declined to comment on their cases.

Andrey Melnichenko’s public relations director, Alexander Byrikhin, did not immediately respond to an emailed request for comment.

Global Affairs Canada said in an emailed statement that it “cannot release information on individuals or entities listed under the Special Economic Measures (Russia) or comment on individual cases.”

“In response to Russia’s illegal and unjustifiable invasion of Ukraine, Canada has imposed hard-hitting sanctions against the Russian regime and those who enable it,” the statement said.

Aleksandra Melnichenko claims in her application that she’s a European citizen with “no connections to Russia whatsoever.”

She denies any involvement in two companies founded by her husband, fertilizer firm EuroChem, and SUEK, a coal company, both of which are owned by a trust administered in the European Union.

“She is merely a beneficiary of the discretionary trust managed by the independent trustee,” her application claims. “The latter is the legal owner of the named companies.”

In June 2022, EuroChem issued a “statement on ownership and control” following reports that Andrey Melnichenko had ceded ownership in the firm to his wife just before being sanctioned by the EU.

“EuroChem Group AG is not sanctioned, has never been sanctioned, and is free to continue with its important mission of supplying high-quality crop nutrients to world markets,” the statement said. “EuroChem is majority-owned and controlled by EU trustees of a trust, whose beneficiary, Aleksandra Melnichenko, has no majority ownership of, nor influence over, EuroChem. Therefore, EuroChem is not controlled by any sanctioned person.”

Aleksandra Melnichenko claims her “erroneous” inclusion on sanctions lists in the EU, Switzerland and Canada caused “difficulties for the companies’ operations worldwide, increasing the ongoing food and energy crisis.”

Andrey Melnichenko claims he’s been falsely portrayed as an “oligarch” in control of the companies, causing production disruptions at facilities in Europe after he was sanctioned by the EU.

His court application warns of similar “unintended consequences” in Canada, where the Russian sanctions list now includes more than 1,300 individuals.

It states that he’s not an oligarch but a “self-made businessman,” quoting a Forbes report referring to his fortune being made independently and free of ties to the Russian government under both Putin and Boris Yeltsin.

Melnichenko sits at number 58 on Forbes’ billionaires list with a net worth of more than $25 billion, which he amassed beginning in the early 1990s with a chain of currency exchange booths, before founding MDM Bank, and later EuroChem and SUEK.

“As has occurred in Europe, sanctioning Mr. Melnichenko could disrupt EuroChem and SUEK’s operations and detrimentally impact the global fertilizer supply which, in turn, has the potential to exacerbate the ongoing food shortage,” he claims in Federal Court.

Julia Webster, a Toronto-based international trade lawyer and partner at Baker McKenzie, said Canada’s approach to Russia contrasts with other countries currently under sanctions.

Unlike sanctions on Haiti, Myanmar, Iran and Sri Lanka, Canada’s sanctions on Russia represent a “true decoupling of economies,” she said, given the economic entanglements between western nations and Russia before its invasion of Ukraine.

She said Canada’s sanctions list mirrors that of allied nations.

“The sanctions are being implemented in co-ordination with Canada’s allies,” Webster said. “There is overlap on many of the prohibitions that are in place amongst the sanctions regimes between different countries and the people who are designated on those sanctions regimes, but there are also differences and Canada at this time seems to have actually one of the strictest regimes comparatively to its allies.”

In March 2022, the EU sanctioned Andrey Melnichenko, noting his attendance at a meeting held by Putin with Russian business leaders and oligarchs on the day of the invasion of Ukraine.

“The fact that he was invited to attend this meeting shows that he is a member of the closest circle of Vladimir Putin and that he is supporting or implementing actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine, as well as stability and security in Ukraine,” the EU said.

Shortly after Andrey Melnichenko was sanctioned in the EU, Italian authorities seized the couple’s $600-million “Sailing Yacht A,” but their other vessel, Motor Yacht A, valued at $300 million, avoided a similar fate by docking in the United Arab Emirates at the time.

In August 2022, the United Stated designated Melnichenko as a “Putin enabler,” pointing to his past involvement in Russia’s financial services sector.

“Listing carries serious social, economic and personal consequences,” the couple claims.

This report by The Canadian Press was first published April 16, 2023.

Darryl Greer, The Canadian Press

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Alberta

Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

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From the Fraser Institute

By Tegan Hill

According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.

The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.

For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).

And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.

In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.

This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.

Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.

Of course, if the government falls back into deficit there are implications for everyday Albertans.

When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.

According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.

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Alberta

Premier Smith says Auto Insurance reforms may still result in a publicly owned system

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Better, faster, more affordable auto insurance

Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.

After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.

Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.

“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”

Danielle Smith, Premier

“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”

Nate Horner, President of Treasury Board and Minister of Finance

Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.

Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.

Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.

In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.

Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.

By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.

“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”

Nathan Neudorf, Minister of Affordability and Utilities

Quick facts

  • Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
  • A 2023 report by MNP shows
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