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Canadian Foreign Affairs Minister Rob Nicholson, right, meets with Ukrainian Minister of Agrarian Policy and Food Oleksiy Pavlenko in Mississauga, Ont., on Friday, March 27, 2015.

Darren Calabrese/The Canadian Press

‎Canadian companies feeling constrained by sanctions against Russia should turn their focus to neighbouring Ukraine instead, that country's agriculture minister says.

Oleksiy Pavlenko, Ukraine's minister of agrarian policy and food, used a recent visit to Ottawa and Toronto to urge Canadian firms to look more closely at investment opportunities in Ukraine. A lengthy war with Russian-backed rebels in eastern Ukraine has consumed a large portion of government spending and damaged the country's already shaky economy.

Mr. Pavlenko held talks with Canada's trade and foreign affairs ministers and met with representatives from Canadian companies during a two-day visit. He told The Globe and Mail in an interview he was eager to convey reforms undertaken by Ukraine's government in recent months, including those aimed at making the country more favourable for trade and investment.

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"You're facing sanctions on the Russian side, and you also have a situation where you have huge decreases in trade with Russia," Mr. Pavlenko said. "But you have [the] Ukrainian market, and it's very beneficial for Canadian companies to see there's a huge Ukrainian market."

Canada's sanctions against Russia apply specifically to individuals and entities on a government list, which means firms are not entirely blocked from investing in that country. But the sanctions list can make investments more risky because companies have to take extra steps to ensure they are complying with the rules.

Mr. Pavlenko said that creates an opportunity for firms to shift their focus to Ukraine, where he said security had returned to much of the country.

John Boscariol, who leads McCarthy Tétrault's international trade and investment law group, said Canadian firms might prefer to invest in Ukraine because of the international scrutiny Russia is facing. However, he added that Canada's sanctions also target those inside Ukraine, so companies would face similar challenges in making sure they aren't breaking any rules. "We'll hear from some companies that they'd rather not deal with the headaches of all of that," he said.

Ottawa announced Friday that it would contribute additional funding to a special monitoring mission to Ukraine and extend the term of some Canadian observers who are participating. The mission is run through the Organization for Security and Co-operation in Europe. The government also signed off on a previously announced $200-million loan for Ukraine during Mr. Pavlenko's visit. The Canadian loan is the second of its kind since the crisis in Ukraine began.

During the interview, Mr. Pavlenko said he planned to discuss progress on free-trade negotiations between Ukraine and Canada, which were revived last year. Mr. Pavlenko said he hopes to see a deal completed before the end of 2015.

"From the Ukrainian side, we have a big will to move, and to sign, because it's not only political, I think it also has a very big economic effect. And it's not only positive for Ukrainian businesses but for Canadian businesses, as well," Mr. Pavlenko said.

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He added that Ukraine is keen to increase its agricultural capacity, and said he was in touch with Export Development Canada about financing mechanisms that could make it easier for farmers in Ukraine to purchase farm machinery and grain silos. A lot of Ukraine's agricultural machinery is obsolete, he said, including some equipment that dates back to the collapse of the Soviet Union.

"One of the discussions we're going to have is how can the EDC help Canadian producers to increase their sales to Ukraine," he said. Mr. Pavlenko said that could involve financing plans that would allow farmers in Ukraine to pay for expensive machinery in smaller instalments.

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