How Canada helped facilitate support for banking sanctions against Russia

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Chrystia Freeland was waiting on hold at her Toronto home last Saturday afternoon when a second call came in – this from a secure Ukrainian government bunker in Kyiv.

“What’s going on?” Ukrainian Prime Minister Denys Shymal anxiously asked Canada’s Deputy Prime Minister. Would the European Union agree to proceed with even harsher banking sanctions against Russia?

As it happened, on her other line, Ms. Freeland had been waiting, along with Prime Minister Justin Trudeau in Ottawa and Bjoern Seibert, a top European Union official in Brussels, to get the same answer. Ursula von der Leyen, President of the European Commission, the executive branch of the European Union, was running a few minutes late for the virtual conference call.

“Hold on,” Ms. Freeland told Mr. Shymal, whom she knows personally after almost daily discussions for weeks on the Ukraine crisis. She held up her iPhone to the video screen so he could be included in the teleconference call with Europe.

Listening on the line, as night fell in Ukraine’s capital, Mr. Shymal learned that the EU was “a go” on taking an unprecedented step to further isolate Russian banks – a measure the Ukrainian government had been desperately seeking from the international community, to bolster its chances against a far-stronger enemy.

“We’re ready to push the button,” Ms. von der Leyen said, according to a source. “Do it now.”

“Yes, we are ready to do it now,” Mr. Trudeau responded. A relieved Mr. Shymal offered his country’s gratitude, predicting the sanctions would “paralyze” Russia’s central bank.

West wages economic war on Russia with unprecedented sanctions

Later that day, Canada and its allies announced that they would move to block access for key Russian banks to the SWIFT international payment system, in escalating sanctions against Moscow for its military assault on Ukraine. They also hit Russia’s central bank and sovereign-wealth funds, effectively freezing their assets and depriving Russian President Vladimir Putin of money he needs to pay for the war in Ukraine.

The source who spoke about the Saturday, Feb. 26 virtual call with Ms. von der Leyen is one of three senior Canadian officials who outlined Canada’s response to the unfolding war in Ukraine. The Globe and Mail is not identifying these officials because they were not authorized to discuss private meetings with world leaders or cabinet deliberations.

The sources concede that a middle power such as Canada doesn’t carry the same weight as the U.S. and Germany on major decisions relating to Russia, and more often follows what has been decided by the big players. They argued that Canada is regarded as a trusted broker by smaller countries and can function as an interlocuter between big and small countries.

But on the unprecedented and severe banking sanctions, the first ever levelled against a major Group of 20 country, they say Ms. Freeland played a helpful role in building a coalition to freeze the Russian central bank’s US$640-billion in international reserves.

Mr. Trudeau, who is leaving Sunday for talks in a number of European capitals, spoke to EU leaders Feb. 24 and 25 to enlist more support for the idea, including those from Latvia, Moldova and Romania.

He was also among the first Group of Seven leaders, along with British Prime Minister Boris Johnson, to call publicly for Russian banks to be cut off from the SWIFT international payment system

The moves to punish Russia’s financial institutions and its central bank made good on a threat the West had outlined earlier in February. Ms. Freeland and other finance ministers had warned Elvira Nabiullina, governor of Russia’s central bank, at a G20 meeting on Feb. 17 that an invasion would bring down punishing sanctions.

“To our Russian counterparts who are struggling vainly to prop up the ruble in freefall, let me say we warned you,” Ms. Freeland told a news conference Tuesday. “The West’s sanctions, I warned, would be swift, co-ordinated, sustained and crushing.”

It took time, however, to get the U.S. and Western allies – including neutral Switzerland – to sign onto these economic sanctions.

Ukraine’s Minister of Culture and Information Policy, Oleksandr Tkachenko, reached out to Ms. Freeland on Feb. 22. Frustrated by the slow pace of enacting sanctions, he asked her to plead the case with the Americans. Ms. Freeland, who speaks fluent Ukrainian and Russian and whose mother helped draft Ukraine’s constitution, has known Mr. Tkachenko from their days as reporters.

Ms. Freeland pleaded the case among allies for targeting the Central Bank of the Russian Federation by cutting off access to its massive foreign-exchange reserves that Moscow could use to offset the impact of Western sanctions.

Ms. Freeland began working the phones to build support for cutting off the Russian bank’s access to its international reserves. On Thursday, Feb. 24, she sent a paper outlining the proposal to the U.S. administration, the sources said.

On Russian sanctions, Chrystia Freeland is in the right place at the right time

That same day, Mr. Trudeau raised the central-bank issue with G7 leaders to gauge their support. The same officials said Mr. Trudeau spoke to a number of European leaders the following day and publicly expressed his support for the sanctions before the announcement.

Ms. von der Leyen has acted as the air-traffic controller overseeing the West’s response to Russia’s invasion of Ukraine. Every step – whether it’s arms or economic sanctions – has been co-ordinated through the European Commission President with the approval of the Biden administration.

Almost every country has been a given a role. French President Emmanuel Macron was designated to be the point of contact with the Russian leader, a frustrating role. One of the Canadian officials said there was no point in Mr. Trudeau talking to Mr. Putin, even though Moscow’s envoy to Canada said the Russian strongman would have accepted his phone call.

Canadian officials did not believe a Trudeau-Putin tête-à-tête would be constructive, given the high-profile role played by Ms. Freeland in promoting Ukraine’s independence from Moscow. The Russians had barred Ms. Freeland from Russia in 2014 when she sat in opposition as a Liberal MP for her strong criticism for its annexation of Crimea. As foreign-affairs minister in the first Trudeau government, Ms. Freeland never hid her dislike of the Putin regime. On a student exchange in the 1980s in Kyiv, Ms. Freeland was under KGB surveillance.

Ottawa also offered to help expedite an International Criminal Court investigation into potential war crimes by Russia in Ukraine. On March 1, the Trudeau government, which helped spearhead the court’s creation nearly a quarter-century ago, intervened after ICC prosecutor Karim Khan said he had decided to open an investigation by any party to the conflict in Ukraine. Mr. Khan said the process could be sped up if a member state referred the matter to his office. Otherwise, he would have had to seek authorization from a three-judge body, which would have taken more time. Because Ukraine is not a member of the court, it could not make the referral itself.

Canada was the first major country to enact a ban on Russian petroleum imports on Feb. 28. Canada hasn’t imported significant amounts since 2019, but the ban going forward will include any import of refined petroleum products such as jet fuel and gasoline. It was a symbolic signal to oil traders that the West was beginning to turn on a staple Russian export.

Ottawa, on March 3, was the first to scrap preferential trade treatment for Russia and its ally Belarus, removing their most-favoured-nation status, which means imposing tariffs of 35 per cent on most imports from those countries.

The looming war in Ukraine was unfolding at the same time as the Trudeau government was confronting a trucker blockade at key border crossings, including the Windsor-Detroit Ambassador Bridge, and protests in downtown Ottawa.

Mr. Trudeau held daily meetings with some of his most-trusted ministers – Ms. Freeland, Foreign Affairs Minister Mélanie Joly and Defence Minister Anita Anand – to discuss Ukraine and the illegal blockades in this country. Some ministers, such as Public Safety Minister Marco Mendicino and Emergency Preparedness Minister Bill Blair, would shuffle in to discuss the blockades. The Incident Response Group meetings easily ran two hours long.

Also at the table were Jody Thomas, the former deputy minister of National Defence and now Mr. Trudeau’s national-security and foreign-policy adviser, as well as Clerk of the Privy Council Janice Charette, the country’s top civil servant. They were joined by the heads of Canadian national-security agencies and provided confidential briefings on intelligence gathered by Canada’s Five Eyes partners – the U.S., Britain, Australia and New Zealand.

On Feb. 14, the government invoked the Emergencies Act to end the trucker protest in Ottawa and also announced that it would send offensive weapons to Ukraine, something Kyiv had been seeking for weeks. Cabinet had been split on these weapons, with some ministers saying Canada should not do so unless other allies, such as Germany, did the same. Since then, Ottawa has sent a fourth shipment of lethal weapons to Ukraine as its military continues to fight off better-armed Russian forces.

Ms. Freeland has warned that the array of sanctions that Canada and its allies have triggered against Russia will carry an economic cost around the world. Inflation will spike as oil and gas prices rise and the global economy struggles with supply-chain delays.

Canadians should brace for economic collateral damage as sanctions against Russia mount, Chrystia Freeland says

As she and Mr. Trudeau grapple with Ukraine, Ms. Freeland has had little time to focus on the federal budget, planned for early April. One of the sources said the budget could very well be delayed until later that month or possibly early May.

Ukraine is among the few foreign-policy subjects where there is little disagreement between the Liberals and opposition parties in Parliament.

The Ukrainian Canadian Congress, a lobby group for the Ukrainian community, enjoys easy access to federal politicians.

Ihor Michalchyshyn, the UCC’s executive director, said Mr. Trudeau and cabinet ministers including Ms. Freeland, Ms. Joly, Ms. Anand, International Development Minister Harjit Sajjan and Immigration Minister Sean Fraser met by video-conference with the UCC board of directors on Feb. 23, taking questions for an hour from 8 p.m. to 9 p.m. ET.

“It was about sanctions, humanitarian assistance and disinformation,” Mr. Michalchyshyn said.

Just after the teleconference wrapped up, news broke that Mr. Putin had announced a “special military operation” in Ukraine.

Mr. Michalchyshyn said his group ramped up discussions with the Canadian government as far back as November. That’s when Russian troops began massing near Ukraine’s border.

“Our community UCC continues to have a high level of access to senior officials and opposition leaders and MPs.”

He said the trucker protests didn’t affect the government’s communications with his group.

“Given the scope of the sanctions and the work we’re seeing done and the way the government’s communicating it, Deputy Prime Minister Freeland is at the lead, at the forefront, rallying her cabinet colleagues.”

He said his group is pressing Canada to push for the enforcement of a no-fly zone over Ukraine. “The fate of Ukraine in the next week stands on what happens in the skies.” So far, that idea has been rejected by the U.S., Europe and Canada.

With reports from Erin Anderssen

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