Bombardier gets federal exemption from sanctions on Russian titanium

Employees work on aircraft during a media preview of the Bombardier Aircraft Assembly Centre in Mississauga, Ont. on Monday, Jan. 22, 2024. (Christopher Katsarov/The Canadian Press - image credit)
Employees work on aircraft during a media preview of the Bombardier Aircraft Assembly Centre in Mississauga, Ont. on Monday, Jan. 22, 2024. (Christopher Katsarov/The Canadian Press - image credit)

Bombardier is now the second large Canadian corporation known to have been granted an exemption from federal government sanctions on Russian titanium.

The Montreal-based aircraft manufacturer, along with its European partner Airbus, can continue to use parts containing titanium produced by Russia's VSMPO-AVISMA, based in Verkhnyaya Salda.

During a conference call Thursday with reporters following the release of Bombardier's quarterly results, CEO Eric Martel disclosed the waiver.

Martel said that while Bombardier does not purchase Russian titanium directly, some of its suppliers use it, so the company needed a sanctions waiver from the federal government.

"We did work with the government and we did work also with all our supplier base to make sure we were doing the right thing," he said. "But at the same time, we needed to ensure, you know, that we keep running our factories."

News of Ottawa's decision to grant Airbus a waiver drew outrage from Ukraine's ambassador to Canada, who was interviewed by CBC's Power & Politics Wednesday night.

Yuliya Kovaliv said allowing the company a pass to continue to use Russian titanium — when there are other suppliers elsewhere in the world — serves to feed the Kremlin's war machine.

She said she sought an explanation from Global Affairs Canada but received none.

Titanium is used in the manufacture of aircraft engines because of its light weight and strength. Canada's sanctions on Russian titanium were introduced in February. Canada was the first western nation to target Moscow's exports of the critical mineral.

Justin Tang/The Canadian Press
Justin Tang/The Canadian Press

Foreign Affairs Minister Mélanie Joly said maintaining Canadian jobs was the main reason for granting the waiver.

"We will always make sure to put maximum pressure on the Russian regime and meanwhile protect our jobs here at home. We can do that together," she said.

Airbus has over 4,000 employees in Canada at two manufacturing plants in Ontario and Quebec. Bombardier employs almost 16,000 workers in North America.

Two major military procurement projects — the acquisition of both new fixed-wing search and rescue planes and new transport and refueling aircraft — could have been affected by the sanctions imposed by Global Affairs. Both aircraft are made by Airbus.

The Department of National Defence was asked to explain exactly how the penalties would have affected the multi-billion dollar procurement programs if the waivers had not been issued. No one was immediately available to comment.

On the commercial side, Airbus is ramping up production of its A220 passenger aircraft. The A220 program is 75 per cent owned by the aerospace company and 25 per cent owned by the Government of Québec.

The imposition of the sanctions last winter came as a surprise to the aerospace sector and its implications are just becoming apparent to Canadian industries.

WATCH | See Yuliya Kovaliv's entire interview with Power & Politics:

"VSMPO is one of the largest titanium producers in the world," said William Pellerin, a partner with McMillan LLP's international trade group. "We certainly did not have advance notice, and I don't think that anyone in the Canadian market had advance notice of the possibility that the government would sanction VSMPO."

He said sanctions guidance issued by the Department of Global Affairs in March further complicated the issue, especially for aerospace industries, because it prohibited imports of parts manufactured in other countries that contain Russian titanium.

"I am not certain that Global Affairs Canada itself understood the ramifications of its sanctioning of VSMPO and the guidance that was subsequently issued has again compounded the issue and made those sanctions far more comprehensive," Pellerin said.

"I suspect that when this came to be fully understood, there was a desire to very quickly roll back some of the impacts of that sanctioning, which we're now seeing through the issuance of these sanctions permits, these waivers."