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A WestJet Airlines aircraft taxis to a gate after arriving at Vancouver International Airport in Richmond, B.C..DARRYL DYCK/The Canadian Press

A Russian oligarch on Europe’s blacklist could end up holding an indirect stake in Onex Corp.’s WestJet Group if the investment company’s takeover of Sunwing Airlines is approved by the Canadian government.

Alexei Mordashov, one of Russia’s wealthiest men, was sanctioned by the European Union on Monday over the country’s invasion of Ukraine. He owns 34 per cent of London-listed tourism giant TUI AG, which owns 49 per cent of Toronto’s Sunwing.

On Wednesday, WestJet announced a deal to buy Sunwing for an undisclosed amount. In the takeover, which requires regulatory approval, TUI and Sunwing owner Stephen Hunter would become minority shareholders of WestJet Group.

Mr. Mordashov, chairman of Russian steelmaker Severstal, is not on Canada’s list of 33 oligarchs who face sanctions that include asset freezes and a bar on entry to Canada. The Canadian sanctions also prohibit doing business with those on the list.

WestJet set to buy vacation airline Sunwing

Mr. Mordashov resigned from TUI’s supervisory board on Wednesday. Vladimir Lukin, a Russian politician, resigned on Friday, TUI said.

“The aim of the EU sanctions is to prevent Mr. Mordashov from disposing of his shares in TUI AG,” TUI said in a statement on its website. “This is to prevent Mr. Mordashov from realizing any proceeds or profits from his investment in TUI. In this context, Mr. Mordashov is also resigning from TUI’s supervisory board with immediate effect. He formally declared the resignation of his mandate to the company today.”

Sunwing spokeswoman Melanie Anne Filipp said TUI is a minority shareholder in the leisure travel company and has no say in operations. “That will remain the case should this transaction be approved,” Ms. Filipp said. “Sunwing Travel Group strongly condemns the horrific attacks on the Ukrainian people. We fully support efforts by the Canadian government to hold Russia accountable.”

Morgan Bell, a WestJet spokeswoman, said the airline takes the issue very seriously, and is awaiting international protocols that will address such passive, minority interests before the takeover is expected to close at the end of 2022.

“This is a complex and rapidly evolving issue that businesses around the world are trying to understand and address,” Ms. Bell said in an e-mail. “It will take months for the international community to design protocols to disentangle Russian capital from investments.”

E-mails to Onex and Transport Minister Omar Alghabra were not returned on Friday afternoon.

Transport Canada spokesperson Sau Sau Liu said: “Should a formal submission be made by WestJet and Sunwing, the government will conduct the appropriate reviews in a rigorous fashion, adhering to required timelines.”

Jan Cimon, a business professor at Laval University, said the possibility of Mr. Mordashov owning an indirect stake in Canada’s second-largest airline at a time of sanctions and the war in Ukraine underlines the need to carefully examine the deal. “That is a great source of uncertainty,” Prof. Cimon said. “That’s why having such an investor, even if they are passive, is a potential liability.”

He said the presence of a Russian oligarch could also increase scrutiny on TUI. “Just the fact he’s there … that should warrant further examination and warrant an examination of what [TUI’s] role is going to be.”

“It certainly is a cause for caution to have a shareholder who may have issues, meaning that given all the sanctions and the business environment with Russia … it’s much harder from a transparency and governance point of view to have Russian stockholders,” Prof. Cimon said.

With a report from Nicolas Van Praet in Montreal

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