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Prime Minister Justin Trudeau has defended Canada's decision to return a turbine used in a pipeline that carries natural gas from Russia to Germany.
He said it was a "very difficult decision" to return the Russian-owned turbine despite sanctions.
Ukraine has accused Canada of wavering to Russia, but Mr Trudeau reiterated his government's support for Kyiv.
He also accused the Kremlin of weaponising its energy sector to undermine Ukraine's allies.
On Saturday, Canada announced the controversial decision to release the turbine that had been stranded in a repair facility in the city of Montreal.
It prompted an angry backlash from some Ukrainians, including from a group representing the Ukrainian diaspora that said it would seek a judicial review of the decision.
Ukraine's government also accused Canada of adjusting sanctions "to the whims of Russia" and called for the decision to be reversed.
Russia's energy sector forms a critical part of its economy and has been a target of international sanctions since Moscow's invasion of neighbouring Ukraine earlier this year.
"I remind people that the sanctions that Canada is leading on, that we continue to push harder and harder, are aimed at Putin and his enablers and aren't designed to harm our allies and their populations," Mr Trudeau told reporters on Wednesday.
Canada plans to return the turbine for the gas pipeline to German energy company Siemens, granting it a "time-limited and revocable permit" despite sanctions put in place by Western nations against Russia.
The turbine would then be returned from Germany to Russia. Mr Trudeau confirmed on Wednesday the exemption is applicable for two years.
The turbine is part of the Nord Stream 1 pipeline, which supplies gas from Russia to Germany. Russia said the pipeline has been operating at 40% capacity due to missing equipment.
Germany has expressed fears of an energy shortage due to its over-reliance on Russian gas, especially with winter months approaching.
On Tuesday, the Toronto-based Ukrainian World Congress filed an application for judicial review with a Canadian court seeking to quash the exemption so that the turbine could no longer be returned.
"We have had no choice but to take legal action," it said in a statement.
The US state department, however, has supported Canada's decision, saying it will allow Germany and other European countries to replenish their gas reserves while increasing their energy security.
As of Wednesday, Kremlin-controlled energy company Gazprom said it had no documentation to show that Siemens is permitted to bring the gas turbine for the Nord 1 Stream pipeline from Canada.
Siemens, however, announced it was now in the planning stages of transporting and deploying the turbine.