In the event of Russia’s invasion, the United States is threatening to place a unique export ban on Russia.
According to government officials, the Biden Administration might also choose to extend this control further, possibly restricting Russia’s access to semiconductors. This could potentially lead to Russian citizens being deprived of their smartphones, tablets and gaming consoles.
Export controls which expand US sanctions beyond their financial targets were only deployed once previously – almost to down Chinese tech giant Huawei.
The measure, known as the foreign direct product rule, contributed to Huawei experiencing its first-even annual revenue drop that fell almost 30 percent last year.
Huawei had to stop selling essential microchips. Although they can be made in the US, these chips require US software.
The US and the EU already have sanctions on Russia’s energy, financial and defence sectors, with tensions between Moscow and Western powers raising the prospect of new economic sanctions being imposed if Russia attacks neighbouring Ukraine.
White House also proposes curbs to Russia’s largest banks. It has already proposed measures against Moscow’s conversion of roubles into US dollars.
Washington might also consider pursuing the Russian Direct Investment Fund, which is state-supported.
Similar technological restrictions were in place during the Cold War. The United States and Western nations imposed strict technology sanctions on Soviet Union to keep it behind the times and slow down its progress.
If Russia invades Ukraine, the United States threatened to place a new export restriction on Russia to prevent it from accessing key components of its tech industry. Biden Administration might also consider expanding the control to limit Russia’s access semiconductors. Biden spoke on Friday
Now, the White House has told the U.S. chip industry to be prepared for new restrictions on exports to Russia if Moscow attacks Ukraine, sources said, potentially blocking the country’s access to global electronics supplies.
Russian industry, including maritime, civil aviation and high tech, could be affected. These are all areas that Putin holds great ambitions.
‘The power of these export controls is we can degrade and atrophy the capacity of these sectors to become a key source of growth for the Russian economy,’ a senior source in the Biden administration told The Washington Post.
Will Hunt, an analyst with Georgetown University’s Center for Security and Emerging Technology, told the newspaper cutting off Russia’s chip imports ‘would invariably hit the Russian leadership’s high-tech ambitions, whether in artificial intelligence or quantum computing.’
The US and European business community could resist the introduction of these controls, fearing that they might lead to Russian retaliation.
It is possible that companies from abroad could design and produce their own technology, reducing American dependence.
Fear stems from the imposition of these controls on an industry that is unheard of, and the move being made against one company only – Huawei.
‘It’s like a magic power — you can only use it so many times before it starts to degrade,’ Robert D. Atkinson, president of Think Tank Information Technology and Innovation Foundation told The Washington Post. Other countries might say that the U.S. is in complete control of us. You’d be better off looking for alternatives.
However, Russia could be harmed by a combination financial and technological sanctions. This would also have long-term consequences.
Already, the US and EU have placed sanctions against Russia in the energy, financial, and defense sectors. Tensions between Moscow, West powers and Russia raise the possibility of economic sanctions being applied if Russia invades Ukraine. Photo: Putin, Jan. 12,
Experts believe that financial restrictions on Russia’s biggest banks and its most important industries will be felt the first. This would drive up Russian inflation, and decrease the ruble’s value.
Export control would be more effective in the long-term and cumulative manner, driving up consumer electronics prices, as well as hitting Russian citizens’ pockets.
Use of the foreign direct product rule could also damage Russia’s military.
Elbrus is a particular type of chip that the Kremlin uses to its advantage. The chip is made in Russia, but it is produced in Taiwan in a chip factory named TSMC.
The United States prohibited TSMC’s supply of chips to Huawei. Doing the same for the Russian military would be ‘devastating,’ electronics expert Kostas Tigkos at UK-based Janes Group told The Post.
Kremlin officials downplayed the potential impact of such controls, with Russian state-owned defense and tech industry conglomerate Rostec saying the country had begun to make components on its own.
China, which supplies Russia with 70% of its smartphone and computer imports for 2020 could be another option to help ease any sanctions.
The United States prohibited TSMC (headquarters pictured here in Taiwan) to supply chips to Huawei. According to Kostas Tigkos, an electronics expert at the Janes Group in the UK, doing the same thing for Russia’s military would have been ‘devastating’.
Sources claim that the White House instructed the U.S.-based chip industry to prepare for additional restrictions regarding Russia’s exports if Moscow attacked Ukraine. This could potentially block the country from accessing global electronic supplies. Pictured: Viewers look at the display of semiconductors in China.
Meanwhile, President Joe Biden could deploy up to 50,000 US troops as well as aircraft and warships to eastern Europe to counter a Russian military build-up that has sparked fears Vladimir Putin is about to invade Ukraine.
This plan could see anywhere from 1,000 to 5,000 troops sent to NATO countries like Lithuania, Estonia, and Latvia that border Russian territory.
If security conditions worsen, troop numbers can be raised to up to 50,000 with the support of new deployments by ships and planes.
Biden received the Pentagon plan during the summit held at Camp David this weekend. It was discussed in the context of military options to prevent an attack from Russia, after sanctions threats had largely fallen on deaf ears.
The plan would not involve American troops deployed directly to Ukraine, with Biden thought to be loathe to enter another conflict following his disastrous withdrawal of US troops from Afghanistan last year, the New York Times reports.
Near Ukraine is a Russian army that has an estimated 100,000 soldiers and tanks. Heavy equipment can also be found near the border.
Biden will make a call about military measures within the next week, according to the newspaper. This is despite high-level talks between Washington, Moscow, and the US continuing to hold discussions. The US must also respond in writing to Russian security requests.
Families of US diplomats in Ukraine received warnings by the Pentagon about an imminent invasion. They were then ordered to evacuate the country.
Due to “increased threats by Russian military action”, non-essential staff at embassy were offered an escape route.
The UK also began withdrawing diplomats, and their families, from Ukraine.
The European Union threatened’massive” sanctions, and U.S. Senate Democrats presented a bill to impose severe sanctions on Kremlin officials as well military leaders and banks if Moscow joins hostilities against Ukraine.
Russia, which has accumulated tens or thousands of troops in Ukraine’s vicinity, denies plotting to invade, is subject to sanctions ever since it annexed Crimea to its neighbor.
After a Russian spy had been poisoned in Britain, in 2018, further punitive steps were taken following an investigation into Russian meddling during the 2016 U.S. Presidential election.
Russia denies any involvement in the poisoning ex-spy Yuri Skripal’s daughter and son, as well as trying to interfere with foreign elections.
In a Kyiv city park, an instructor trains volunteers of the Armed Forces’ Territorial Defense Forces of Ukraine members.
Mark Stone, a former economist at U.S. State Department, said that individual sanctions can often create sector-wide problems because they cause investors to worry that restrictions will be increased or made impossible to differentiate.
According to Brian O’Toole of the Atlantic Council think-tank, the Sanctioning Russian Bank Transactions and Frozing Assets would have’more effectual and more targeted’ than cutting off the SWIFT global messaging network.
O’Toole explained that Russia’s SWIFT account, which is used widely in international financial transactions worldwide, could be targeted only after the United States, Britain and EU imposed financial sanctions.
It is common to sanction individuals through asset freezes or travel bans. This tool can often resonate well.
In April 2021, Britain placed sanctions on 14 Russians pursuant to a law that gave the government the authority to punish those who it believes are involved in serious corruption overseas.
Senate Democrats unveiled a bill that would impose severe sanctions on Russian top officials, including President Vladimir Putin.
Dmitry Peskov (Kremlin spokesperson) stated that the imposition of sanctions against the Russian president would mean that Moscow and Washington are at odds.
Disconnecting the Russian financial sector from SWIFT would be one of the most extreme measures.
SWIFT has been used by over 11,000 financial institutions from more than 200 countries. The cooperative is located in Belgium and is managed by a 25-member board that includes Eddie Astanin who serves as chairman of Russia’s Central Counterparty Clearing Centre.
A precedent exists: SWIFT cut off Iranian banks in March 2012 when international sanctions were imposed on Tehran for its nuclear program. According to Carnegie Moscow Center, the move saw Iran lose 50% of its oil exports and 30% foreign trade.
Iran’s economy may be smaller than that of Russia, but it is still connected internationally. This shield has been forged by its interconnectedness to the West.
America and Germany could be the biggest losers, because their banks are among the top SWIFT users to Russian banks according to Maria Shagina from the Carnegie Moscow Center.
When Russia annexed Crimea in 2014, there were calls for Russia to be cut off from SWIFT. Moscow developed an alternative messaging platform, SPFS.
SPFS sent around two million messages in 2020. This is one-fifth Russian inner traffic. According to the central banking, it aims at increasing this number to 30 percent by 2023.
Shagina said that SPFS, with its message size limit and limited operation on the weekdays has not been able to pick up foreign members.
O’Toole of the Atlantic Council stated that Russia’s exclusion from SWIFT would result in immediate disruption, but it would gradually diminish.
O’Toole explained that although payments might be delayed or made at a higher cost, there will not be a major collapse in Russian trade as long as it remains legal and unsanctioned.
In Europe, Chancellor Olaf Scholz has signalled that Germany would be ready to discuss suspending the Nord Stream 2 pipeline project – intended to bring gas under the Baltic Sea from Russia to Germany – if Moscow attacked Ukraine.
Although the pipeline is complete, regulatory approval has yet to be granted. The United States has opposed the pipeline, and some European politicians are concerned that Russia will be more dependent on Europe for its energy supply.
Russia stated that Nord Stream 2 will benefit both Russia and Europe, and Germany shouldn’t ‘politicize’ it.
Russian bonds have become more restricted in access and could face further restrictions. One option is to ban secondary market participation.
Over accusations of election interference, Joe Biden (the US President) banned U.S. citizens from buying Russian rouble bonds.
In 2015, sanctions were imposed that made Russian dollars future debt uneligible to many investors and indexes like JPMorgan’s EMBI Global.
These measures reduced Russia’s debt externally by 33% from early 2014. It fell from $733 billion at the beginning of 2014 to $489 billion during the third quarter 2021. A country with lower debt has a better balance sheet but is less likely to have access to financing that would support its economic growth.