Biden administration considers technology sanctions if Russia invades Ukraine

In the months since Russia began massing troops on the border of Ukraine, the Biden administration has, on multiple occasions, warned that any further aggression by Moscow toward its neighbor would be met with unprecedented levels of sanctions. Now, the White House appears to be dropping some specific hints about what those sanctions might look like.

According to multiple confirmed media reports, the administration has begun laying the groundwork for a ban on the sale of high-technology products containing U.S.-made components or software to Russia.

The plan echoes steps the Trump administration took against the Chinese telecommunications giant Huawei in 2020, barring vendors from selling the company semiconductors it needed to produce mobile telephone handsets. The ban had devastating consequences for Huawei’s business. Once the world leader in smartphone sales, it has fallen to 10th overall since the ban was put in place.

The extent to which the administration intends to cut off Russian supplies of high-tech gear is unclear, and that’s probably intentional, experts said.

“As with any sort of major event, or crisis, or potential invasion, government leaders want options … from strongest to weakest and everything in the middle, in terms of actions that can be taken,” Kevin Wolf, a former assistant secretary of Commerce for export administration in the department’s Bureau of Industry and Security, told VOA.

Wolf, now a partner with the law firm Akin Gump in Washington, said that the administration is unlikely to signal exactly what action it will take unless Russia forces its hand by trying to take over more of Ukraine’s territory.

In 2014, in an earlier invasion, Russia took control of Crimea, a region of Ukraine, and continues to support local militias that control parts of the country’s Donbass region.

Extraterritorial reach

The U.S. appears to be considering the application of a new doctrine, the foreign direct product rule, to Russia. First put forward under the Trump administration, the rule would make it illegal under U.S. law for any entity in the world to sell high-technology equipment to Russia if that equipment was made or tested using U.S. technology.

Theoretically, that could apply to virtually any product in the world that contains semiconductors, given the prevalence of U.S. technology and software involved in the devices’ manufacturing process.

The rule relies on the implicit threat that companies that rely on U.S. technology or software to produce their products — even if the physical components of the products themselves originate outside the U.S. — could find themselves cut off from crucial licenses or equipment if they refuse to honor the U.S. export ban.

The extreme reach of the rule, into the business dealings of non-U.S. firms, makes it politically fraught, according to Jim Lewis, senior vice president and director of the Strategic Technologies Program at the Center for Strategic and International Studies.

However, speaking with VOA, Lewis said, “Using force against Ukraine really justifies it.”

‘No more iPhones for Russia’

The U.S. has a wide range of options when it comes to blocking the transfer of technology to Russia, both in terms of the entities within Russia that the sanctions affect and the companies outside Russia that would be subject to them. (The U.S. already has export controls in place that target Russia’s defense sector, so anything the Biden administration applies would be in addition to those existing sanctions.)

At the more targeted end of the spectrum, the administration could identify specific companies, making it illegal to sell U.S. technology to them. More broadly, the U.S. could impose sectorwide restrictions, barring the export of technology to, for example, the Russian civil aviation industry.

At the far end of the spectrum would be a flat-out ban on the sale of all U.S.-related technology to Russia.

“If they go for the maximum approach, that means no more iPhones for Russia,” said Lewis, of CSIS.

Pushing Moscow toward China?

If the U.S. does move forward with extensive technological sanctions against Russia, it will be difficult for Moscow to fill the gap with domestic production, said Jeffrey Edmonds, a senior analyst at the security think tank CNA.

“Russia has always been fairly weak when it comes to things like microchips, microelectronics and electronics in general,” Edmonds told VOA. “That’s coupled with the fact that Russia has a very weak entrepreneurial system, in that most of the technology companies in that whole sector are really run by government-sponsored organizations that are highly inefficient and subject to high levels of corruption.”

The result could be to push Moscow toward China, which has already been working to create a domestic manufacturing base that, in the future, might be able to provide Russia with homegrown equipment that would render U.S. sanctions ineffective.

In an email exchange with VOA, research analysts Megan Hogan and Abigail Dahlman, at the Peterson Institute for International Economics, pointed out that United Nations data indicate that Russia already imports some 68% of its consumer IT products from China.

“In the short term, the application of the (foreign direct product) rule will provide the Chinese government with further evidence of Western powers, particularly the U.S., meddling in Eastern affairs, validating the Chinese government’s … anti-foreign sanctions measures and further straining U.S.-China relations,” Hogan and Dahlman wrote. “Chinese tech companies will likely be forced to choose between access to the U.S. market and access to the Chinese market, with penalties associated with either decision.”

They continued, “In the long term, the U.S. risks expediting China’s development of its own domestic semiconductor industry. China’s largest chip manufacturer, SMIC (Semiconductor Manufacturing International Corporation), is currently years behind its competitors in terms of its manufacturing technology and capacity. While China is already making moves to improve its domestic semiconductor manufacturing (as is the U.S.), U.S. technology sanctions on Russia are likely to expedite the process at the cost of the American semiconductor industry.” (Adopted from VOA)