The decision to stop the flow of technological goods and services to Russia, among a host of other restrictions imposed in response to the invasion of Ukraine, may not have a significant impact, and it will take time before these moves have any effect, and there are Ways to circumvent the effects of sanctions. However, the new rules are a reminder to Moscow that over time it will struggle to manage an economy that does not have access to the latest products on global markets.
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The Biden administration announced on Thursday that the United States and its partners would impose measures that would inflict "severe and immediate economic costs" on Russia. In addition to banning access to financial services, the United States will restrict exports to Russia of a range of technology products, including semiconductors, encryption software, lasers, and aerospace equipment. The ban will also extend to sensitive technologies produced in foreign countries using software or other equipment developed in the United States.
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Despite the wide scope of the embargo, it shouldn't be too difficult for Russia to find a way around it. For starters, most programming today is done on computers, servers, and other equipment that are readily available in stores around the world, and Russians who need replacement hardware can probably buy them clandestinely in other countries and bring them home.
China could offer another path around sanctions. Russian President Vladimir Putin has built a close strategic relationship with Chinese President Xi Jinping, and can turn to Chinese technological equipment in times of crisis.
But perhaps the biggest challenge to the success of technological sanctions is the age and durability of modern computers. Earlier this month, Amazon Web Services, Amazon.com's cloud provider, extended the life expectancy of its servers and network equipment by one year, to five and six years, respectively, citing better efficiency and reliability. Alphabet, the parent company of Google, also took a similar step this year on devices used by companies such as Google Cloud.
This does not mean that Russia will be immune from having to update its technology regularly, but it does give companies and government agencies more leeway to delay replacing critical equipment.
The restrictions imposed on Russia will likely not have a clear financial impact on the technology industry, as Russia accounts for only 0.1% of global semiconductor purchases, and only $25 billion of the multi-trillion dollar global market. in information and communications technology products, according to the Semiconductor Industry Association. US chip sales to Russia amounted to just $114 million out of its $6.4 billion in foreign trade last year.
The EU's exports reveal a more lopsided picture. Of €79 billion ($97 billion) worth of exports to Russia in 2020, telecommunications and electronics accounted for less than 5%, and chips just 0.8%.
But the relatively low importance of technology exports, measured in dollars, means the impact is too small for the United States and its allies to suggest that if Russia cannot act as a responsible member of the international community, it will eventually lose access to the best products the world has to offer. Over the past two years, we've seen the chaotic impact of component shortages on industries ranging from electronics to automobiles, and if Russia, for example, can't import advanced oil extraction machines because it uses Taiwanese-made chips based on American technology, that could put pressure on Putin and his war economy. tries to manage it.
In order to increase this effect, technology companies in the United States and elsewhere should join the sanctions effort voluntarily, and not just because it is legally binding. Some have already done so, with the semiconductor association saying the US chip industry is "fully committed to complying with the new export control rules". Key US partners, such as Taiwan, home to chipmaking giant Taiwan Semiconductor Manufacturing Co. (TMSC), have declared they are ready to support the sanctions.
However, others have been more subdued. Apple CEO Tim Cook tweeted, "I am very concerned about the situation in Ukraine." He pledged support for the humanitarian effort without condemning the invasion or even naming Russia. Such non-committal statements do not help build a sense that all aspects of industry and society are united.
As the tragedy in Ukraine unfolds, more companies and business leaders may start to take a clearer stance, and their statements will be welcome. But for now, symbolic positions suffice.
(This is a joint article, written by Tim Colban and Tae Kim)
