US Previews 'Incredibly Potent' Export Controls If Russia Invades Ukraine
The Biden administration this week previewed its plan to impose a “massive” set of export controls and sanctions on the Russian economy if the country further invades Ukraine, including measures to cut off Russian companies from both U.S. and foreign-produced technology inputs. The export restrictions could include an expansion of the Commerce Department’s foreign direct product rule, officials said, and would specifically target several of Russia’s “key” technology sectors, including its defense, aerospace, quantum computing and artificial intelligence industries.
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Although the Biden administration has hinted at the measures for weeks, it officially confirmed its export control plans this week and expressed confidence that both the sanctions and export restrictions will be coordinated with allies, including the European Union. “We are prepared to implement sanctions with massive consequences that were not considered” before, a senior administration official said during a Jan. 25 call with reporters. “That means the gradualism of the past is out, and this time we'll start at the top of the escalation ladder and stay there.”
The U.S. expects the export controls, if imposed, to deal Russian President Vladimir Putin a “weak, strategic hand and over the medium term,” the official said, calling the restrictions “incredibly potent.” The U.S. is working with allies on a set of severe restrictions that will “deny something to Russia that it needs and can't easily replace from anywhere else,” including “sophisticated technologies that we design and produce that are essential inputs to Russia’s strategic ambitions.”
One of those measures could be an expansion of the foreign direct product rule, which could place new license restrictions on foreign-made goods that contain certain amounts of U.S.-origin content. The U.S. used the rule in 2020 to try to restrict Huawei from acquiring certain critical technologies, including semiconductor-related equipment (see 2008170029 and 2005150058).
“You can think of these export controls as trade restrictions in the service of broader U.S. national security interests,” the official said. “We’ll use them to prohibit the export of products from the U.S. to Russia and potentially certain foreign-made products that fall under U.S. export regulations.”
Although the official said the controls could target Russia’s defense and aerospace sectors, the person also said “that's not an exhaustive list.” The U.S. is specifically looking to target sectors being developed by Russia to diversify its economy away from oil and gas. “In many instances, if Russia wants to develop these sectors, it needs to import technologies and products that only we and our allies and partners produce,” the official said. “All options are very much on the table,” the official said.
Even though the official said the U.S. has mainly focused on coordinating the restrictions and other sanctions with the EU, it’s also willing to work with less traditional allies. “We're willing to work with any country in order to deny Russia an input that it needs to diversify its economy,” the person said. Russia could still lean on China for its import needs, the official said, but the U.S. is betting that supply won’t be sufficient. “If they have to resort only to China in terms of purchasing oil and gas or to supplying technology,” the official said, “we believe that's going to make the Russian economy far more brittle.”
The administration said the export restrictions would only have a “minimal impact” on global supply chains, especially because they would be coordinated with allies. “We're talking about denying to Russia downstream products that are critical to its own ambitions to develop high-tech capabilities in aerospace and defense, lasers and sensors, maritime, A.I., robotics, quantum, etc.,” one official said. “In each of these supply chains, we and/or our allies and partners design and produce the technology, and the export controls would deny Russia a sophisticated input that it can't replace through domestic production or alternate supplies.”
The U.S. is also preparing for possible Russian retaliation, another official said, which could include cutting off its energy and gas supplies to Europe. The person said the U.S. is working with countries, energy companies and gas producers to ensure a sufficient supply of gas to European importers, but didn’t name specific countries or companies. “To ensure Europe is able to make it through the winter and spring, we expect to be prepared to ensure alternative supplies covering a significant majority of the potential shortfall,” the official said.
The officials said they believe their potential sanctions and the U.S. ability to mitigate Russian retaliation could deter Putin from invading Ukraine. “Ultimately, any leader, no matter how rogue they are, whether they're an autocrat or not, they have to care about popularity, at least as a method of social control,” one official said. “So his tolerance for economic pain, it may be higher than other leaders, but there is a threshold of pain above which we think his calculus can be influenced.”