US 'Confident' Export Controls Against Russia Will Align With EU, Official Says
As the U.S. and the European Union both prepare their own set of Russian sanctions and export controls, a senior U.S. official said the measures may not be identical but will align very closely to avoid hurting the competitiveness of U.S. firms. Peter Harrell, a National Security Council official, also said the trade restrictions won’t amount to an embargo against “everyday” Russian consumers, and will likely include exemptions and a wind-down period.
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U.S. officials this week previewed the sweeping set of export controls and sanctions, which would only be imposed if Russia further invades Ukraine and which could cut off Russian companies from both U.S. and foreign-produced technology inputs, targeting the country’s financial, defense, aerospace and emerging technology sectors (see 2201250042). Although the U.S. has avoided saying exactly how closely the measures will be aligned with the EU, Harrell, speaking during a Jan. 27 conference hosted by the Massachusetts Export Center, said he and other officials are “quite confident we will have a very high degree of alignment with Europe.”
But he also stressed that the process has been complicated, particularly because each of the EU’s 27 member states has to agree to the trade restrictions. “I have spent at least an hour or two a day over the last two or three weeks talking with my European counterparts, and so it is a very live and active issue,” Harrell said, adding that the controls won’t differ enough to place U.S. companies at a competitive disadvantage.
“Does that mean the [Export Control Classification Number] on 100% of the products will be exactly the same? Probably not,” he said. “But they will be substantially aligned, and it's not going to be a world where you're just sort of losing your market opportunities to European competitors.”
He said the U.S. is planning a “two-fold strategic approach,” with the first being “heavy hitting financial sanctions” to impose immediate consequences on the Russian government. “The goal of the financial sanctions is really to have short-term, up front costs on Russia to trigger capital flight, to trigger inflation, to make the Russian Central Bank provide bailouts to its banks,” Harrell said. “Upfront costs so [President Vladimir] Putin feels costs on day one.”
The second portion of the approach are the export controls, which may not have the same immediate impacts as the sanctions, Harrell said, but which will hurt Russia’s industrial and technological capabilities over the medium term. “The intent there really is to have measures that we think will degrade Russia's industrial capabilities and industrial production capacity over time, not to go after individual, everyday Russian consumers,” he said. “The goal is not to have a complete embargo that would impact ordinary Russians.”
Any sanctions or trade restrictions would also include a carve-out or exemption for some humanitarian-related goods, Harrell said, including health and medical products. He also urged companies with business in Russia to begin “thinking defensively,” and for companies with existing orders from Russia to reach out to the administration if they think their products may be affected by the restrictions. He said the administration is “trying to evaluate” a potential wind-down period for business operations or transactions in Russia if the sanctions take effect.
“We are certainly meeting with companies that have those kinds of issues,” Harrell said. “Some of those issues we may have to deal with on a case by case basis.”
Harrell also described some of the administration’s export control plans for China, saying it plans to continue robustly using controls to protect sensitive U.S. technologies, particularly semiconductor tools and equipment. He also said companies should expect to see more Entity List activity targeting specific Chinese entities, and said the administration is focusing on crafting controls to keep China from developing advanced semiconductor manufacturing capabilities.
The U.S. and its partners, including TSMC in Taiwan and Samsung in South Korea, have a “qualitative edge” in semiconductors over China, Harrell said. “We are determined to maintain that edge.” He said he met with about 30 companies operating in the semiconductor industry over the last six months to hear feedback on export controls, adding that it’s important to “better understand each other's perspective and make the right decisions.”
But he stressed that the controls will not be slowing down. “The entity listings, I think, you are going to continue to see,” he said. “We certainly expect that we will continue to be using these tools in a robust fashion.”