(Bloomberg) — The Biden administration announced sweeping restrictions to deny Russia access to products based on U.S. technology, as well as those that can be used for military purposes, in response to its invasion of Ukraine.
President Joe Biden is creating two new so-called foreign direct product rules for Russia and the Russian military, limiting access to goods and parts made by non-U.S. companies using American inputs and design, the Commerce Department said in a statement on Thursday. The rule has been used against Huawei Technologies Co. to restrict use of Taiwan Semiconductor Manufacturing Co. and others to make chips.
The U.S. is suspending all existing licenses for exporting to Russia and creating a new requirement for American companies to ship items including microelectronics, telecommunications items, sensors, navigation equipment and aircraft components, Commerce officials told reporters. Some items weren’t previously controlled for Russia and will significantly impact the nation’s ability to buy things that it doesn’t produce.
The rules will be coordinated with allies and partners to deny Russia access to products used in the defense, aerospace, and maritime sectors, the Commerce Department’s Bureau of Industry and Security said.
“Russia’s actions are an immediate danger to those living in Ukraine, but also pose a real threat to democracy throughout the world,” Secretary of Commerce Gina Raimondo said in the statement. “By acting decisively and in close coordination with our allies and partners, we are sending a clear message today that the United States of America will not tolerate Russia’s aggression against a democratically elected government.”
Restrict Access
The export controls are the most comprehensive used by the U.S. for targeting a single nation and will restrict Russia’s access to items that can support the country’s defense industrial base and military and intelligence services, Commerce said.
Thursday’s action also imposes stringent controls on 49 Russian military end-users, which have been added to the BIS’s so-called Entity List, prohibiting American firms from doing business with them without first obtaining a U.S. government license.
A White House statement said that Australia, Canada, the European Union, Japan, and the U.K. also will take similarly forceful actions to hold Russia accountable, deepening the impact on the nation more than any action that the U.S. could have taken alone. Together, the moves will restrict more than $50 billion in key inputs for Russia and hurt the nation’s ability to wage war, Commerce officials said.
“Getting this number of allies on board is a significant step in ensuring the effectiveness of the controls,” said Cordell Hull, who led the BIS during the Trump administration and is now a principal at national security advisory firm WestExec.
While China has formed a strategic bond with Russia, the world’s second-largest economy won’t be able to provide all of the imports that Russia is losing as a result of the export controls, Commerce officials said. China accounts for only 16% of global semiconductor capacity, doesn’t have the most advanced technology and like Russia depends on the U.S. and its allies, the officials said.
The Commerce Department pledged that the U.S. government will follow up with additional stringent measures in the coming days based on any additional destabilizing actions by Russia. Commerce officials said that they expect more countries to put export controls for Russia into place in the coming days.
The export controls for the military and companies working for the military are broad and will affect more items than in the past, said Kevin Wolf, a partner at Akin Gump Strauss Hauer & Feld LLP in Washington who helped oversee export controls as an assistant secretary at the BIS during the Obama administration. The controls go beyond technology and cover everyday items as basic as toothbrushes if they’re manufactured with American tools or software, he said.
“The breadth, the reach and coordination with allies are the points that jump out,” Wolf said. The actions collectively “will have a significant impact on the Russian economy for the long term.”
(Updates with comments from officials starting in third paragraph.)
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