Give and tech: How technology sanctions can help counter the threat from Russia

Russia’s large-scale invasion of Ukraine on 24 February has brought about a seismic shift in the international order. The resulting U-turns in European security and defence policy are truly remarkable. The long-term geopolitical consequences of the war are still unclear, but one thing is certain: much will depend on the policy choices European leaders now make.

European countries are not only expanding their defence capabilities and arming Ukrainian forces but also working with their allies to ‘weaponise’ Russia’s economic and technological dependencies. The financial and technological sanctions the European Union and the United States imposed on Russia shortly after President Vladimir Putin launched a full-scale war in Ukraine are unprecedented in their scale, direction, and speed. Their exclusion of many Russian banks from the SWIFT payments system and particularly their sanctions on Russia’s central bank have already caused severe damage to the Russian economy – and will continue to do so in the long term.

However, these powerful financial measures have somewhat eclipsed the West’s far-reaching technological sanctions on Russia, which are designed to “cut off Russia’s industry from the technologies desperately needed today to build a future”, according to Commission President Ursula von der Leyen. In concerted fashion and within less than a day of the invasion, the EU and the US deployed tight, exhaustive, and almost matching export controls to, as the White House explained, “choke off Russia’s import of technological goods critical to a diversified economy and Putin’s ability to project power”.

The long list of advanced technologies subject to de facto bans on exports to Russia includes semiconductors, telecommunications equipment, software (including that for encryption), lasers, aviation and space systems, and oil-refining machinery. While EU sanctions are limited to sales and exports to Russia from within the union, the US now prohibits exports to Russia and Belarus from anywhere in the world of any product created using American software or equipment. With other important tech players such as South Korea, Japan, and Taiwan having joined the blockade, Russia is largely cut off from the global high-tech industry.

However, in contrast to some of the main financial sanctions, many technological export controls will only have a major impact over time. Although some multinational companies have halted services on their own terms, the sanctions regimes deployed by the West have generally excluded consumer products – such as smartphones, computers, and cars – to spare ordinary Russian citizens for now.

In the medium and long term, measures will have dire consequences for Russian industry. Cloud computing centres, high-performance computers, aviation and defence technologies, and oil-refining machinery all require regular replacements and upgrades of microprocessors, controllers, sensors, and mechanical parts. A lack of access to these technologies will not only set back the Russian economy but also drastically weaken Russia’s military capabilities in the long term. Modern military systems are dependent on advanced chips, sensors, and materials. And, currently, Russia has little capacity to produce many of these advanced technologies domestically.

Greater technological sovereignty has been on Russia’s agenda for more than a decade – particularly since 2014, when its annexation of Crimea prompted the West to target it with far weaker sanctions. But Russia has not fulfilled its ambitions. This is because Moscow’s strategy has often focused on maintaining authoritarian power rather than spurring economic and technological development. The Kremlin sacrificed the economic freedom that is essential to innovation for greater control over the digital sphere. Today, Putin’s ability to surveil and censor online content, and to coerce Western tech companies, is greater than ever. But so is Russia’s dependence on foreign technology. Between 2014 and 2019, Russian imports of semiconductors devices and integrated circuits grew by 60 per cent and 25 per cent respectively. Similarly, since 2014, there has been a dramatic increase in Russian imports of other electronic equipment – including telecommunications and data storage systems – and advanced machinery such as gas turbines and aircraft parts.

It is the West’s pooled technological sovereignty and Russia’s technological dependence that make these controls on tech exports so significant. To achieve its foreign policy objectives, the West has coordinated measures that leverage American, Taiwanese, Japanese, and South Korean dominance in semiconductors and data processing with European market power in advanced engineering and telecommunications technologies. These unprecedented sanctions will show how much technological sovereignty matters in international affairs. They underscore the fact that technological differentiation and interdependencies among allies are not necessarily a weakness but a form of shared technological sovereignty. And Russia’s vulnerability to these sanctions illustrates the dangers of an approach to tech sovereignty that is narrowly focused on security concerns.

The debate on technological sovereignty in the West, especially Europe, has often been excessively defensive. Following the revelations about US intelligence practices made by former NSA employee Edward Snowden, many Europeans have seen technological dependencies primarily in light of vulnerability to foreign espionage and coercion. This trend only accelerated with subsequent discussions about Huawei’s role in the 5G market and links to the Chinese state. The EU is right to be cautious about weaponising technological dependencies – but it is also right to have done so in response to Russia’s war on Ukraine if there is a chance this could help push Putin to change course.

The pressure on the Kremlin from tech sanctions will only increase. There is a widespread belief that Chinese technology companies will simply fill the gaps left by their Western counterparts. But things are not so simple.

Firstly, in many important areas, China’s technology is nowhere near as advanced as that of the West and its allies. This holds particularly true for semiconductors. The leading Chinese semiconductor company, SMIC, is currently several years away from manufacturing chips as advanced as those of Samsung (South Korea) and TSMC (Taiwan). Secondly, Russia’s security services are deeply concerned about excessive reliance on China for critical technologies, despite the recent rapprochement between the two countries. Thirdly, Chinese companies may prove reluctant to risk their access to Western markets and technology just to do business in the relatively unimportant Russian market. These companies are already suffering from US extraterritorial sanctions. And the White House would likely tighten these measures if Chinese companies expanded their exports of advanced technologies to Russia. So, technologically, Russia may be left to fend for itself.

It is hard to say whether these concerted financial and technological sanctions will change Putin’s mind. It is generally difficult to predict the economic impact of such measures, which often have unintended effects. There will be loopholes. Black markets will arise. Enforcement in complex technology supply chains is inherently difficult. And, importantly, it is private actors who are implementing the sanctions in practical terms. Western multinationals such as Apple and Mercedes-Benz have already halted sales in Russia of their own volition.

The longer the West’s tech sanctions are in place, the greater their impact. There is little chance these measures will end so long as Ukrainians are being forced to defend themselves from the Russian invasion. The threat of sanctions did not deter Putin from starting this war but, in negotiations between Ukraine and Russia, he will find it hard to ignore the damage they are inflicting on the Russian economy.

The EU and its partners did well to swiftly impose extensive sanctions on Russia in response to the war. It appears that the union spent weeks preparing the measures in detail as Russia built up its forces on Ukraine’s border. But the EU would do well to set up the structures and processes required to deter abrupt escalation and to respond quickly when this does occur.

The EU needs to gain a better understanding of its technological capabilities and dependencies, as well as those of its partners. And it needs to identify how to better use these capabilities against potential aggressors. To this end, the EU can build on its 2021 assessment of its strategic dependencies. The union should expand this process to cover actors other than the US and China, while drawing on the insights provided by the Observatory of Critical Technologies it plans to set up.

To secure peace in Europe, the union needs to not only expand its defence capabilities but also improve its technological sovereignty and use this effectively as an instrument of foreign policy.

The world may have entered an age of unpeace in which economic and technological connectivity allow for new forms of warfare. Yet it is also an age in which interdependence can be key to halting military conflict.