US Threatens to Cut Off Chip Supply to Russia if It Invades Ukraine

( )- The United States is threatening to levy some pretty serious sanctions on Russia if they decide to invade neighboring Ukraine.

On Monday, officials with the Biden administration said they’d cut off Russia from its semiconductor supply. That would be a massive blow to the Russian economy, and a sanction that really doesn’t have any former precedent.

With diplomacy failing on multiple occasions to ease tensions between Russia and Ukraine, President Joe Biden is taking a decidedly different approach to convincing Russia not to attack — hitting the country where it hurts the most, their wallets.

The ban would restrict all microchips that are produced not only by U.S. companies, but also by foreign companies that rely on tools, equipment, designs and software from the United States. Because U.S. companies are involved in so many aspects of the supply chain responsible for making chips, a ban of this kind could have a monumental impact on Russia.

A Washington policy analyst who works for Raymond James, Ed Mills, recently explained to Axios:

“Semiconductors are the new weapon. If you can link arms and deny a country access to semiconductors, their ability to function as a modern economy is eliminated.”

This is a big threat from the Biden administration. Cutting off the supply of chips to Russia certainly wouldn’t do any immediate damage to the country’s military efforts in Ukraine. Instead, it would deal a huge long-term blow to Russia’s economy, which could serve as enough of a deterrent to convince President Vladimir Putin not to invade.

It’s apparently part of a multi-pronged approach to enacting economic sanctions on Russia. The Biden administration said recently that there would be some financial sanctions that would have a more immediate impact on Russia, and that the semiconductor block would make Russia’s economy brittle over the long-term.

Last week, a senior Biden administration official said that export controls the U.S. is considered would focus on specific areas that Putin said in the past are important to Russia strategically. That includes quantum computing and artificial intelligence.

As the official explained to reporters:

“If Russia wants to develop these sectors, it needs to import technologies and products that only we and our allies and partners produce. And so that would lead to an atrophying of Russia’s productive capacity over time.”

It’s not all roses for the U.S., though. Some within the industry are concerned that a ban on semiconductors to Russia could ultimately hurt many U.S. companies in the long term. They believe that foreign companies could accelerate their own plans to design around American technology, or even seek out alternatives from companies not located in the U.S.

And it’s not just Russian companies. The president of the Information Technology and Innovation Foundation, Robert Atkinson, said the possibility exists that companies from other countries could be fearful of a potential U.S. threat.

He explained:

“This is certainly a big stick that we can deploy to make Putin think twice. The problem with deploying the stick is the more you use it, the more it degrades. Even bringing it up sends a very clear message to a lot of countries and companies that they don’t want to be dependent on U.S. whims.”