The Next Huawei? US Threatens to Inflict 'Export Control' on Russia if It Invades Ukraine

How exactly could Russia be deterred from invading Ukraine? The U.S. government is now "threatening to use a novel export control to damage strategic Russian industries, from artificial intelligence and quantum computing to civilian aerospace," according to Stars and Stripes (an editorially-independent newspaper for the American military). The newspaper cites administration officials as its source:The administration may also decide to apply the control more broadly in a way that would potentially deprive Russian citizens of some smartphones, tablets and video game consoles, said the officials. Such moves would expand the reach of U.S. sanctions beyond financial targets to the deployment of a weapon used only once before - to nearly cripple the Chinese tech giant Huawei. The weapon, known as the foreign direct product rule, contributed to Huawei suffering its first-ever annual revenue drop, a stunning 30% last year, according to analysts. The attraction of using the foreign direct product rule derives from the fact that virtually anything electronic these days includes semiconductors, the tiny components on which all modern technology depends, from smartphones to jets to quantum computers - and that there is hardly a semiconductor on the planet that is not made with U.S. tools or designed with U.S. software. And the administration could try to force companies in other countries to stop exporting these types of goods to Russia through this rule. "This is a slow strangulation by the U.S. government," technology analyst Dan Wang of Gavekal Dragonomics, a research firm in Shanghai, said of Huawei. The rule cut the firm's supply of needed microchips, which were made outside the United States but with U.S. software or tools. Now officials in Washington say they are working with European and Asian allies to craft a version of the rule that would aim to stop flows of crucial components to industries for which Russian President Vladimir Putin has high ambitions, such as civil aviation, maritime and high technology.... But the effort could face head winds from American and European business interests that fear using export controls could lead to Russian retaliation in other spheres - and eventually cause foreign companies to seek to design U.S. technology out of their products. That's because the extension of the rule beyond a single company like Huawei to an entire country or entire sectors of a country is unprecedented. "It's like a magic power - you can only use it so many times before it starts to degrade," said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a think tank. "Other countries will say, 'Oh, man, the U.S. has total control over us. We'd better find alternatives.'" The newspaper also spoke to Paul Triolo, chief of technology policy at a global political risk research and consulting firm called Eurasia Group. His opinion "this would be weaponizing the U.S. semiconductor supply chain against an entire country." And in more ways than one:Targeted use of the foreign direct product rule could be a blow to Russia's military, which relies on a type of chip called Elbrus that is designed in Russia but manufactured in Taiwan at a chip foundry called TSMC, according to Kostas Tigkos, an electronics expert at Janes Group, a U.K.-based provider of defense intelligence. If the United States barred TSMC from supplying those chips to Russia, as it successfully barred TSMC from supplying Huawei, that would have a "devastating effect," Tigkos said. In a statement, TSMC said it "complies with all applicable laws and regulations" and that it has a "rigorous export control system in place ... to ensure export control restrictions are followed."Analysts say that Western multinational firms probably would comply with the export controls. All U.S. chipmakers include clauses in their contracts requiring customers to abide by U.S. export rules. The article also explores a scenario where businesses in China step in to supply Russia (citing estimates from the Peterson Institute for International Economics that China already builds 70% of the computers and smartphones that Russia imports). "If Chinese firms wound up supplying Russia in violation of the rule, that would leave Washington with a major diplomatic dilemma: whether to sanction them, even if they make ordinary - not military - goods."

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