US seeks to undercut third-party semiconductor supply to Russia with new sanctions

The U.S. has imposed new sanctions on Russia targeting its financial infrastructure, tech industry and foreign third-party sellers of semiconductors and other crucial technology used by Moscow to develop military equipment for its war in Ukraine.

According to a statement by the U.S. Treasury Department, the new sanctions aim to "restrict the ability of the Russian military-industrial base to benefit from certain U.S. software and information technology services," while limiting access to foreign products "that enable Russia to support its war effort."

Russia has heavily relied on foreign chips and other technology to produce military equipment, including drones and missiles. Despite previous sanctions, Russia has found ways to obtain this technology from other countries.

"Each missile that strikes Ukraine contains dozens of components — electronics, and chips — sourced from companies in other countries and imported through Russia's neighboring territories," stated Ukraine’s President Volodymyr Zelensky in an April video address.

To restrict Moscow’s access to microelectronics, the U.S. sanctions target companies based in China, Kazakhstan, Turkey and Hong Kong that sell semiconductors and other technology to Russia.

For instance, China-based Shenzhen Youxin has provided over half a million dollars’ worth of technology, including microchips, to Russia. Some of these were discovered in Russian reconnaissance drones, according to the Treasury statement. 

The sanctions also target individuals aiding in the procurement of microelectronics, such as Russian national Alexey Chichenev, who manages a large-scale procurement network for microelectronics based in Hong Kong, according to the U.S. Chichenev’s business facilitated the shipment of millions of dollars’ worth of electronic integrated circuits and other critical technology items to Russia, the Treasury said.

In a separate statement, the U.S. Commerce Department announced measures against shell companies in Hong Kong that divert semiconductors to Russia.

"These new restrictions will make it harder for shell companies, which frequently change names or use multiple corporate identities, to find a corporate services provider willing to assist in unlawful trade," the agency stated.

The U.S. is also expanding sanctions on U.S.-branded technology, prohibiting the supply of IT consultancy and design services, tech support services, and cloud-based services for enterprise management software and design and manufacturing software to any person in Russia.

"The United States strongly supports the free flow of information and communications globally, and these actions are not intended to disrupt civil society and telecommunications," said the Treasury Department.

The Kremlin has promised retaliation in response to the sanctions. 

“As always in such cases, Russia will not leave such aggressive actions unanswered,” said Maria Zakharova, spokeswoman for the Russian Ministry of Foreign Affairs. She did not specify what response the U.S. should expect.

Russia’s deputy chairman of the Security Council, Dmitry Medvedev, wrote an angry post on Telegram, urging the entire Russian population to respond to the sanctions.

“Every day, we must strive to inflict maximum harm on those countries that have imposed these restrictions on our country and all our citizens,” Medvedev wrote.

He specifically called for Russians to identify weaknesses in the enemies’ most critical technologies "and strike them mercilessly." He also encouraged Russian citizens to spread disinformation and disrupt the operations of foreign media.

“Let's turn their lives into a complete crazy nightmare where they cannot distinguish wild fiction from the daily realities, infernal evil from ordinary life,” he added.