Technology plays a huge role in the current global economy. Almost every sector of the world’s economy including financial, health, education, tourism, etc. relies heavily on technology to thrive. So what happens when a country is banned from technology import or has its technology sector sanctioned? With most companies and startups, including security guard companies thriving on technology, what does a sanctioned sector mean for such firms?
The United States and its European Union allies have slapped the Russian Federation with unprecedented sanctions after invading Ukraine on February 24, 2022, in what it calls “special military operations.” Almost every sector of the country has been attacked one way or the other, with one of the heaviest sanctions being Russia’s removal from the SWIFT financial system, in addition to the country having most of its foreign reserves frozen. About 500 foreign companies in Russia have also withdrawn from the country causing massive unemployment among Russians. In addition, Oligarchs with some form of links with the Russian President Vladimir Putin have had their investments and properties seized.
Russia has now become the most heavily sanctioned nation in the world surpassing North Korea and Iran. A day doesn’t pass without a new sanction coming in, and now the US is targeting Russia’s technology sector. In what form is this going to take, and what are the consequences?
According to a Reuters report, the United States has imposed new sanctions on Russia, targeting the country’s technology sector. In a statement, Treasury Secretary Janet Yellen, said, “We will continue to target Putin’s war machine with sanctions from every angle until this senseless war of choice is over.” The statement confirms that Russia’s economic woes are far from over. The newest US sanctions involve 13 individuals and 21 entities including Joint Stock Company Mikron, which is Russia’s largest chipmaker. Joint Stock Company Mikron manufactures and exports microelectronics to several countries.
The US also seeks to introduce new sanctions on three other sectors of Russia’s economy under an existing executive order. This would enable Washington to sanction individuals and companies in the marine, aerospace, and electronics sectors that try to evade sanctions and execute business dealings with Russia. This means any American is barred from doing business with the targeted firms and individuals. In addition, the decision automatically freezes the US assets of the targets.
Companies targeted include Serniya Engineering and equipment maker Sertal, which the Treasury Department has accused of illicitly procuring equipment and technology for Russia’s defense sector and civilian use.
Are the sanctions crippling Russia’s economy as expected?
The answer to this is yes and no. The draconian sanctions on Russia seem to be counterproductive and have detrimental effects everywhere. Currently, the world’s economy is bleeding, with no hope in sight. Inflation has skyrocketed to record high levels; the cost of living is worsening, while prices of oil and gas keep rising.
Small economies especially Eastern European countries, Africa, and Asia are at the mercy of these sanctions, due to the strategic role Russia plays in the world’s economy. Aside from oil and gas, Russia and Ukraine produce a substantial amount of the world’s wheat and other grains. The country is also a hub for fertilizer production and other agricultural input. With sanctions on most of their exports and smaller countries trying to avoid being sanctioned, they unable to directly trade with Russia. Most countries are not taking unprecedented decisions to safeguard their economies.
The US president, Joe Biden, on Thursday made an unprecedented order for the release of one million barrels of oil a day from the US reserve, to shore up world production and bring down prices. The move comes after he struck a deal with European partners to export oil and gas exports to the region to reduce Europe’s dependency on Russian oil and gas. EU countries have also been looking for new energy deals to wane their dependency on Russia.
How is Russia responding to the sanction?
Russia has been taking several measures to circumvent the crippling economic sanctions. On Thursday, President Vladimir Putin ordered “unfriendly countries” to pay rubles for oil and gas imports. While the United Kingdom and some EU countries like Germany are protesting the order as a breach of contract, Putin seems to be firm on the order.
Russia is also trying to find new trading partners to sell oil and gas to, with India showing up in the critical times. But why would India buy Russian oil, despite the numerous sanctions? The country has so far purchased about 13 million barrels of Russian discounted oil.
President Putin has also ordered government officials to develop strategies and homegrown measures including retaining jobs and creating new ones to reduce the impact of the sanctions on the citizens.
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