As Russia launches an unprecedented invasion of Ukraine, world leaders are considering what sanctions they could impose to stop President Vladimir Putin in his tracks.
These could include cutting off Russia’s access to key technologies such as semiconductors and even the payments service SWIFT, which powers most of the world’s international money transfers.
Chips are the lifeblood of the modern world. Used in everything from mobile phones and computers to cars and missile systems, semiconductors are the brains that power today’s electronics.
Their importance can’t be understated. Without access to certain chips, Russian carmakers and defense companies would be crippled.
The foreign ministry of Russia, which is a major supplier of oil, gas and materials like titanium, said Thursday it will respond to U.S. sanctions in a tit-for-tat manner, according to news agency RIA.
Prakash said there’s a “high” likelihood that the West will try and block Russia’s access to chips. “Since the first round of sanctions targeted Russia’s financial sectors, the next round are likely to target Russia’s military and economy — putting semiconductors in the crosshairs,” he said.
U.S. chip heavyweights include Nvidia, Intel, AMD and GlobalFoundries, while European chipmakers include the likes of Infineon and STMicro. There’s also TSMC and Samsung in Taiwan and South Korea respectively. If Russia was unable to use products made by these companies, it may be forced to turn to Chinese chipmakers like SMIC, whose semiconductors lag behind the most advanced chips in the world.
Russian carmaker Avtovaz is already looking for alternative sources of chips, the firm’s CEO said Tuesday.
“The semiconductor materials and components that Russia exports to the West might be restricted, putting Western technology firms in a challenging position,” Prakash said. “This will force companies to rapidly reorient their supply chains, causing the world to become vertical, as the nations split apart because of technology orientation.”
Global payments
When it comes to international payments, Czech President Milos Zeman said Thursday that Russia should be cut off from the international payments network SWIFT, adding that Russia’s attack on Ukraine was a “crime against peace.” SWIFT is a messaging network that financial institutions use to securely transmit information and instructions.
However, the EU is unlikely at this stage to take steps to cut Russia off from SWIFT, Reuters reported Thursday, citing sources familiar with the matter.
“Remember all of Russia’s material exports and energy exports – most of which goes to Europe but quite a lot goes to the U.S. and other countries as well – they have to be paid for and they’re paid for using the SWIFT system,” Weafer told CNBC on Thursday.
“So Russia has said that it would not cut off energy supplies for political reasons, but if those supplies are not paid for, then you may see a disruption of energy going into those markets, so it’s a very extreme action that would of course have severe consequences for Russia but also would have consequences for Europe and for the global economy, if those exports were to be cut.”
For this reason, Weafer said SWIFT could be held back as a “last chance saloon” sanction, if Russia’s invasion and intentions continue to become more sinister.
