The impact of sanctions and export controls on the Russian Federation
Since Russia launched its unjustified and unprovoked total war against Ukraine in February 2022, the United States has worked with Allies and partners around the world to impose an unprecedented range of sanctions and export controls on Russia for its brutal aggression. Moreover, we will continue to impose costs on the Kremlin as long as its war of aggression continues.
Sanctions and export controls have significant and lasting consequences for Russia’s defense industrial base. Since February 2022, the United States and our partners and allies have coordinated to use export controls and sanctions to restrict who has the ability of the Russian arms industry to produce and stockpile weapons to replace those destroyed during the war.
Some effects include:
- Significant supply shortages for Russian forces in Ukraine are forcing Russia to look to less technologically advanced countries, such as and North Korea for supplies and equipment.
- Russia is struggling to import semiconductors and other key components. Export controls have forced Russia to cannibalize parts of existing airlines that they can no longer access overseas.
- Russian production of hypersonic ballistic missiles has almost ceased due to the lack of necessary semiconductors used in the manufacturing process.
- Russia’s military aviation program has been cut off from the resupply provided by the global aviation trade.
- Russian media reports that production of their next-generation airborne early warning and control military aircraft has stalled due to lack of foreign components, including semiconductors.
- Mechanical factories, including those producing surface-to-air missiles, were closed due to shortages of foreign-sourced components.
- Russia reverted to Soviet-era defense stocks because our measures disrupted the ability of Russian companies to replenish domestic supply chains.
- Exports of certain goods and services, including dollar-denominated banknotes, accounting, management consulting, quantum computing, and trust and business establishment services to persons located in the Russian Federation are now prohibited.
Additionally, since February 2022, the U.S. government has:
- all denied [U.S.] exports, re-exports and transfers of items subject to the Export Administration Regulations for military end uses or end users in the Russian Federation and Belarus.
- Targeted Russian and Belarusian military end-users through their addition to the Ministry of Commerce’s Entity List, which effectively cut off these end-users from almost all items subject to export administration regulations.
- Refusal to export, re-export and transfer within Russia and Belarus of items necessary for oil refining. Also imposed additional licensing requirements to further limit Russia’s petroleum sector by restricting the export, re-export, and transfer of additional items needed to refine petroleum.
- Targeted items useful for Russia’s chemical and biological weapons production capabilities and other advanced manufacturing by imposing export controls.
- Luxury goods targeted to impose costs on certain Russian oligarchs who support the Russian government by imposing licensing requirements and denying licenses for the export and re-export of luxury goods to all end users in Russia.
- Using new foreign direct product rules targeting Russia to prevent exports of foreign-sourced items produced with advanced US technology, tools and software. This prevents these items from being transferred to support Russia’s military capabilities.
- Formed a coalition of 37 countries that amplified the impact of US actions by enforcing controls substantially similar to those imposed by the United States. This robust global coalition bolsters US efforts to isolate Russia from the products, technologies and software needed for Putin’s war.
Furthermore, the sanctions (administered and enforced by the US Treasury Department) have a significant impact on Russia’s ability to wage its unjust war against Ukraine. Specifically, sanctions implemented by the United States with its allies and partners and allies have tied up approximately $300 billion in Russian Central Bank assets, limiting the central bank’s ability to support the effort to war and mitigating the effects of sanctions. Sanctioned Russian oligarchs and financial institutions have been forced to divest themselves of long-held assets outside Russia. Moreover, the sanctions prompted banks in several countries to sever their ties with the Russian financial sector. Despite benefiting from high energy prices, the IMF still expects Russia’s economy to contract by more than 3% this year. Lost investments, export controls and constraints on Russia’s real economy will dampen Russia’s growth prospects for years to come. Significantly, US sanctions and export controls have cut off Russia’s access to key technologies and industrial inputs that erode its military capability. Since February 2022, the United States has published approximately 1,500 new sanctions lists and 750 amended lists, including:
- State Corporation Rostec, the cornerstone of Russia’s defense industrial base which includes more than 800 entities within the Russian military-industrial complex, such as Sukhoi, MiG and Kalashnikov Concern.
- Joint Stock Company Mikron, the largest Russian manufacturer and exporter of microelectronics.
- Tactical Missiles Corporation JSC, a Russian state-owned company that produces missiles used by the Russian Armed Forces in Ukraine.
- Individuals and entities outside of Russia who have sought to procure goods and technology for the Russian military-industrial complex and intelligence services
- Russia’s largest financial institutions and limited relationships with banks accounting for 80% of Russian banking sector assets.
- Rosoboronexport, which is Russia’s only state-controlled intermediary agency for the export and import of the full range of military, defense and dual-use products, technologies and services.
- Issued guidance emphasizing sanctions and export control risk for individuals and entities inside and outside Russia who provide material support to Russia’s bogus referendums and the alleged annexation of the Ukrainian regions of Kherson, Zaporizhzhya, Donetsk and Luhansk.