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Monday, November 28, 2022
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The Impact of Sanctions and Export Controls on the Russian Federation

Sanctions administered and enforced by the U.S. Department of Treasury are having a significant impact on Russia’s ability to wage its unjust war against Ukraine.

Since Russia launched its unjustified and unprovoked all-out 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 for as long as its war of aggression continues.

Sanctions and export controls are having significant and long-lasting consequences on 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 Russia’s access to advanced technology , which has degraded  the Russian weapons industry’s ability to produce and stockpile weapons to replace those that have been destroyed in the war.

A few effects include:

  • Major supply shortages for Russian forces in Ukraine are forcing Russia to turn to less technologically advanced countries such as Iran  and North Korea for supplies and equipment.
  • Russia is struggling to import semiconductors and other key components.  Export controls have forced Russia to cannibalize existing airline parts they can no longer access abroad.
  • Russian hypersonic ballistic missile production has nearly ceased due to the lack of necessary semiconductors used in the manufacturing process.
  • Russia’s military aviation program has been cut off from resupply provided by global aviation trade.
  • Russian media reports that production of its next-generation airborne early warning and control military aircraft has stalled due to lack of foreign components, including semiconductors.
  • Mechanical plants, including those producing surface-to-air missiles, have been shut down due to shortages of foreign-origin components.
  • Russia has reverted to Soviet-era defense stocks because our measures have interrupted Russian companies’ abilities to replenish domestic supply chains.
  • Exports on certain goods and services, including dollar-denominated banknotes, accounting, management consulting, quantum computing, and trust and corporate formation services to persons located in the Russian Federation are now prohibited.

In addition, since February 2022, the U.S. government has:

  • Denied all [U.S.] exports, reexports to, 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 Department of Commerce’s Entity List, which has effectively cut off these end users from nearly all items subject to the Export Administration Regulations.
  • Denied exports to, reexports to, and transfer within Russia and Belarus of items needed for oil refining. Also imposed additional license requirements to further limit the Russian oil sector by restricting the export, reexport and transfer of additional items needed for oil refining.
  • Targeted items useful for Russia’s chemical and biological weapons production capabilities and other advanced manufacturing by imposing export controls.
  • Targeted luxury goods to impose costs on certain Russian oligarchs who support the Russian government by imposing license requirements and denying licenses for the export and reexport of luxury goods for all end users within Russia.
  • Used new foreign direct product rules targeted at Russia to prevent exports of foreign-origin items produced with U.S. advanced technologies, tools, and software. This prevents these items being transferred to support Russia’s military capabilities.
  • Formed a coalition of 37 countries that has amplified the impact of U.S. actions by applying substantially similar controls to those imposed by the United States. This robust global coalition reinforces U.S. efforts to isolate Russia from commodities, technologies, and software necessary for Putin’s war.

Furthermore, sanctions (administered and enforced by the U.S. Department of Treasury) are having a significant impact on Russia’s ability to wage its unjust war against Ukraine.  Specifically, sanctions implemented by the United States along with Allies and partners and allies have immobilized about $300 billion worth of Russian Central Bank assets, limiting the central bank’s ability to aid the war effort and mitigate sanctions impacts.   Sanctioned Russian oligarchs and financial institutions have been forced to divest from long-held assets outside Russia.  Moreover, sanctions have prompted banks in several countries to curtail ties with the Russian financial sector.  Despite benefiting from high energy prices, the IMF still expects Russia’s economy will contract by over 3 percent this year.  Lost investment, export controls, and constraints on Russia’s real economy will create a drag on Russia’s growth prospects for years to come.  Significantly, U.S. sanctions and export controls have severed Russia’s access to key technologies and industrial inputs that erode its military capability.   Since February 2022, the United States has issued approximately 1,500 new and 750 amended sanctions listings, including:

  • State Corporation Rostec, the cornerstone of Russia’s defense-industrial base that includes more than 800 entities within the Russian military-industrial complex, such as Sukhoi, MiG, and Kalashnikov Concern.
  • Joint Stock Company Mikron, Russia’s largest manufacturer and exporter of microelectronics.
  • Tactical Missiles Corporation JSC, a Russian state-owned enterprise that produces missiles used by the Russian Armed Forces in Ukraine.
  • Individuals and entities located outside Russia who have sought to procure goods and technology for the Russian military-industrial complex and intelligence services
  • Russia’s largest financial institutions and restricted dealings with banks representing 80 percent of Russian banking sector assets.
  • Rosoboronexport, which is Russia’s sole state-controlled intermediary agency for exporting and importing the entire range of military, defense, and dual-use products, technologies, and services.
  • Issued guidance emphasizing the sanctions and export control risk to individuals and entities inside and outside Russia that provide material support for Russia’s sham referenda and purported annexation of the Kherson, Zaporizhzhya, Donetsk, and Luhansk regions of Ukraine.

Read more at the State Department

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