Technology export controls have taken a prominent place in the response of the United States and its allies to Russia’s invasion of Ukraine. By applying the so-called Foreign Direct Product Rule (FDPR) to Russia, the U.S. cuts off Russian customers not only from U.S. technology but also from foreign-produced items that contain or were developed with controlled U.S.-origin technology or software. The Biden administration imposed one FDPR on Russian military end users and one Russia-wide FDPR (the latter excludes some low-technology consumer goods). U.S. allies and partners that are also major tech producers, including the EU, Japan, South Korea, and Taiwan, have backed the United States’ measures and supplemented them with their own restrictions. In addition, by pulling out of the Russian market, powerful tech firms like Apple contribute to Russia’s increasing technological isolation.
The sweeping tech controls will likely impose severe costs on the Russian military and economy. For some time, Russia has intensified its efforts to develop a domestic high-tech industry. With this push, the government aimed to diversify the Russian economy away from natural resources, while also making the country technologically more self-sufficient. But Russia’s tech economy bid has produced mixed results. Russian companies have successfully developed some homegrown solutions, including messenger services, social networks, and search engines. Russia has also made some progress in developing its own mobile operating systems and cloud services. However, in other areas, like semiconductors and telecommunications equipment, the country remains highly dependent on imports. The United States and its allies now target these dependencies.
While the breadth and reach of the U.S. technology controls against Russia are unprecedented, their design was visibly inspired by previous measures imposed on China’s tech giant Huawei. The telecom equipment manufacturer has come into the U.S. government’s crosshairs due to security concerns regarding its 5G technology, the evasion of sanctions against Iran, and allegations of intellectual property theft. In 2020, the Trump administration used the FDPR to cut Huawei off from semiconductors, after the company had successfully circumvented some less restrictive measures. Reportedly, the FDPR significantly curtailed Huawei’s business operations and profits.
But China also plays an important role when considering the effects of tech export controls against Russia. In recent years, Russia and China have significantly deepened their bilateral ties, with Putin and Xi going so far as to proclaim that their countries’ “friendship has no limits.” The countries share economic and security interests, an authoritarian style of government, and the desire to counter U.S. global leadership. Cooperation on high-tech has become an important element of the strategic partnership. Both governments view technological prowess as vital for their competitiveness – especially vis-à-vis the United States – and their skills and resources as complementary. Prioritized areas of collaboration include, for example, artificial intelligence (AI), big data, robotics, and biotechnology. Importantly, China has also become Russia’s largest supplier of semiconductors and consumer electronics over time.
At first glance, the strengthened technological and political partnership would suggest China will help Russia to dampen the impact of the tech controls imposed by the United States and its allies. In other words, technologically isolating Russia could further strengthen Sino-Russian high-tech cooperation. Yet this prospect is anything but certain. On the contrary, Putin’s war on Ukraine could expose the boundaries of China’s and Russia’s “limitless friendship” in the high-tech domain.
First, there are objective limits to China’s ability to plug in Russia’s high-tech gaps. China is unable to provide Russia with some strategically important technologies like high-end semiconductors. The most advanced chips, which are critical for some weapons systems and emerging technologies like AI, can only be manufactured by Taiwan’s TSMC and South Korea’s Samsung. Due the broad export restrictions of the U.S. and its allies, Russia is cut off from both firms and Beijing cannot come to Moscow’s rescue. Despite significant investments in its domestic industry, Chinese manufacturers like Semiconductor Manufacturing International Corporation (SMIC) still lack the ability to develop high-end semiconductors, and China itself relies heavily on imports to meet its demand.
Second, China may fear it will come in the crosshairs of Western sanctions if it backs Russia in the high-tech sphere. China has the potential to increase its exports of certain technologies to Russia, including less-sophisticated chips, cloud services, as well as computers. However, supplying Russia with any technologies that are covered by the United States’ FDPRs would bear significant risks for the viability of China’s long-term strategic goals. In the short and medium term, Beijing remains dependent on access to Western technology and markets for its continued rise. The Russian market pales in comparison. And while the complexity of supply chains and the breadth of the Russia FDPRs complicate their enforcement, the U.S. will probably spare no efforts to monitor the compliance of Chinese entities. Therefore, aiding Russia to evade U.S. export controls and sanctions could come at a high cost, possibly making Chinese institutions a target for secondary sanctions.
Third, Russia may be reluctant to significantly increase its dependency on Chinese tech. In the past, Moscow was careful to avoid depending too heavily on Chinese technology, especially in security sensitive areas like telecommunications equipment. An expansion of Russia’s reliance on Chinese foundational technologies would provide Beijing with greater political and economic leverage over Moscow – something that Putin, already uncomfortable enough in the role as Beijing’s junior partner, will try to avoid. Therefore, the Russian government will likely try to double down on the development of domestic solutions. However, the export controls and sanctions against Russia have significantly complicated this effort further.
So far, China has been cautious in responding to the Russian invasion and it remains unclear whether Chinese entities will comply with U.S. restrictions on technology exports. Yet, given China’s long-term interests and its dependency on foreign technology and markets, it seems unlikely at this point that Beijing will put its future on the line to back Putin. It is possible that Putin’s war on Ukraine and the tough tech controls imposed by the U.S. and its allies may not bring Russia and China closer together but – at least temporarily – drive them apart.