How will the US’ new tech sanctions affect Russia?

The United States hit Russia with sanctions on software and Information Technology (IT) services on Thursday, following an announcement in June ahead of the G7 summit in Italy that it would do so. 

The latest ban limits the provision of IT services and support to “any person in the Russian Federation” but also applies to countries that trade with Russia. 

Why is the US targeting IT services?

This is not the first round of sanctions on Russia. While past sanctions have not stopped illicit goods from reaching Russia, the aim is to make it harder for Russia to source certain technology and make it more expensive to acquire. 

The US Department of the Treasury said in June that its goal is to “restrict the ability of [the] Russian military-industrial base to take advantage of certain US software and [IT] services,” and “disrupt the Russian military-industrial base’s reliance on foreign IT [systems]”.

The sanctions will also target companies that support Russia’s war in Ukraine, as the US ramped up secondary sanctions and new ones on Russian and foreign entities that aided Russia in procuring war materials. 

The aim is to “target more than 300 individuals and entities both in Russia and outside its borders – including in Asia, the Middle East, Europe, Africa, Central Asia, and the Caribbean – whose products and services enable Russia to sustain its war effort and evade sanctions,” the US Treasury said. 

The US has previously gone after Chinese companies for shipping military equipment and its June announcement saw new sanctions that would apply to Chinese chip suppliers, whose technology has been found in Russia’s military equipment. 

However, US and Western-made chips and other technology have also been found in Russian military equipment, according to Ukrainian officials. 

What does the ban mean in practice?

The ban prohibits the supply to any person in the Russian Federation of IT consultancy and design services; and IT support services and cloud-based services for enterprise management software and design and manufacturing software, the US Treasury Department says. 

It means US companies must stop offering IT consultancy, design, cloud services, or IT support to anyone based in Russia and threaten foreign financial institutions with sanctions if they do business with almost any sanctioned Russian entity.

What’s the implication of the latest IT ban?

The ban could affect Russia’s ability to operate its systems as most of the major software companies are based in the US. 

The ban would also impact Russia’s access to software such as business intelligence (BI) or computer-aided design (CAD), which are often used by companies.

The Treasury said that the US “strongly supports the free flow of information and communications globally,” and that the measures “are not intended to disrupt civil society and civil telecommunications”.

Exceptions to the ban

There are some exceptions to the ban, which are as follows: 

• A US company that sells a cloud-based electronic health records software subscription to a Russian company;  

• A US company providing customer support services to a Russian individual who is experiencing technical difficulties with their publicly available cloud-based spreadsheet web application; 

• A US person working at a third-country company provides customer support services to a Russian individual who is experiencing technical difficulties with their free-of-charge publicly available teleconferencing application;

• A US company that provides IT support services to a Russian individual to a non-covered software application.

The US has sanctioned more than 4,000 Russian businesses and individuals since the invasion of Ukraine began two years ago.