We have heard many times about the sanctions against Russia for the Ukraine conflict, but… what if it is not the economy or the Ukrainian army itself that can stop the war machine of Putin, but the technology that can be his real coup de grace? Thus, the arsenal of technological sanctions promoted by the US and the EU have a long-term depth charge that hinders the military and non-military use of technology in Russia. And all this ends up having a wearing effect about the strategic plans of the Kremlin. And the final tagline can be the call of the three hundred thousand reservists which could be a million, according to the Duma documents, and which means having less active population to sustain the economy, and with some Russian pensioners who need their financial support.
Vladislav Inozemtsev, director of the Moscow Research Center for Post-Industrial Studies, warns that Putin’s mobilization will have “truly catastrophic consequences. Families will be left without income and in big cities… the loss of even a few employees can cause disproportionate damage. Russia is the economy of big cities and companies. In addition, a recent Yale University report rated the Russian economy as “an internally corrupt colossus, dependent on Western technology”.
In fact, the departure of the software giants and the shortage of foreign chips, connectors, transistors and components is affecting military equipment – in which 450 components from western manufacturers– and is being forced to use Soviet-era equipment, while Ukraine receives the latest technology from the West. From hypersonic missiles to the aerospace, oil and gas industries depend on this technology.
Basically it is a war against time what is at stake, and as it points out Juan Carlos Martinez Lazaro, professor of economics at IE University, «every day that the conflict continues is one more nail in the coffin that is being put in place. Russia has natural resources and energy, but where it is going to collapse is because of the technological part. The productive apparatus will slow down and it will not be able to compensate for it by developing its own technology in such a short period of time”. Since, as Martínez underlines, “it is estimated that the 75% of the technology it used came from the West.
And it is that, between butter and cannons, Putin has chosen a war economy, and that could take its toll on him because military spending has risen 130%, says Martínez. One example is that Western export controls found Iskander-M cruise missiles dependent on a British design in computer control. And Russia’s military tactical communication components come from the US, the UK, Germany, the Netherlands, Japan and Israel. And the same goes for precision weapons and armored vehicles.
Tip of the iceberg
However, the debate remains for many whether or not the sanctions have a real effect. The x-ray that can be taken today, as indicated Esther Wirth, Professor of International Economics at Comillas iCADE, is that “at first glance, the Russian economy has resisted sanctions better than expected”. Martínez establishes that the Russian economy is doing well from the point of view of macro indicators, even some indicators show that it is much better than it was before the conflict.
Although the bad data is that the Russian economy is going to contract by 6%, but Ukraine’s is expected to be 35%. “In short, the sanctions have not stopped the war in the short term, but the damage that is going to be brutal if the sanctions continue is a long-term thing.” Elvira Nabiullina, the commissioner of the Russian Bank warned about it.
Wirth adds that “the impact of displaced people fearful of recruitment has yet to be seen. But according to the UK Ministry of Defense, the number of Russians trying to dodge Putin’s recruitment is higher than the number of soldiers Russia sent to the front line in February. These deserters fleeing the country are precisely the most educated, so the country will suffer a brain drain considerable”. And the Russian Association for Electronic Communications estimates that between 50,000 and 70,000 computer scientists have left Russia. And another 100,000 plan to do so.
Some of the sectors hardest hit by the sanctions, according to the professor from Comillas, are the car, due to the lack of parts and components. which are also essential for the repair and maintenance of civil equipment, such as airplanes, trains, subways o excavators that extract minerals and hydrocarbons. “The Russian military is also said to be looking for standardized components by breaking down refrigerators and washing machines,” Wirth notes. In addition, the lack of high-tech equipment has prevented the deployment of the 5G, artificial intelligence and data centers or the issuance of new plastic cards in Mir, the Russian internal payment system. and the lack of boats may delay Arctic drilling plans.
However, an investigation of Reuters in collaboration with the British ‘think tank’ Royal United Services Institute, revealed that Western-made electronic components continue to cross the Russian border. And there are more than a hundred countries that are not applying embargoes. Even Russian trips to Uzbekistan are organized for the purchase of Visa cards. Wirth explains that “the Russian military procurement department has been developing alternative routes since the Cold War, such as unregulated online marketplaces or front companies, just as North Korea or Iran had done. But, it is almost impossible to keep such a large country afloat based on products of smuggling».
Despite everything, Putin has worked for years to achieve digital sovereignty and dedollarization of its trade, but the industry continued to show a global dependency. Baikal Electronics and the Moscow Center for SPARC Technologies (MCST) are the Russian manufacturers of home processors, which have sought to become viable alternatives. However, they lag behind in performance because they consume too much power and only perform simple tasks. And the state approach is insufficient. For this reason, Putin has announced that he is going to spend 115 million to make chips, but this pales in comparison to the 45 billion of the EU, and it is late. And as for China, it will play an active role in Russia’s technological future, as long as it does not jeopardize its own ambitions and the dependence it still maintains on foreign countries.
Putin can put pressure on the West to the point that European citizens beset by the crisis ask for the end of sanctions on their politicians. For Professor Martínez, «Putin he plays it all in the remainder of the year, because the next year his situation will be more weakened, as well as his blackmail capacity ».