US expands anti-Russian sanctions in the semiconductor sector — complicating chip supplies from China.

In what seems as an escalation in the US economic stand against Russia, the United States on Wednesday expanded sanctions on Russia’s semiconductor industry. This move is to increase secondary sanctions risk for Chinese companies supplying semiconductors to Russia.

The US Department of Treasury has declared it would increase the “risk of secondary sanctions for foreign financial institutions dealing with the Russian military economy”. This is seen as an implicit threat to Chinese and other foreign companies that could lose access to the American financial system for working with Russian military contractors.

The Treasury also announced plans to restrict the Russian military-industrial complex’s ability to use certain American IT products and services. In collaboration with the State Department, they have targeted over 300 entities in Russia and beyond, including those in Asia, Europe, and Africa.

Furthermore, the US Department of Commerce revealed it exposed shell companies in Hong Kong making semiconductor deliveries to Russia. The pursuit of these companies will impact contracts for the supply of chips to Russia, valued at about $100 million.

Regarding the expansion of the sanctions, Secretary of the Treasury Janet Yellen said: “Today’s actions hit their (Russia) remaining supply routes for international materials and equipment, including critically important supplies from third countries”. Adding, “We raise the risk (of falling under secondary sanctions) for financial institutions dealing with the Russian military economy, remove evasion routes from sanctions restrictions, and reduce Russia’s ability to benefit from access to foreign technologies, equipment, software, and IT services”.

This news comes as US President Joe Biden heads to the G7 summit in southern Italy.

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