(Reuters] – If President Vladimir Putin wants to invade Ukraine, the Biden administration will prepare a U.S. export ban against Huawei, a Chinese manufacturer of telecoms equipment.

It is not yet clear what the rules could mean for Russia. However, Huawei’s smartphones business was severely limited by these restrictions. Huawei last month stated that it expects 2021 revenue will have dropped nearly 30%, and forecasted continued problems this year.

What is the RESTRICTION?

The Foreign Direct Product Rule, as it is called, may be adapted to halt Russia’s ability to import smartphones, key aircraft and automobile components, Reuters reported last month.

According to a top official, the administration may restrict chips or products with integrated circuits that are bound for Russia. It will also impose its authority on items manufactured abroad, provided they have been designed or made using U.S. technology or software.

WHAT EXPORTS CAN RUSSIA BE AFFECTED?

According to the official, restrictions could be applied to crucial industrial sectors such as artificial intelligence, naval defense and civil aviation. They could also apply more widely to consumer electronics.

Although the scope of Russia’s sanctions has yet to be determined, officials from the White House National Security Council have warned the Semiconductor Industry Association (a lobbying organization for chipmakers) of potential unprecedented actions.

The rule’s impact on Russia is not as devastating as its effect on Huawei.

“A strict imposition of the Foreign Direct Product rule would significantly affect trade and output in Russia, though it’s hard to say by how much,” said Jeffrey Schott, an expert on international trade policy and economic sanctions at the Peterson Institute for International Economics.

HOW DID IT EFFECT HUAWEI

Now, the Foreign Direct Product Rule prohibits U.S. or non-U.S. businesses from shipping to Huawei items that are directly derived from U.S. software and technology. These shipments cannot be done without a U.S. licence.

This rule was created in response to Huawei being placed on the so-called “entity list”, an export blacklist, which was established in 2019. It did not prevent the flow of chips from Huawei.

Although the initial listing was for U.S.-made products and limited overseas items using U.S. technology, it did not prevent Huawei companies from shipping to Huawei.

The United States also added the Foreign Direct Product Rule (in 2020) to strengthen its power to ban shipments to Huawei of products from other countries. Companies, such as TSMC which make use of U.S. chips must get U.S. licences before they can supply Huawei. Licences for more advanced chips will not be granted.