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Semiconductors, SWIFT payments could be targets


A semiconductor wafer at an Intel event before the IFA International Consumer Elektrons Show.

Krisztian Bocsi | Bloomberg | Getty Images

Russia announces unprecedented measures invasion of UkraineWorld leaders consider what sanctionsThey might use force to stop President Vladimir Putin dead in his tracks.

These could include cutting off Russia’s access to key technologies such as semiconductors and even the payments service SWIFT, which powers most of the world’s international money transfers.

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These could potentially have catastrophic consequences for Russia’s economy.

Modern society depends on chips for its lifeblood. Semiconductors are used in every aspect of modern electronics, including mobile phones, computers and cars as well missile systems.

They are vitally important. Russian automakers and defense firms would suffer if they were unable to obtain certain chips.

EU President Ursula von der Leyen said ThursdayAccording to the bloc, it will propose a “massive” and “targeted sanctions package to European leaders to be approved.

“We will target strategically important sectors of Russia’s economy by blocking access to technologies, markets and key for Russia,” she stated. She also said that Russia’s “capacity” to modernize will be limited by the EU.

During the time, Joe Biden, U.S. president promised to take more steps to help Russia’s economy recover from the invasion.

A Russia-focused Foreign Direct Product Rule could lead to economic sanctions. according to U.S. think tank The Atlantic Council. This rule is similar to the one used by America to stop Chinese tech company Huawei from entering the United States in 2019. It would also limit Russia’s access to technology that originated in the U.S.

Abishur Prakash (co-founder, Center for Innovating the Future), a consulting firm said that the U.S. offers a wide range of technology sanctions options. He spoke to CNBC by email on Thursday.

For example, the U.S. could push Russian-funded technology companies or Russian directors to modify their structures. The U.S. could also propose to delist Russian companies from U.S. stock exchanges. The U.S. could also take more drastic steps, such as banning certain software exports (i.e. Android) to Russia. But, Washington might find it difficult to withstand the negative impact on U.S. corporations.

According to RIA, the Russian foreign ministry is a significant supplier of oil, natural gas, and other materials such as titanium. It said that Thursday, it would respond to U.S. Sanctions in a titt-for-tat way.

Prakash stated that there is a high likelihood that Russia will be prevented from accessing chips by the West. “Since the first round of sanctions targeted Russia’s financial sectors, the next round are likely to target Russia’s military and economy — putting semiconductors in the crosshairs,” he said.

These are the U.S. chips heavyweights Nvidia, Intel, AMDAnd GlobalFoundriesWhile European chipmakers also include such names as InfineonAnd STMicro. You can also TSMCAnd SamsungIn South Korea and Taiwan, respectively. These companies produce products in Russia. Russia may have to look to Chinese chipmakers if it is unable to do so. SMICIts semiconductors are behind the top-of-the-line chips worldwide.

Russian carmaker Avtovaz is already looking for alternative sourcesAccording to the CEO, chip makers are a good choice.

Russia may also affect semiconductor companies in West Europe that depend on Russia for their production.

Prakash stated that Russia might limit the exports of semiconductor components and materials to Western countries. This could make it difficult for Western technology companies. This will require companies to quickly reorient their supply chain, making the world vertical.

International payments

Czech President Milos Zeman stated Thursday, “When it comes to international payment,” Russia should be cut offFrom the international payment network SWIFT. They added that Russia’s attack against Ukraine was a “crime versus peace.” SWIFT, a messaging system that financial institutions use for secure transmission of information and instructions, is part of the international payments network SWIFT.

The EU has yet to make any moves to remove Russia from SWIFT. Reuters reported ThursdayCiting sources who are familiar with this matter,

Chris Weafer CEO, Moscow-based Macro-Advisory said that cutting Russia out of the SWIFT network would not only have an adverse effect on Russia’s economy but also have serious consequences for Europe. He suggested the Kremlin may be hoping that this will serve as a deterrent to Western powers.

“Remember all of Russia’s material exports and energy exports – most of which goes to Europe but quite a lot goes to the U.S. and other countries as well – they have to be paid for and they’re paid for using the SWIFT system,” Weafer told CNBC on Thursday. 

Russia said it wouldn’t cut energy supplies to political reasons. However, if supplies don’t get paid for then there may be disruption in energy entering those markets. This extreme move would have serious consequences not only for Russia, but also for Europe and the global economy if these exports were cut.

Weafer stated that SWIFT might be held as a last chance saloon sanction if Russia continues to invade and intends to invade.

– Additional reporting by CNBC’s Elliot Smith.