Unless there is a dramatic de-escalation of the sobering situation in Ukraine, it is going to become a lot more difficult for companies to win business in Russia. Of more immediate concern for the many businesses that adorn the pages of Faultline on a weekly basis, is the likelihood that sanctions could hinder technology vendors from continuing to serve existing Russian customers, in fields including video, telecommunications, computers, lasers, and navigation tools, among others.
Sanctions issued by the White House have put strict barriers in place for technology makers importing products into Russia, with US companies now required to obtain relevant licenses, which we understand will be almost impossible to obtain given intent by the US authorities to deny virtually all license requests, bar a few exceptional circumstances.
Crucially, these sanctions extend to any companies using US tools to develop technologies overseas, which must also seek a US license before doing any deals with Russia. However, the White House has noted that any ally that adopts similarly strict export restrictions will be given special exemptions from obtaining US licenses for homemade technology products.
These are, as of writing, the UK, European Union, Australia, Canada, Japan, and New Zealand. Even Switzerland – a famously neutral territory – has embraced the EU’s package of sanctions imposed on Russia.
Some might argue that without China on this list, any technology sanctions are futile. However, much of China’s domineering semiconductor empire relies on US tools, according to the Semiconductor Industry Association, and therefore certain Chinese chip makers will have to apply for the aforementioned US licenses to do deals with Russia.
Certain technology companies have even taken actions independently of government-imposed sanctions, with various electronics manufacturers holding shipments to Russian distributors. For the Faultline ecosystem, that could have adverse knock-on effects for developers of components and software in the supply chain, which is not the news businesses want to hear after two years of supply chain constraints and a global semiconductor shortage.
Consumer household electronics are not covered by these restrictions, for now, meaning smartphones and TV devices are safe, as are consumer encryption technologies, so as not to hinder local Russian media outlets and protestors. However, that hasn’t stopped the likes of Samsung from shutting off the taps of devices into Russian territory. More will follow.
Comparisons can be drawn from the Huawei debacle – in which telcos the world over are either completely ripping out or greatly reducing the share of Huawei equipment used in their networks. Indeed, the exile of Huawei from mobile infrastructure was triggered by the US, with the rest of the world duly following suit. This proved to be a hugely effective swing of the sword from the US and its allies, albeit one which will take network operators years to realize the benefits of..
The same will be true of these new technology sanctions imposed on Russia, taking time for any economic effects to be realized before pressure mounts on Putin. The big problem with comparing sanctions imposed on Russia with those on Huawei, as a lot of mainstream news outlets have done without due diligence, is that lives weren’t and aren’t at stake with the latter.
Meanwhile, the content ecosystem, both terrestrial and streaming, has been much more swift-footed with taking actions with immediate results – following a rallying cry from a group of Ukrainian media groups asking operators to cut off all Russian news channels across cable, satellite and OTT delivery. The first wave of pressure came from 1+1 media, StarLight Media, Media Group Ukraine, and Inter Media Group, resulting in numerous countries taking Russian news channels off air. Resultant waves of official letters combined with social media activity directly from Ukranian government ministers has triggered a domino effect of TV pull-outs.
One of the most significant moves has seen the EU ban Russia Today (RT), a talk channel backed by the Kremlin, as well as the Sputnik satellite news agency. YouTube soon followed suit, blocking any channels associated with RT and Sputnik content in Europe only, while parent Google has banned state media ads, and Roku has taken similar moves to wipe RT from its Roku Channel Store, again only for European viewers.
Social media is as much of a part of the war in Ukraine as physical weapons, with TikTok videos from soldiers and civilians on the ground documenting what news agencies can’t, or won’t. Facebook has not completely banned content from RT and Sputnik, yet, but has restricted access to the state-sponsored channels to stem the spread of disinformation. Russia ended up banning Facebook entirely anyway.
Even SVoD has been dragged in, with Netflix refusing to carry Russian state channels – on the same day that a new law came into place requiring services with over 100,000 subscribers in Russia to distribute some 20 FTA news and entertainment channels.
Neighboring Estonia has seen top operator Elisa blackout some 15 Russian channels and counting, while one of the latest headlines through the doors is that Sky TV is has clamped down on RT, which the UK culture secretary described as “Putin’s polluting propaganda machine.”
Of course, Russian broadcasters have hit back, by withdrawing from the European Broadcasting Union (EBU) – including Russian Television and Radio Broadcasting Company (RTR), Channel One Russia, and Radio House Ostankino.
Faultline hopes to be in discussions with the industry about how sanctions might impact business in the long-term, if at all – something we will have to approach delicately.