Since the start of the Russo-Ukrainian conflict in February 2022, the European Union has ratified 10 sanctions packages designed to undermine Russia’s capacity to wage war in Ukraine. Now, kitchen appliances are in the EU’s crosshairs.
British newspaper The Telegraph, claiming to have seen a confidential EU report, says Brussels is considering imposing trade restrictions “on countries helping Russia acquire [microchips] in washing machines and used cars to repair its battle-stricken fleet of tanks.”
Thus the EU is threatening to apply secondary sanctions – that is, penalties on persons and entities outside of the EU’s legal jurisdiction – on countries in Central Asia and the Caucasus.
When weighing the imposition of secondary sanctions, EU policy should be guided by realpolitik and strategic thinking rooted in common sense, rather than by ideology and moral indignation, whether feigned or sincerely meant.
For the EU to impose trade restrictions on other countries on the suspicion that they are reselling significant quantities of home appliances to Russia, which then strips them for their microchips, is potentially destructive of the West’s strategic interests across Middle Eurasia.
The evidence suggests that harvesting microchips contained in home appliances sourced in “secondary” countries, usually for military use, is an exceedingly rare occurrence. It is cost-ineffective and unnecessary to boot, because EU countries have not seriously clamped down on the export of EU-sourced processors used in refrigerators, washing machines and other such appliances.
EU (and G7) leaders should think twice before insisting that other countries – mainly in Central Asia and the Caucasus – expend energy and resources on so dubious an undertaking with potentially negative political consequences for themselves.
To sanction – and possibly punish – consumers and traders of home appliances is unreasonable and impractical in view of the easy accessibility of military-grade microchips on the market already.
Moreover, these chips are nearly impossible to track after delivery to distributors or resellers in third counties around the world. What’s more, by the end 2022, Qingdao Haier Ltd, a Chinese enterprise, had become the largest maker of washing machines and refrigerators in Russia.
(By the way, General Electric sold its 100-year-old appliances business to Haier in 2016.)
Common sense
Then there is this consideration, which should occur to anyone with an ounce of common sense: Why would the Russian military – or any military for that matter – go through all the trouble and expense of finding, importing or buying vast numbers of washers and refrigerators when it is easier and cheaper to order large quantities of microchips from the many companies and resellers hawking them worldwide, including chips compatible with Russia’s own global positioning system, GLONASS?
A Forbes magazine article titled “Is Russia really buying home appliances to harvest computer chips for Ukraine-bound weapons systems?” states that “these kinds of chips [for drones] have long been widely available to civilian users on the global market, and Ukrainian authorities say at least six US companies produce GLONASS-compatible chips.”
And these components are “not under embargo,” says Sven Etzold, the senior director of business marketing at U-Blox: “They are usually for civil usage and can be officially bought through a distributor.”
Chris Miller, a fellow at the American Enterprise Institute and specialist in semiconductors, said recently, “My feeling is that most of the chips that Russia is accessing today for integrating into military systems are not coming via this route [home appliances].
“We should probably assume that Russia is going to find ways to get access to lower-tech chips simply because they’re widely available,” he said.
Chip suppliers
According to an investigative report in January summarized in the Netherlands Times, “Several million microchips produced by Dutch manufacturers, including NXP and Nexperia, wound up in Russia last year in shipments that were handled by resellers after sanctions were in place as a consequence of Russia’s invasion of Ukraine.”
One can only assume that Russia has installed some of these Dutch microchips in military hardware.
“Key technology [used in drones for satellite navigation] is European and American,” reports CBS Evening News, and “the chips are still flowing” into Russia and available in the global market. The Columbia Broadcasting System singled out U-Blox, a Swiss company, and Maxim and Microchip, two US producers of microprocessors, whose chips could well have ended up in Russia.
In view of all this, it doesn’t seem to make sense to threaten Armenia, Kazakhstan or Turkey, for example, with sanctions of one kind or another when the availability of new lower-tech chips is widespread. Secondary sanctions on home appliances seem uncalled for.
EU-Russian trade
Al Jazeera reported last month that “in total, the EU imported €171 billion (US$186 billion) worth of goods from Russia starting from March 2022 until the end of January 2023.”
According to Eurostat, the EU statistics office, the European Union has posted a net trade deficit in the billions of dollars with Russia each month since January 2021. This means that significant business between Russia and the EU continues despite all the chatter to the contrary.
Europe’s double standards are clear for everyone to see. While Brussels wants to call on non-EU countries to cut their trade with Russia, the EU continues to trade with Moscow.
Start with Western firms
Nearly 9% of Western firms have divested from Russia since the onset of the Russo-Ukrainian conflict, according to Simon J Evenett, professor of international trade and economic development at the University of St Gallen, and Niccolò Pisani, professor of strategy and international business at IMD Business School in Switzerland: “Of the total of 1,404 EU and G7 companies with commercially active equity investments in Russia before the invasion of Ukraine … by the end of November 2022, a total of 120 (8.5%) [had] actually left.”
European Commission President Ursula von der Leyen should be careful before boasting in public about the devastating efficacy of her sanctions:
“We have sanctions. We have banned all export of semiconductors. The impact of these sanctions is now very real and tangible on the ground in Russia. The Russian military, for example, cannibalizes refrigerators and washing machines to take out the semiconductors, trying to get the semiconductors for their military hardware.”
The EU does not seem to understand that the imposition of secondary sanctions works against its efforts in Central Asia and the Caucasus – as described in a recent official document – to “mitigate socio-economic dislocation, facilitate trade within and beyond the region, diversify transport routes, [and] lift investments.”
Brussels might go after those EU and G7 companies with active businesses in Russia and prevent its own microchip makers from making available thousands of microprocessors in world markets before giving the countries of Central Asia and the Caucasus a hard time about refrigerators and washing machines.
It would be more diplomatically productive for EU ambassadors stationed abroad to engage their hosts as partners rather than as pawns on the global chessboard.