The use of sanctions by the US and its allies against Russia as a possible deterrence mechanism was expected ever since the country unilaterally decided to engage in a large-scale military operation in Ukraine. It has been 49 days since the invasion started and as of now, there are very few signs of the conflict ending.
One interesting aspect of the conflict has been the use of tech sanctions by the West, its allies and even private technology companies to deny Russia access to critical technology components needed for the running its critical sectors, like space and telecommunications. This is the first time that specific technology sanctions have been levied against a single country.
The impact of these sanctions can be absolutely devastating to the government and its strategic sectors, and even create inaccessibility to domestic consumers.
The US started with the tech sanctions by targeting specific products like semiconductor chips, telecommunication equipment and other high-tech products that they felt might adversely affect the Russian economy. This was followed by several tech companies unilaterally pulling out of the country and stopping all further tech supplies to Russia.
A caveat with the US sanctions was that any other country using American intellectual property (IP) and home-grown tech to produce specific products had to take licenses from the US government if they wanted to continue tech exports to Russia. This left Russia with few options on how to bypass or overcome the regulations imposed on it. Even its primary import ally, China, is under threat of secondary sanctions as Chinese companies utilise American IP to manufacture tech components.
Also read: Sanctions on Russia Are a Tool That Must Be Calibrated Like Any Other
This raises the issue of how tech sanctions can be used to cripple ones economy in the current Information Age. India, as a technologically advanced country, is also a large consumer of tech products itself; ranging from consumer electronics to specific tech components used in higher-end systems and manufacturing plants.
It must be noted that Indias economy is highly tech driven and any sanctions on it in the future have the potential to completely shut down critical economic sectors in the country. There is also the possibility of India coming suffering secondary sanctions from the US due to its stance on the current conflict.
Also read: Russias Invasion of Ukraine and Indias Diminishing Global Role
India, as a technically competent state, must ensure that there are contingency plans in place if and when something goes haywire and tech sanctions are imposed on it. It is the responsibility of the government, as well as the private sector, to keep in place specific shock absorbers to deal with these potential tech sanctions.
There are two main aspects for India to consider when it comes to nullifying, or at least reducing the impact of potential tech sanctions:
Diversification of tech imports
The COVID-19 pandemic has showcased the fragilities of critical technology supply chains and how easily the global supply of technology components or devices can be affected. The ongoing semiconductor chip shortage is a perfect example of the complexities in these technology supply chains.
India must realise that it is near impossible to achieve self-sufficiency in critical technologies and plurilateral cooperation remains a necessity. Currently, the country relies on a wide variety of tech imports to meet domestic demand. This can range from finished products to building blocks of tech systems. But imports in the tech domain will remain regardless of how much India progresses technologically.
The most important aspect is that the country must ensure a diversified basket of tech imports. Over-reliance on specific countries can significantly affect supply in case of specific sanctions.
In the case of Russia, over 70% of its semiconductor chipsets are imported from China. With Chinese companies also under threat of secondary sanctions, both countries are in a problematic situation. India, to its credit, has diverse sources of imports in critical goods like oil and natural gas. This must be extended to the field of technology as well.
Watch: Sanctions Are Economic Weapons of Mass Destruction, We Must Consider Their Consequences
Recently, India has relied heavily on Chinese imports for solar hardware (used for the construction of large-scale panels) and other renewable energy technologies. With respect to critical tech components, like semiconductor chips, India, again, is heavily reliant on China. This dependency needs to be reduced and a more nuanced approach to importing technology goods needs to be taken. Once multiple import sources are in place, the effect of sanctions can be greatly reduced due to the options generated for ensuring consistent levels of tech imports.
Creating dependencies on tech giants
India has been a revenue generating market for most tech companies around the world. The relatively cheap labour costs, the abundance of talent and human resources at their disposal, and an up and coming tech-driven society are just some of the reasons why multinational tech corporations are inclined towards outsourcing work to India.
The Russia-Ukraine war resulted in many of these tech companies citing humanitarian reasons to completely stop all business with Russia. While some companies, like the semiconductor giants Intel, AMD and NVIDIA were required to comply with the imposed sanctions (as semiconductor chips were covered under the imposed sanctions), some took the decision without any hesitation. The streaming giant, Netflix pulled out of Russia and suspended all services in the country. Similarly, Apple and Samsung have stopped all product sales and other services that the companies offer.
Companies ranged from consumer electronics (such as Dell and HP) and telecommunication equipment manufacturers (such as Nokia and Ericsson) to software service providers (such as SAP and Oracle). Each imposed their own restrictions and the stoppage of all exports to the country. This places the question of how tech companies can unilaterally bring down a countrys economy itself. Hence, it is in Indias interest that these tech companies operations in India remain integral to their global supply chain and pulling out of the country should not be a viable option for the firm itself.
A dependency in the form of a large market in India has already been created for most firms. In the light of potential sanctions in the future , companies may decide to forego business (on whatever scale) while remaining true to their ideals. It is this case that India must ensure that the companies cannot completely disassociate itself with the country. Bringing in critical operations that are part of the firms value chain to Indian soil is a first step. For example, most major international semiconductor firms have their design centers in India. The majority of its design services are provided by the Indian workforce.
Bringing in manufacturing processes to the country, like in the case of telecommunications equipment can ensure that firms have a critical presence in the country and sanctions cannot reduce this kind of dependency. Assembly lines for finished products, tech components manufacturing and other key processes must be in the country to dilute the effect of the sanctions.
Another way to create intrinsic dependencies is to use the model of defence joint ventures and strategic partnerships. The government should work with the domestic private sector in developing partnerships with big tech companies in the West. This would automatically ensure that the Indian domestic sector is integrated into the value chain. That would prevent withdrawals of companies due to any potential sanctions that might be imposed.
It is a hypothetical scenario that India might be at the receiving end of tech sanctions in the near future. But the recent imposition on Russia has showcased the power that tech companies have in the current Information Age. If a situation arises when India is eventually bombarded with tech sanctions, there has to be a safety net in place to keep the economy from crumbling. This can help in ensuring that the currency remains strong and also how sanctions can be toothless if a robust tech economy is in place for the country.
Arjun Gargeyas is a Research Analyst at The Takshashila Institution
Read more:
A Blueprint for India to Insulate Itself from Future Tech Sanctions - The Wire
