According to a senior executive with the local payment system, Russia is turning to Chinese microchip manufacturers to avoid western sanctions, which have boosted demand for bank cards tied to the Mir payment system.

Russia has been cut off from the global financial system and over half of its $640 billion in gold and foreign exchange reserves as a result of Western sanctions implemented in response to its invasion of Ukraine.

According to Reuters, Oleg Tishakov, a board member of the National Card Payment System of Russia, said at a conference on Tuesday, April 5, that Russia lacks microchips due to supply chain disruption. Asian manufacturers have suspended production amid a coronavirus pandemic, while European suppliers have discontinued providing due to Western sanctions.

Oleg Tishakov said, “We are looking for new microchip suppliers and [have] found a couple in China, with certification process ongoing.”

The New York Times cited Gina Raimondo, the U.S. Secretary of Commerce, saying that Chinese firms might defy U.S. restrictions against exporting to Russia.

In recent years, China and Russia have strengthened their trading connections, and despite the invasion, the Chinese government has shown some solidarity with the Russian leadership. But, according to Ms. Raimondo, China lacks the capability to produce the world’s most advanced semiconductors, and Chinese companies that continue to supply Russia would suffer significant consequences.

Raimondo said that Russia would certainly be courting other countries to do an end-run around our sanctions and export controls. But suppose the United States were to find that a company like the Semiconductor Manufacturing International Corporation in Shanghai was selling its chips to Russia. In that case, the United States could essentially shut SMIC down because the United States prevented them from using its equipment and its software.

Raimondo added, “They have their own self-interest to not supply this stuff to Russia. So they’re not doing it out of the goodness of their heart. It would be devastating to China’s ability to produce these chips.”

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