U.S. to Sanction U.S. Companies Providing Technology for Russian Military, Intelligence Services

The Biden administration is preparing sanctions targeting Russian companies it says provides goods and services for the military and intelligence services, including dual-use components used in weapons proliferation, U.S. officials said.

The Treasury Department sanctions, which could be announced as early as next week, come as the U.S. and allies continue to target a range of economic sectors in response to Russia’s invasion of Ukraine. The sanctions are the latest action under an executive order signed by President Biden that aims at blocking or prohibiting transactions with entities or people linked to harmful foreign activities on behalf of Moscow.

According to U.S. officials and documents reviewed by The Wall Street Journal, the Russian government has relied heavily on key western and international technologies for its defense industry to function. The new sanctions are tailored to target companies that are part of Russia’s procurement networks that produce and buy goods that have both civil and military purposes.

Among those expected to be targeted: Serniya Engineering, which the U.S. thinks is at the center of a procurement network engaged in weapons proliferation for Russia’s intelligence services; and Moscow-based Sertal, which the administration says produces equipment and technology for Russia’s military. The U.S. also will impose sanctions on what it describes as four front companies used by Serniya and Sertal to facilitate their procurement for the military.

Most of the companies that are expected to be sanctioned, including Serniya Engineering and Sertal, previously had been added to a Department of Commerce list that prohibits exports of sensitive technologies to them. While that blackballs the firms, it doesn’t ban all business dealings.

Treasury sanctions, however, also hit any financial dealings, threatening to cripple those companies’ ability to do business anywhere. The sanctions, combined with the export-control restrictions, also cut off access to foreign-made computer chips and the financing and components needed to make them domestically.

Together, those measures “can have a very big impact, which will then spread to the whole Russian economy,” said Justine Walker, who leads global sanctions and risk at the Association of Certified Anti-Money Laundering Specialists. “As you hit those supply chains, you have a pretty immediate effect.”

While some of the export controls target the government and military’s technical capacity, many are also about affecting the broader economy, Ms. Walker said.

Microchips are ubiquitously, and modern economies rely on the data-processing power of supercomputers—including the oil and aviation industries. The measures are designed to prevent Russia from importing critical technologies, weakening both its military’s capabilities and the larger economy, reducing popular support for Putin’s war in Ukraine, she said.

The Treasury Department declined to comment.

Planned sanctions packages frequently are postponed, reworked or narrowed during the interagency review process before being completed and published, an official said.

The administration also is planning to target technology companies that it says are enabling Russian President Valdimir Putin’s war against Ukraine. Among those slated for sanctions is AO NII-Vektor, a St. Petersburg-based software and communications technology company, which the U.S. says has supported production of the Liana constellation satellites, which Russia uses for radio and radar reconnaissance.

The Treasury Department is also looking to target the Joint Stock Company Mikron, Russia’s largest chip maker and T-Platforms, a supercomputing firm. Treasury’s sanctioning of the companies would expand the U.S. export restrictions already placed on them by prohibiting any financial dealings with them. Without the sanctions, those companies might still be able to buy parts from suppliers in countries that don’t support the Western pressure campaign.

Also being looked at for possible sanctioning is iGrids, which does software for automated control systems for Russia’s electricity grid.

None of the firms targeted for sanctions immediately responded to requests for comment.

iGrids has partnership agreements with several technology and cyber defense firms, including JSC Kaspersky Lab, a Russia-based cybersecurity company. Germany this week warned that the Russian government could leverage Kaspersky’s antivirus software as a vehicle for cyberattacks in Europe. Kaspersky said it thought the German warning was “not based on a technical assessment of Kaspersky products” and was instead “made on political grounds.”

Kaspersky isn’t on the latest list of sanctions. It has maintained that it isn’t linked to the Russian government and for years has denied allegations that its technology enables espionage by the Kremlin or any government.