According to foreign media Light Reading (LR), Ericsson and Nokia confirmed on Tuesday (March 2, 2022) that they will stop supplying products to Russian customers while assessing the impact of Western government sanctions, which came after Russian President Vladimir Putin. It was implemented after an invasion of neighbouring Ukraine was ordered last week. LR said that this leaves Russian operators with only Huawei as an alternative.

That means Russian mobile operators－MegaFon, MTS and Veon－could face billions of dollars in replacement fees in the future to replace Nordic equipment they no longer support. What’s not clear is how reliant these companies are on Western equipment suppliers. But they all appear to be affected to some extent, and Russia, like most other countries, has no viable domestic suppliers.

For example, MegaFon is known to have signed a multi-year nationwide microwave back-haul contract with Ericsson back in 2019. The company also identified Nokia as a mobile network provider last year. Sources revealed in 2019 that Amsterdam-based Veon, an operator with a large presence in Russia, had previously bought IT products from Ericsson, but Nokia is understood to have replaced Veon equipment at about 2,200 Russian mobile sites, including Equipment manufactured by Ericsson. In its most recent annual report, MTS listed Ericsson and Alcatel (now part of Nokia) as its main suppliers.

It’s been a bad day for Ericsson, largely because of the new revelations of the Iraq scandal. The Swedish company confirmed the move in an email to Light Reading. “Ericsson is also urgently assessing how our business may be affected by sanctions. While conducting our analysis, we have decided to suspend all shipments to customers in Russia,” the company said.

Nokia has adopted a similar strategy. “Our focus is on ensuring compliance with all sanctions and restrictions on Russia and we have suspended shipments,” the company said in an email. “The situation is complex and rapidly evolving, and we will continue to evaluate it.”

The decisions are unlikely to have a material impact on the businesses of either company. Although they do not publish financial results for most countries, Ericsson last year named the UK as its fourth largest market, which also accounts for only 3% of its total revenue. Raymond James, a bank, believes that Russia accounts for only 2% of Ericsson’s sales.

The action comes days after U.S. President Joe Biden announced sweeping sanctions on Russia. Recently, the Biden administration announced a series of new restrictions on technology products. According to the new regulations, high-tech items created using U.S. equipment, software or designs in other countries are also not allowed to be shipped to Russia, aiming to restrict Russia’s access to foreign goods such as semiconductors, computers, lasers and telecommunications equipment, thereby cutting off Russia’s access to cutting-edge technology.

The rules could also affect ZTE, a Chinese supplier that still relies heavily on U.S. components. Any continued sale could land ZTE in trouble with U.S. authorities and put it back on the Entity List.

Huawei, which is still on the entity list, has not publicly stated that it will stop supplying to Russia like Ericsson and Nokia. A spokesman for the company confirmed that the company’s position had not changed.

That does nothing to Huawei’s image in Western countries spooked by Russia’s activities. Huawei has long maintained that it has nothing to do with the Chinese government and is independently owned. But if it continues business as usual, its stance appears to be aligned with the Chinese authorities, which have refused to criticize Putin. One possible scenario is that Russia moves further into China’s sphere of influence, replacing Western suppliers with Chinese suppliers in various industries.

But sanctions put Russian operators in an extremely difficult position. Russia has yet to start deploying 5G on a large scale, and Huawei’s stockpile may be exhausted. Without access to chips made by TSMC and Samsung, the world’s most advanced chip foundries due to U.S. sanctions, the company may end up relying on less complex semiconductors to make 5G network equipment.

Meanwhile, the Russian currency fell to a record low against the dollar after several Russian banks were kicked out of SWIFT, the main international system for cross-border transactions. Shares of Veon have plunged 61% since Feb. 23 as interest rates soar to 20%, making it difficult for ordinary Russians to pay interest.

To reassure investors, the company issued a statement on liquidity, saying it had about $2.1 billion in cash and deposits, with $1.5 billion in U.S., European Union and Japanese banks. Serkan Okandan, Chief Financial Officer of Veon, said: “The US$1.5 billion cash and deposit balance at headquarters and the US$800 million undrawn line of credit under the RCF (Revolving Credit Facility) will allow us to remain prudent in these times of macroeconomic uncertainty.” Russia Telecom is in disarray.