Stupidity of the highest order. Xeon chips can be sourced by using an intermediary that orders them for some other "legitimate" use. E.g., you go find some company in Germany that makes servers for data centers, and order X amount of Xeon servers from them through an intermediary.
There is no way to stop your adversaries from getting commodities that go into the general flow of commerce. The fact that the US State Department does this indicates that they don't understand the way the world works, more than anything else.