Like the whole local economy, the Russian tech industry is extremely weakened by the sanctions panel following the Russian invasion of Ukraine in late February. But the crisis is affecting Russian digital flagships to varying degrees. Some will lose their export markets while others, on the contrary, were primarily intended to meet local needs, and could therefore be less affected.
“There was a very dynamic ecosystem in Russia, with a series of reforms after the 2010s that helped foster this sector driven by several large players, such as Yandex, VK, WildBerries and Rambler.ru.”observes the doctoral student in geopolitics Marie-Gabrielle Bertran. Thus, this specialist in software development in Russia notes that one of the limits to Western sanctions lies in the many existing alternatives to the tools offered by the large American tech companies.
No more access to American cloud services
Many Western IT services are no longer available in Russia, such as Paypal. Withdrawals that will destabilize companies, the most critical case being that, according to Marie-Gabrielle Bertran, the cloud sector which relies in large part on infrastructure based outside Russia. The Russian media Kommersant echoed the executive’s concerns about the high demand for servers.
However, it is clear that the financial sanctions are already having a profound impact on Russian companies. Tigran Khoudaverdian, the Armenian boss of Yandex, one of Russia’s digital flagships, has just announced his resignation after being added to the blacklist of Russians whose assets in the European Union will be seized.
And even if this group, known for its search engine, its flagship product, seems relatively protected by the positioning of its activities in the Russian-speaking space, concerns about a possible default have also already emerged. Its counterpart VK – the equivalent of Facebook Russia’s London-listed Facebook has just reported that it may not have enough cash to repay a $400 million bond.
No more trust in Kaspersky!
Beyond the sanctions, Russian tech firms are now facing a very serious reputation problem. After the French government’s cyber fire brigade, Anssi, warned about the potential risks, in the long term, of the products of the cybersecurity company Kaspersky, its German equivalent, the BSI, has also just recommended the abandonment of its antivirus software. A political decision, immediately regretted the firm of Eugene Kaspersky, who had personally called on Twitter to the opening of negotiations to stop the war.
The military invasion has opened “a new crisis of confidence” of Kaspersky with its customers, a crucial issue for a firm specializing in security, observes Marie-Gabrielle Bertran. Banned five years ago from federal networks in United States Against the backdrop of suspicions of espionage, the antivirus manufacturer had retaliated by opening transparency centers to show its credentials.
This is a blow for the antivirus manufacturer, which presents itself, rather than a Russian company, as a global enterprise. Although its headquarters are based in Moscow, the Russian capital, the company is controlled by a holding company registered in United Kingdom. Kaspersky earns 80% of its revenue outside Russia, which amounted to about $700 million in 2020.
Brain drain
But the most worrying phenomenon for Russian tech companies seems to be the brain drain. The Bell a Russian-language media specializing in economics, reports mass registrations of Russian developers on Telegram channels dedicated to exile.
A crucial problem for the Russian economy, which already lacks, according to the media Kommersant from 500,000 to one million computer scientists. “The brain drain is not new,” notes researcher Julien Nocetti, “but it will accelerate: it was a clear trend since 2014 and the annexation of Crimea.”
In addition to these mass departures, Russian tech companies are likely to face an internal motivation problem. Witness this open letter, signed by more than 33,000 people – closed since new laws restricting free speech – from a Russian tech employee to her peers, or the challenges within Yandex, on the legal censorship implemented by the search engine around the military invasion.
The alternative ?
For Julien Nocetti, these are the reasons that would leave Vladimir Putin’s country with two alternatives in the long run. Either a strategy based on espionage, like the massive theft of technology during the Soviet era. Or an even more accentuated turn towards China. However, as the researcher observes, there is a risk of creating very strong technological dependencies that would undermine the declared desire for digital sovereignty.
The current crisis validates the strategy of the two founders of Telegram, probably the best known Russian company in france. Created by the two Russian computer scientists behind the social network VK, the messaging service was finally set up in Dubai, out of reach of the Russian authorities.
A march abroad is far from being within the reach of all Russian companies. Last September, the boss of the cyber security flagship Groupe-IB was arrested under unclear circumstances for high treason. No doubt, suggests Julien Nocetti, because the firm had shown too great a desire for independence from the Kremlin.
