The Russian authorities are introducing more and more measures aimed at the “sovereignty of the Internet” and, in general, IT technologies. By and large, this is somewhat contrary to the very nature of its development, but given that at the very top, we have people who are new to the Internet and modern technologies, this is of little concern to anyone. Ideally, Russia should shut itself up in terms of information realm – without giving out anything, and most importantly, without receiving from the outside. Against this background, the domestic IT sector is happy to “reinvent the wheel,” receiving state references and budget money.
On November 5, the State Duma passed the first reading of the bill banning the sale of smartphones, computers, and smart TVs without Russian software. If the law is adopted, then from July 1, 2020, foreign equipment manufacturers will have to pre-install Russian applications. It is still unknown which ones. According to the document, their list should be determined by the government. It is proposed to fine the sale of devices without Russian software up to 200 thousand rubles.
The bill was submitted to the State Duma in July by deputies from all parliamentary factions: United Russia party members Vladimir Gutenev, Sergey Chindyaskin and Aleksey Kanaev, LDPR representative Sergey Zhigarev, Fair Russia’s Oleg Nikolaev, and communist Alexander Yushchenko. Usually, in this way they approve the initiatives launched from the Presidential Administration. So, with a high degree of probability, we can assume that the law will be adopted.
Moreover, this topic has already been discussed. Last summer, the Federal Antimonopoly Service prepared the concept of amendments to the Law on Communications, identical to the bill. Firstly, this was all motivated by the convenience for users – supposedly, domestic products are more adaptive – and secondly, by greater security. Foreign software carries a threat of information leakage and the likelihood of disconnecting Russian users from technical support in “conditions of a difficult political situation,” experts explained.
Head of Anti-Monopoly Service Igor Artemyev
Their fears found confirmation. In 2018, as part of the sanctions, the largest American company developing database management systems Oracle refused to serve the Russian oil and gas sector, namely Gazprom, Rosneft, LUKOIL, and Surgutneftegaz.
Opponents of such stringent requirements from the state, such as the Association of Trading Companies and Manufacturers of Household and Computer Equipment (RATEK), considered these measures fatal for the domestic IT industry, which absolutely does not reflect the real situation on the market. According to representatives of the association, Russian users can easily download the applications that they actually use, especially since domestic software is the leader in download ratings. But “enforcement” at the legislative level can lead to the departure of large international companies from the Russian market and the transformation of its IT segment into a kind of “stagnant reservation”.
In turn, market experts noted that the amendments could lead to new costs on the part of manufacturers, which means an increase in the cost of devices for consumers.
One can draw an analogy with import substitution in the food sector, when, in the absence of competition, the quality of Russian products decreased and prices rose. And as a result, according to economists, Russian consumers lose half a billion rubles each year due to the food counter sanctions introduced by the government in 2014.
Rostelecom Head Mikhail Oseevsky
Without much enthusiasm, the possible innovations were accepted by the users themselves.
“Maybe FAS will simply offer Russian companies to produce competitive software? And then users will decide for themselves whether they need such an application? The user will choose convenience and functionality,” one of the users said.
Naturally, representatives of foreign IT companies are not happy about this bill, and first of all Apple, which has never preinstalled third-party applications on the IPhone. Therefore, if this law is adopted, the company, in principle, can leave the Russian market.
At the same time, Russian developers and telecom operators (Mail.ru, Kaspersky Lab, MTS, Megafon, Russoft) supported this concept, hoping that, like in many similar initiatives, the second bottom of sovereignty software will also be the development of budgetary funds.
In this regard, Russia has rich experience. After the plan for import substitution of software was approved in 2015, the so-called State Software Register appeared, obliging government agencies to give preference to Russian software when purchasing software (to get on the list, software undergoes an examination confirming its domestic origin). Broad prospects opened up for Russian IT companies, even though more than 90% of federal departments and extrabudgetary funds still use import software. Because many of the domestic software either does not meet modern requirements, or simply represents copies of foreign. It is one thing to use systems from Microsoft or Apple that have proven themselves all over the world and quite another from the Russian “noname” companies.
In the summer of 2018, it was announced that in 2019, officials and civil servants will be obliged to use smartphones with the pre-installed Russian Sailfish operating system. 160 billion rubles ($2.5 billion) should have been spent on it. Another 2.3 billion ($36 million) was required to complete the development of the OS.
Sailfish OS is an operating system that has been developed by the Finnish company Jolla since 2012. In 2014, Russian billionaire Grigory Berezkin became a co-owner of Jolla through his ESN group. It was he who lobbied for the creation of the Russian national mobile OS based on Sailfish in the Ministry of Communications. Since 2016, Open Mobile Platform company has been developing the Russian version of the system. In 2018, Rostelecom group joined it. In February 2019, the Russian version of the OS was renamed Aurora, becoming the only domestic mobile operating system. To date, equipping officials with smartphones based on the Aurora has not yet begun. The OS itself is not used anywhere.
Even more revealing is the story of the “sovereign” Internet search engine Sputnik. In this case, the emphasis was also placed on the fact that the search engine would be promoted at the state level, and officials would have to use such a system by default.
Initially, according to representatives of Rostelecom, investments exceeded 580 million rubles ($9.1 million). These are funds invested in the project until 2014. In 2015, 800 million rubles ($12.5 million) more were invested in Sputnik.
In addition to the main product, the developers of Sputnik released several others, including the Sputnik browser and its mobile version.
In 2017, representatives of Rostelecom announced that Sputnik had failed, as it could not occupy 1% of the search market for the Russian-language segment of the Internet. If the number of transfers from Google and Yandex in 2017 amounted to billions, then Sputnik had about 100 thousand.
In August 2018, it became known that Rostelecom had recognized Sputnik LLC bankrupt.
Unfortunately, Russian software does not keep pace with the increasingly complicated electronics and other high-tech equipment. The fact that the most powerful Intel and AMD processors are not manufactured by us does not make it possible to create a Russian mass consumption OS. This simply does not make sense.
Medvedev, Chemezov and YotaPhone
Therefore, in Russia, the competition of developers for users is replaced by competition for getting into the government list for mandatory pre-installation.
At the top of this pyramid of interest, of course, are state corporations, such as Rostec, led by the owner of an apartment worth 5 billion rubles (according to the Anti-Corruption Foundation FBK) Sergey Chemezov and Rostelecom.
By the way, Chemezov’s wife Ekaterina Ignatova is also no stranger to the world of high technology. In 2016, she acquired 99% of Sistemnye Resheniya (System Solutions). Her only asset is 100% of the Smart Driving Laboratory company, which is involved in the Smartdriving.io smart insurance project. Later, she received a major contract from AvtoVAZ to develop a Lada Connect remote control and monitoring system installed on Granta cars. Using this system, you can remotely (using a smartphone or computer) start the engine, open doors, turn on headlights, and track the location and condition of the car (mileage, fuel level, battery charge, etc.).
In its structure, Rostelecom has many IT companies that regularly become recipients of the largest contracts. In addition, the state-owned company is engaged in venture capital investment, supporting startups.
As for Rosatom, it has recently announced the start of work on a quantum computer. The project is estimated at 24 billion rubles ($376,666). By 2024, it is planned to create four types of quantum computers ranging in size from 50 to 100 qubits.
In addition, Putin has recently signed a decree on the development of artificial intelligence in the Russian Federation. This decree approves the National Strategy for the Development of AI until 2030 and guarantees the allocation of financial resources.
Nobody knows how much the state spends on the development of the IT sector. For example, at a meeting with representatives of the business community in the spring of this year, Prime Minister Dmitry Medvedev said that the state will invest about 2 trillion rubles in the development of the digital economy in the coming years. It’s really worth fighting for.
And if everything is clear in the case of numerous companies affiliated with the state (they were largely created under the state order), then the situation is somewhat different with private and successful companies.
Unlike the oil sector, the IT sector cannot simply be taken over – you can’t put a Sechin in charge – everything will collapse at once. Therefore, the authorities allow them to develop, not forgetting about their own benefit, following the carrot and stick principle.
Yandex.Book, written based on an interview with company executives, says that the Kremlin first showed interest in the company back in 2008, when Yandex was about to go public. According to Elena Ivashentseva, a member of Yandex board of directors, first through newspapers and then in private conversations, it was made clear that they had chosen wrong shareholders. The problem was solved by involving the state in its development, convincing that it is beneficial to both parties.
However, the general trend for crackdown on the Internet could not but affect the company, whose entire business is in Russia.
In April 2014, speaking at the St. Petersburg media forum organized by the All-Russian Popular Front, Vladimir Putin expressed his attitude to the Internet. According to the president, the global network began “as a special project of the US CIA – and continues to develop as such.” Therefore, he believed, it was not surprising that Yandex was forced to accept American and European companies as governing bodies. From his words, it turned out that one of the most successful Russian Internet companies operated under external management. Previously, Putin already spoke about traitors and the so-called fifth column, and now he made it clear that there was something very wrong in the presence of foreigners on Yandex.
The following day, shares of Yandex NV, the Dutch founding company of the Russian search engine, fell 16%.
Later, Russian politicians did a similar trick with Yandex, tanking stocks with their statements.
For example, recently, United Russia deputy Anton Gorelkin has submitted a bill to the State Duma on a 20 percent restriction on foreigners owning popular Russian sites for the third time. Naturally, it led to a panic sale of Yandex shares by foreign owners.
In addition, authorities regularly impose restrictive measures as part of the censorship and control of Internet users.
For example, in 2016, amendments to the federal law “On Information, Information Technologies, and Information Protection” shifted the responsibility to news aggregators, which include Yandex.News, for the accuracy of all published information. Aggregators are obliged to check the “reliability of information” in all sources that are not registered by Roskomnadzor as media. Aggregators were supposed to immediately remove “inaccurate” publications from issuance at the request of Roskomnadzor. For delay, a fine of 600 thousand to 1 million rubles was imposed. Technically, it was impossible to comply with these conditions, since the aggregator forms all the news automatically. Accordingly, the only way out was the need to drastically reduce the number of sources, leaving only “correct” and politically verified ones in the results.
In June this year, it became known about the FSB’s requirement to provide keys for decrypting the data of users of the Yandex.Mail and Yandex.Disk services as part of the Yarovaya law. To recall, previously, Telegram was blocked in Russia precisely because of the refusal to share decryption keys as prescribed by a court decision. When asked by reporters, Yandex neither confirmed nor denied the receipt of such a demand from special services.
In general, any mention of an attempt to control a company by the state greatly affects its image and, as a result, causes economic damage.
Thus, another collapse of shares happened in 2018, when information appeared that Sberbank was negotiating the purchase of a controlling stake in Yandex.
In terms of carrot and stick, the bill on preinstalled domestic software that we are reviewing is a carrot.
Yandex has lobbied this idea for a long time. Back in 2015, the company complained to the FAS about Google, accusing it of violating antitrust laws. The claims were that Google prohibited preinstalling applications and services of other Internet companies on devices running on its Android mobile operating system. Google, in turn, filed a lawsuit in the Moscow Arbitration Court. As a result, a few months later an amicable agreement was concluded between the FAS and Google, and Yandex was left in the lurch.
Now we should expect that the pre-installed programs will not be highly specialized, but simply become analogues of popular foreign ones. For example, Safari and Chrome browsers will be replaced by Yandex.Browser, Sputnik, and Rambler, mail and cloud storage will be represented by Russian counterparts Yandex and Mail.ru. An alternative to Google maps will be Yandex.Maps, 2GIS and Maps.me. Our social networks VKontakte and Odnoklassniki will replace other social networks; instant messengers will replace ICQ and TamTam. It is proposed to replace Apple Music and Spotify with Yandex.Music, Boom, Zaycev.net, and Zvooq. As a substitute for foreign antiviruses, experts mentioned Kaspersky and Dr. Web.
In connection with this bill, another major party in interest appears; it is Mail.ru Group. The main shareholder of Mail.ru Group is the holding of Alisher Usmanov and his partners, USM. It owns 15% of the capital and 58% of the vote. South African media company Naspers owns 27.5% of the capital, another 7.4% is owned by the Chinese Internet company Tencent; the rest is owned by private shareholders.
The general director of Mail.ru Group Limited is the son of General Director of VGTRK Oleg Dobrodeev, Boris Dobrodeev. The board of directors is headed by former CEO of the company Dmitry Grishin. In addition to them, the board also includes Vladimir Streshinsky, who manages the consulting company USM Advisors, which is part of Alisher Usmanov’s USM Holdings; Vasily Brovko, director of public relations at Rostec Corporation and co-founder of the Apostol advertising agency, created by him together with Tina Kandelaki and known for its multi-million state contracts; and three representatives from Naspers and MegaFon.
Last year, CNN accused Mail.ru of spying on Facebook users. The channel called Mail.Ru Group “affiliated with the Kremlin” and said that it collected data from Facebook users; two of the company’s applications received the right to collect data after the termination of this practice.
They will surely find Kaspersky Lab’s antivirus to be “useful” to Russians. Head of the company, Yevgeny Kaspersky, has long been associated with security officials, especially since he is a graduate of the KGB Higher School. Meduza has recently spoken about top managers Andrey Tikhonov and Igor Chekunov, who had created a certain group of security managers opposing the “techies” in the company. The Kaspersky Lab explained that Tikhonov indeed had the rank of lieutenant colonel, which he received during service in the Russian army, in air defense, and Chekunov served in the border troops of the KGB of the USSR in the 1980s. However, since then, none of them had any ties with intelligence. As for the confrontation, there really was a conflict in management in 2013-2014, Kaspersky Lab admits. However, according to a company spokesman, it was related to contradictions regarding the development strategy.
Two years ago, US authorities ordered all government agencies in the country to abandon Kaspersky Lab products and services for three months, being concerned that Russia could threaten US security through the company’s programs. In 2016, up to a quarter of the company’s total revenue accounted for North America ($644 million in a year).
Therefore, it remains an open question to what extent all these presets will become useful for Russian users. It is more likely that the law does not so much care about the development of domestic IT companies, but about further restriction of the Russian Internet. No wonder it has recently become extremely fashionable to blame it for all the troubles of modern society – from the killing of eight colleagues by Ramil Shamsutdinov to the fact that women do not want to have children.