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Russia’s ongoing invasion of Ukraine is driving one of Russia’s biggest tech giants

Russia would lose its largest technology company, which would throw a dent on President Putin’s plans to promote Russian alternatives to Western technology.

Yandex, often referred to as Russia’s Google, is the largest online company in the country best known for its search browser and ride-hailing apps. But the Dutch-based parent company wants out of Russia because of the potential negative impact of the Ukrainian invasion on its business, according to a New York Times report. The exit of Russia’s biggest tech giant would deal a blow to President Vladimir Putin, who has made a concerted effort to produce Russian technology and goods as sanctions cut off access to Western suppliers.

As part of a larger restructuring plan first reported by Russian media outlet The Bell, Yandex’s parent company (called Yandex N.V) will move its new business and promising technologies — including self-driving cars, machine learning, and cloud computing services — offshore from Russia, The Times reported, citing two anonymous sources familiar with the matter. These companies will need access to Western markets, experts and technology, all of which are unworkable while the Russian invasion of Ukraine rages on and Western sanctions remain in place.

However, the decision to transfer Yandex’s fledgling technology business may not be up to the parent company. The Times reported that the company would have to obtain Kremlin approval to transfer licenses of patented Russian technology out of the country. In addition, Yandex shareholders will have to agree to a broader restructuring plan.

Russia’s tech sector is taking a beating amid the Ukraine war

Yandex’s business, once hailed as a rare Russian business success story, has struggled since the invasion of Ukraine. The tech giant’s story is not unlike the one in Silicon Valley. Yandex employed more than 18,000 people, was worth more than $31 billion, and is often referred to as the “Google of Russia.” It even had offices in downtown Palo Alto, California, at one point.

But since the Russian invasion of Ukraine, thousands of Yandex employees have left Russia, and the New York-listed company’s shares have lost more than $20 billion in value almost immediately after the war, before Nasdaq stopped trading in its shares. Meanwhile, Moscow-listed Yandex shares have fallen 62% in the past year.

Yandex’s misfortune mirrors other Russian tech companies, which have struggled in the face of Western sanctions and the displacement of tens of thousands of Russian IT workers, according to Al Jazeera’s report. It’s something not even Putin can deny, acknowledging that Russia’s IT sector will face “enormous” difficulties because the United States and 37 other countries restrict Russia’s access to technologies, such as semiconductors and telecommunications equipment, via export controls.

Dismantling Russia’s dependence on the global economy has been an uphill battle for the country, even before the Ukraine invasion and its sanctions.

In 2015, the Kremlin attempted to ban all government agencies from using foreign software, but by 2019, only 10% of software used by the country was Russian-made. Nor does Russia rely solely on foreign technology. More than half, or 65%, of Russian companies relied on imports for their manufacturing, according to a 2021 note from the Russian Central Bank. From cars to office papers, most companies have foreign suppliers somewhere in the supply chain.

Smith

Tricare west is a global news publication that tells the stories you want to know.

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