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

Putin of Armenia

Russian President Vladimir Putin arrives for a welcoming ceremony in Yerevan, Armenia on November 23, 2022.Contributor/Getty Images

  • Yandex, Russia’s biggest tech giant, wants to cut ties with the country, according to the NYT.

  • Yandex’s parent company is worried about the impact of the Ukrainian war on its businesses.

  • The departure could deal a blow to President Putin as he focuses on domestic technology and goods.

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

Yandex, often referred to as Russia’s Google, is the country’s largest online store, best known for its search browser and horse-riding apps. But its Netherlands-based parent company wants out of Russia because of the potential negative impact the Ukrainian invasion could have on its business, according to a New York Times report. The departure 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 limit 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 NV) will move its new businesses and most promising technologies — including self-driving cars, machine learning and cloud computing services — outside of Russia, the Times reported, citing two anonymous sources familiar with the matter. These businesses would need access to Western markets, expertise and technology, all of which are unviable while Russia’s invasion of Ukraine rages on and Western sanctions remain in place.

However, the decision to move Yandex’s tech startups may not be up to its parent company. The firm will have to get the Kremlin’s approval to transfer Russian technical licenses outside the country, The Times reported. Additionally, Yandex shareholders would have to approve a broader restructuring plan.

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

Yandex, once hailed as a rare Russian business success, is struggling after the invasion of Ukraine. The story of the tech giant is not unlike those found in Silicon Valley. Yandex employed more than 18,000 people, was valued at more than $31 billion, and is often referred to as the “Google of Russia.” At one point, it even had offices in downtown Palo Alto, California.

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

Yandex’s woes mirror those of other Russian technology companies that have struggled with Western sanctions and an exodus of tens of thousands of Russian IT workers, according to a report by Al Jazeera. It’s something even Putin can’t deny, admitting that Russia’s IT sector will experience “colossal” difficulties as the US and 37 other countries restrict Russia’s access to technologies such as semiconductors and telecommunications equipment through export controls.

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

In 2015, the Kremlin tried to prevent all government agencies from using foreign software, but by 2019 only 10% of software used by the state was Russian-made. Russia is also not only dependent on foreign technologies. More than half, or 65%, of Russian businesses relied on imports for production, according to a 2021 release from Russia’s central bank. From cars to office paper, most companies engage foreign providers at some point in the supply chain.

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