The war in Ukraine sinks dream of ‘Russia’s Google’

Dubbed “Russia’s Google,” Yandex was the symbol of Russian entrepreneurship – the largest technology multinational in the country. But the dream of its founder, Arkady Volozh, has turned into a nightmare following his country’s invasion of Ukraine.

A company that once competed with the giants of Silicon Valley, Yandex is to be dismantled. Volozh will be allowed to keep whatever foreign assets are not sold, and a direct Kremlin insider will enter the company as a shareholder. The decision did not depend on its board of directors or an anti-monopoly body, but on Russian President Vladimir Putin, whose thoughts on any subject are law in 21st-century Russia.

On November 24, Putin instructed his government to introduce artificial intelligence “into every national initiative” and demanded that cloud services be promoted within its borders, precisely one of the activities that Yandex will see axed.

Volozh has seen his multinational cut off from the rest of the world due to EU sanctions. Although the company has not been directly blacklisted, the businessman was sanctioned in June and the company has been significantly affected by sanctions on the Russian financial sector and the flight of investors. Its listing on the US stock exchange was suspended in March after its stock plummeted to $18.9, down 77% from March 2021.

Up to this point, Yandex has tried to survive the war, which its board has sharply criticized. “The war is monstrous,” said Volozh’s deputy chief executive, Tigran Khudaverdyan, last March before stepping down. However, the company decided to save itself trouble and erased a number of borders from its map service after the Kremlin annexed several Ukrainian territories in September.

Faced with the prospect of the Russian political or economic crisis getting worse, Yandex has been one of a large number of technology firms to relocate thousands of workers to other countries. In the summer, it announced it was opening offices in Belgrade, Serbia, and in Yerevan, Armenia, moving hundreds of employees there. Meanwhile, the Israeli daily Haaretz revealed in March that another 800 workers were to be relocated to the Jewish state.

In view of this situation, Volozh has negotiated a restructuring plan with the Kremlin. According to the Russian media site The Bell, negotiations were held with the head of the National Accounts Chamber and former economy minister, Alexei Kudrin. Volozh currently lives in Israel and delegated his voting rights in the firm after being sanctioned by Brussels.

The parent company, Yandex N. V., is registered in the Netherlands. The restructuring deal involves the creation of another main company in Russia that will take over all the assets within the country while most of the foreign assets will be sold, except for four strategic holdings that Volozh will keep. Yandex’s current management will move to the new Russian firm, albeit with changes: former economy minister Kudrin will get a 5% stake in the new company, according to The Bell and Forbes. And its founder will receive a minority stake.

The idea is to prevent the sanctions imposed on Russia from affecting the four key overseas subsidiaries: drones, cloud services, autonomous cars and an education initiative. However, it remains to be seen whether the European authorities will approve. When Brussels sanctioned Volozh, it highlighted in its statement that the multinational was not only owned by Russian state-owned banks Sberbank and VTB, but was also “responsible for promoting the narrative of Russian government media” while its business was a “substantial source of revenue” for the Kremlin.

Kremlin-dominated tech giants

Yandex is not the first tech giant to have its control wrested away by the Russian government. The Russian Facebook, VKontakte, was nationalized in December 2021 through Gazprom, while Meta’s Facebook has been outlawed for fomenting opposition and spreading material critical of the war.

Putin himself lacks any social media and is unfamiliar with the workings of platforms such as YouTube. “What do I have to sign? I don’t understand,” he said last year in response to a request from a child who encouraged him to join his YouTube channel. However, on November 24, he gave a speech at the Journey to the World of Artificial Intelligence forum in which he issued numerous instructions, including that all the authorities’ initiatives should include these technologies, from schools to healthcare, promising that the country’s life expectancy would consequently exceed the age of 80.

“From 2023, we will monitor the use of artificial intelligence in the economy and the social sphere,” Putin declared in his speech. “To do this, I propose to create a special tool – a maturity index for industries and regions.” However, he was also unable to conceal his deep-seated distrust of new technology: “If you digitize chaos, you only get digital chaos [...] first you have to put things in order,” he said.