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March 7, 2022updated 09 Mar 2022 2:55pm

International sanctions could cripple Russia’s tech ambitions

Sanctions are likely to scupper Russia's plans to be a global tech power. China may come to the rescue, experts say, but on its own terms.

By Afiq Fitri

A raft of technological sanctions on Russia are likely to reverse the country’s ambitions to be a global tech power, with lasting impacts on its domestic capabilities. The country’s manufacturing and aviation industries are already feeling the effect of these sanctions, while its technology industry will see an exodus of its highly skilled workforce in the near future. 

Since the invasion of Ukraine began, the US and allies including the EU, UK, Taiwan, Japan and Canada have imposed crippling restrictions on the exports of critical technologies designed to “cut off Russia’s industry from the technologies desperately needed today to build a future”. Countries ranging from Switzerland to Singapore have also since supported these sanctions on Russia. 

This includes restrictions on telecommunications equipment, semiconductors, encryption software, dual-use technologies, as well as aerospace and marine equipment. Trade statistics show that the total value of such exports from these countries to Russia totalled almost $11bn at the end of 2021, with the vast majority coming from the EU.

There may be more restrictions on Russia's technology sector to come. The UK government is facing calls to take action against Yandex, Russia’s largest web company, which recently launched a delivery service in London. Layla Moran, the foreign affairs spokesperson for the Liberal Democrats drew parallels between Yandex and Huawei, urging the Foreign, Commonwealth and Development Office to include the former into its sanctions list.

As the Russian economy goes into free fall, there has been speculation that China will seek to fill the gap left by mostly Western countries. But some experts have doubts about how far the country is willing to go to come to its neighbour’s rescue. 

The impact of tech sanctions on Russia

These sanctions will have an immediate impact on Russia's manufacturing sector, which relies on imports from Western economies to integrate key technologies and maintain production lines, says Professor Gulnaz Sharafutdinova from the King’s College London Russia Institute.

In the past week, automakers including Renault and Volkswagen have announced plans to either shift or shut manufacturing operations in Russia after sanctions were imposed. “That’s going to be quite devastating in terms of maintaining production,” she says. “I cannot see how Russia can quickly substitute those production and supply lines, it would probably take several years to fully achieve that.”

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Similarly, Russia’s civil aviation industry, which heavily relies on leasing aircraft and spare parts from Western companies, will be hit hard by technological sanctions. While Russia does have its own aircraft fleet, in particular the Sukhoi superjet, these are much less reliable than Boeing and Airbus planes, according to Professor Sharafutdinova. “Even if you wanted to make more of them, this would depend on engines imported from Germany, so the impact on civil aviation will be felt very quickly and in a very dramatic fashion,” she adds.

In the medium term, technological sanctions on Russia are likely to disrupt public and private sector initiatives to develop emerging technologies. This could include the Chervonenkis supercomputer, built by Russian language search engine Yandex using Nvidia chips to train artificial intelligence (AI) algorithms.

Since 2018, the government has allocated more than €400m to initiatives that promote 5G networks, the Internet of Things, and AI. Against the backdrop of a plummeting ruble and wide-ranging export controls on hardware, Professor Sharafutdinova believes these investment plans are likely to be put on hold or even scrapped entirely. 

Prior to the latest round of sanctions on Russia, the country’s AI sector was already lagging behind that of its global competitors. A global AI index compiled by Oxford Insights ranked the country at 38th in terms of its ability to apply AI in its public services. Russia has published approximately 9,000 AI research papers since 1980, less than a third of Germany and the UK’s respective total research output, according to data from the Organisation of Economic Development’s AI Policy Observatory.

The co-chairman of Russia’s Chamber of Commerce and Industry has also lamented the slow growth of domestic AI capabilities, saying that in the past, “the Chinese visited us and studied our developments in AI... now we are talking about the fact that we are either in the 20, or even among the 60 leading countries in this field. How did it happen with our potential in this area?”.

Russia's tech brain drain

Russia's technological capabilities may stagnate even further, as ongoing economic turmoil accelerates a brain drain of the country’s AI talent while deterring a highly skilled diaspora from returning, says Oksana Antonenko, director of global political risks at Control Risks.

Previously, she says, senior figures from state-owned bank Sberbank would routinely travel to Silicon Valley and convince young Russians to return and help build the country’s AI talent pool. “It is just impossible to imagine that anything like that will be feasible in the current environment,” she says. “The chain of technological development and innovation in Russia is going to be broken, and nobody would want to come back and work there.”

Professor Sharafutdinova similarly foresees a “dramatic” exodus of academics and highly skilled engineers from Russia’s IT sector. “The brain drain has already occurred in a major way in recent years, and now there will be another spike in talented people leaving the country if they are able to. No doubt about it.” 

I’m definitely not planning to come back... We don’t want to be complicit in what the Russian state is doing.
Sofia, data scientist

Sofia, a Russian-born data scientist based in London, is one of those people. “I’m definitely not planning to come back, and many people I know share the sentiment that we don’t want to be complicit in what the Russian state is doing,” she says. “This complicity is inevitable if you’re working in Russia’s big tech companies like Yandex and MailRu that receive significant funding from the state.”

China’s ambiguous role

As the Russian economy reels from the impact of sanctions, there is growing speculation that its immediate neighbour China might step in to fill the gap left by Western countries.

Existing trade relations between the two countries are strong. Official Chinese customs data shows that their total trade increased by 36% in 2021 and reached nearly $147bn, while Chinese exports of key technologies restricted by the latest round of sanctions made up approximately 7% of total trade. China also has a history of bypassing sanctions regimes it views as unilateral and illegitimate.

A week after the invasion of Ukraine began and sanctions were swiftly imposed on Russia, China’s foreign ministry spokesperson said that the two countries would “continue to conduct normal trade cooperation in the spirit of mutual respect, equality and mutual benefit.”

But while such diplomatic statements indicate that trade relations might continue normally, China’s abstention from a critical United Nations vote and the Beijing-headquartered Asian Infrastructure Investment Bank’s recent cessation of business with Russia and Belarus have cast a spotlight on the limits of this relationship. 

Antonenko believes that while technological cooperation and trade between the two countries might continue, she doubts whether China will actively support Russia’s ailing technology industry in the face of Western sanctions. “Russia will be able to source certain technologies from China, but it will not be an accelerator for its own indigenous technology development in the medium term,” Antonenko says, 

“But in the long-term, it will be in China’s interests to make a fellow G20 member more dependent on Chinese technology in the global race for technological dominance, since it benefits them both financially and in terms of its global status,” she adds. “So if China were to help, they would do it through the prism of their national interest and ambitions, rather than actively help its neighbour circumvent Western sanctions.” 

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