The war in Ukraine destroys the dream of the “Russian Google”

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

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

On Nov. 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 Yandex will see cut.

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

So far, Yandex has tried to survive the war, which its board has strongly criticized. “The war is monstrous,” Volozh deputy general manager Tigran Khudaverdyan said last March before stepping down. However, the company decided to save itself trouble and erased a number of borders from its mapping service after the Kremlin annexed several Ukrainian territories in September.

Faced with the prospect of a worsening political or economic crisis in Russia, Yandex was one of many tech companies to relocate thousands of workers to other countries. Over the summer, it announced the opening of offices in Belgrade, Serbia, and Yerevan, Armenia, moving hundreds of employees there. Meanwhile, the Israeli daily Ha’aretz revealed in March that another 800 workers were to be relocated to the Jewish state.

Faced with this situation, Volozh negotiated a restructuring plan with the Kremlin. According to the Russian media site The bell, negotiations took place with the head of the National Accounts Chamber and former Minister of Economy Alexei Kudrin. Volozh currently lives in Israel and delegated his voting rights in the company after being sanctioned by Brussels.

The parent company, Yandex NV, is registered in the Netherlands. The restructuring agreement involves the creation of another main company in Russia which will take over all assets in the country while most foreign assets will be sold, except for four strategic holdings which Volozh will retain. The current management of Yandex will be transferred to the new Russian company, but 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 main subsidiaries abroad: drones, cloud services, self-driving cars and an education initiative. However, it remains to be seen whether European authorities will approve. When Brussels sanctioned Volozh, it pointed out 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 Russian government media narrative” as its business was a “substantial source of revenue” for the Kremlin.

Tech giants dominated by the Kremlin

Yandex is not the first tech giant whose control has been wrested by the Russian government. Russia’s Facebook, VKontakte, was nationalized in December 2021 via Gazprom, while Meta’s Facebook was banned for fomenting opposition and disseminating material critical of the war.

Putin himself has no social media and is unfamiliar with how platforms such as YouTube work. “What do I have to sign? I don’t understand,” he said last year in response to a child’s request that 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 initiatives by authorities should include these technologies, from schools to health care, promising that the country’s life expectancy would therefore exceed the age of 80.

“From 2023, we will monitor the use of artificial intelligence in the economy and the social sphere,” Putin said 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 hide his deep distrust of new technologies: “If you digitize chaos, you only get digital chaos. […] you have to put things in order first,” he said.