How Russia Killed Its Tech Industry

It has now been more than a year since the full-scale invasion of Ukraine began, with over 8,300 civilian deaths and counts recorded. Tech workers who left everything behind to flee Russia warn that the country is on the verge of becoming a village: cut off from the global tech industry, research, funding, scientific exchanges and critical components. Meanwhile, Yandex, one of its biggest tech hits, began to fragment, selling lucrative businesses to VKontakte (VK), a competitor controlled by state-owned companies.

“I felt like my country was stolen from me,” says Igor, a VK executive who has family in Russia and who asked for his name to be changed so he could speak openly. When the war started, he said, he felt like 20 years of Russia’s future had been swept away in the blink of an eye.

In Russia, technology was one of the few sectors where people believed they could succeed on merit rather than on relationships. The industry has also maintained a spirit of openness: Russian entrepreneurs have secured international funding and made deals around the world. For a time, the Kremlin also seemed to embrace this openness, inviting international companies to invest in Russia.

But cracks in the Russian tech industry began to appear long before the war. For more than a decade, the government has attempted to bring Russia’s internet and its most powerful tech companies under control, threatening an industry that once promised to lead the country into the future. Experts at MIT Technology Review say Russia’s war on Ukraine has only accelerated the damage already done, pushing the country’s biggest tech companies even further into isolation and chaos and locking its citizens in its tightly controlled national internet, where information comes from official government sources. and freedom of expression is severely restricted.

“Russian leaders have chosen a completely different development path for the country,” says Ruben Enikolopov, assistant professor at the Barcelona School of Economics and former rector of Russia’s New Economic School. Isolation has become a strategic choice, he says.

The tech industry wasn’t Russia’s largest, but it was one of the main drivers of the economy, says Enikolopov. Between 2015 and 2021, the IT sector in Russia was responsible for more than a third of the country’s GDP growth, reaching 3.7 trillion rubles ($47.8 billion) in 2021. Even though that was only 3.2% of total GDP, says Enikolopovthat as the tech industry falls behind, the Russian economy will stagnate. “I think this is probably one of the biggest blows to Russia’s future economic growth,” he says.

Departures begin

The mood was tense in the red-brick, glass-walled offices of Yandex in southern Moscow on February 24, 2022, the day the Russian invasion of Ukraine began. Anastasiia Diuzharden, then head of content marketing at Yandex Business, was there, along with a number of others, but she says she saw few people working. The smoking area of ​​the building had five times more people than usual. Some employees left the country the same day.

As news of the invasion circulated through the office, Diuzharden and his colleagues were called into a “khural,” a weekly meeting. There, she said, Tigran Khudaverdyan, executive director and deputy general manager of Yandex, reassured them that the company would continue to operate.