The TechStream newsletter: Russia’s darkening tech landscape

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Russia’s darkening tech landscape

Two weeks into Russia’s invasion of Ukraine, the Russian tech and media ecosystem is being battered from two directions—an unprecedented Western sanctions regime and an increasingly authoritarian Russian state. Technology companies and workers are fleeing Russia, Western media and information is being severely restricted, and Russian access to key technologies is being significantly curtailed. Between the force of sanctions and the Russian government’s moves to consolidate power, we are witnessing a radical restructuring of the Russian economy and Russia’s relationship with the West.  

Over the last week, the United States and its allies have rolled out an extraordinary sanctions regime that aims to deny Russian access to Western financial infrastructure and critical high-tech goods. On the heels of these sanctions, a slew of Western companies, including a host of technology companies, have announced they will no longer do business in Russia. Apple is ending product sales in Russia; Microsoft is halting all new sales; Google and Facebook have stopped ad sales. A number of video game companies have stopped selling their products to Russian gamers. Payment processors Visa, Mastercard, and Paypal no longer service Russian clients. Samsung, Nvidia, Intel, and AMD all will no longer sell microprocessors to Russia. And this list captures only a slice of the companies pulling out—either due to sanctions compliance or for reputational or symbolic reasons.  

As tech companies stream out of Russia, the Kremlin is cracking down on online freedoms and moving to control information available to its citizens. Facebook has been blocked in the country, and Twitter has been throttled. A new press law makes it a crime to spread “false information” and to criticize the Russian war effort—an offense punishable by up to 15 years in prison. Western media outlets are withdrawing their correspondents from the country, and what remains of Russia’s independent media has little choice but to bow to the new law. Citing the new press law, TikTok said it would suspend service in Russia. In the words of Robert Mahoney, the executive director of the Committee to Protect Journalists, “President Vladimir Putin has plunged Russia into an information dark age.” 

Technology access. In response to the Russian invasion of Ukraine, the West is seeking to control access to strategic technology. Broad export controls issued by the Commerce Department’s Bureau of Industry and Security mean that a wide range of goods, including semiconductors, will be banned from export to Russia. Just as the United States has blocked China from accessing chips made in the United States or manufactured using U.S. technology elsewhere, the Commerce Department is using the same framework to limit Russian access to key technologies.  

U.S. diplomatic efforts are now focused on preventing China from supplying Russia with goods restricted by the United States. In an interview on Tuesday, U.S. Treasury Secretary Gina Raimondo threatened that the United States could “shut down” China’s largest manufacturer of microchips, SMIC, if it finds out the company supplies its products to Russia. SMIC is currently subject to U.S. export controls but continues to have access to U.S. chip-design and manufacturing tools due to a broadly worded component in its U.S. designation. Some officials within the U.S. government have sought to close that loophole, and Raimondo is now publicly threatening to do so.  

Russia’s relationship with China moving forward is perhaps the key challenge facing the effectiveness of the technology-related sanctions the U.S. has imposed on Moscow. While China has amplified Russian propaganda related to Ukraine and refrained from criticizing the decision to invade, Beijing’s path forward is unclear. A Russian economy mostly cut off from the West is one that is captive to Chinese high-tech firms, which could build on a growing trade relationship; in the first two months of this year, trade between Russia and China surged 38.5% compared to January and February of 2020. However, Chinese institutions clearly wish to avoid U.S. financial sanctions, as evidenced by Chinese state banks limiting Russian access to finance. Constraining Russia’s trade relationship with China will be a key priority for U.S. policymakers.  

The view from Russia. For ordinary Russians, the developments of the past two weeks are a catastrophe and leave them cut-off from technology they have come to depend upon. When Visa and Mastercard suspended service, the first to feel its effect were Russians who had either fled the country or were stranded abroad when the invasion was launched. In suspending service in Russia, debit and credit cards issued in Russia by Visa and Mastercard no longer worked abroad, effectively cutting these people off from their funds at the worst possible time. Because Russia has built a system with domestic vendors processing Visa and Mastercard transactions, cardholders in Russia were not affected. Russian video game streamers and social-media creators, on the other hand, are mostly cut off from payment via Western platforms.  

For Russian internet users, the most worrying development is Western internet providers pulling out of Russia. In recent days, Lumen and Cogent Communications announced they will end their business in Russia. The moves do not cut Russia off entirely from the global internet but will limit the amount of bandwidth available for internet connections between Russia and the outside world, according to an analysis by the internet monitoring firm Kentik. Moves like this threaten the integrity of the global internet and ordinary Russians’ access to information—and make it easier for Russian authorities to control what information is available to the country’s citizens. Civil society groups are also concerned that the sanctions regime will have spillover effects on internet access. In a letter to the Biden administration this week, a coalition of digital rights groups urged the White House to make clear that the provision of internet access in Russia is not in violation of U.S. sanctions.  

The long-term trajectory for freedom of expression online for Russia is dismal. Ahead of the Ukrainian invasion, Russia has made major investments in building the infrastructure to monitor network traffic, similarly to how China restricts access to the global internet. Russia’s restrictive new media law combined with restrictions on major online platforms like Facebook point toward a future of increased repression. With the Russian government launching a crackdown on dissent, technology companies pulling out of Russia, and the economy in free-fall, technology executives, investors, and workers are leaving Russia in droves.  

Where does all this leave the Russian tech sector and users? There’s a temptation to view Western sanctions, unprecedented in speed and scope, as having a crippling effect on the Russian economy. But the reality is likely more complicated. The Russian technology industry will likely be less vibrant, forced to rely on inferior goods, and more domestically focused. Russian industry and society will muddle on, trying to find solutions to sanction-imposed problems, workarounds and loopholes to both Kremlin and Western restrictions. Russian internet users will be far more cut off from the world, but this too will be a mixed picture: Russian internet users are already flocking to virtual private network applications to get around local controls. 

—Elias Groll (@EliasGroll)

Recently on TechStream

Crypto innovations threaten sanction regimes 

As cryptocurrencies march toward mainstream adoption, a persistent misconception seems to have taken root among policymakers: That cryptocurrencies broadly—and Bitcoin specifically—pose a major threat to sanctions regimes and anti-money laundering efforts because of the anonymity they provide users. Although Bitcoin and related cryptocurrencies offer some anonymizing features, they are in fact highly traceable. In a series of recent cases, investigators have demonstrated how to use the visible and immutable ledger of decentralized blockchains to trace illegal transactions and sometimes even recover stolen funds. In the cat and mouse game between law enforcement and online criminals, policymakers concerned with money laundering and sanctions ought to focus less on targeting Bitcoin and similar currencies and instead get ahead of shifting trends—principally, the adoption of privacy-protecting coins and the use of decentralized exchanges—that threaten to make investigations of online crimes and enforcing sanctions more difficult, Richard Clarke, Sarah Kreps, and Adi Rao write.  

Read more  

What we’re following

Cryptocurrency. President Joe Biden signed an executive order directing federal agencies to step up their planning work for a digital dollar and to coordinate efforts to regulate cryptocurrencies. The White House cited the explosive growth of digital assets in the past year as a catalyst for the move. Countries around the world are actively exploring or piloting digital national currencies, and the United States is lagging in its efforts to do so, something experts fear could undermine the dominance of the U.S. financial system in the long term.  

Crypto sanctions. U.S. cryptocurrency exchange Coinbase said it is blocking 25,000 addresses linked to illicit Russian entities. The move is aimed at complying with sanctions leveled at Russia in response to its invasion of Ukraine.  

Sanctions loophole? A whistleblower complaint alleges that Facebook violated U.S. sanctions law by allowing Russians subject to U.S. sanctions to maintain a presence on the platform, where they spread pro-Russian propaganda. The complaint addresses an area of ambiguity in sanctions law, according to experts interviewed by the Washington Post. U.S. sanctions law does not provide clarity on whether being subject to U.S. financial sanctions requires social media companies to remove their presence from online platforms, where they might continue engaging in the type of behavior sanctions seek to punish.  

Twitter on Tor. Twitter announced that it is making a version of its platform available via the Tor onion network. The Tor-specific version of the site provides greater privacy protections for users, especially those trying to access the site from repressive countries or facing severe surveillance threats.  

Self-driving. A pair of U.S. Senators criticized carmaker Tesla’s responses to inquiries regarding the safety of its self-driving features. Tesla is under fire for what Richard Blumenthal (D-Conn.) and Ed Markey (D-Mass.) argue are the company’s insufficient investments in driver monitoring technology to make sure that drivers remain engaged while using autonomous driving features. The inquiry comes after multiple safety warnings from the U.S. National Highway Traffic Safety Administration that resulted in Tesla issuing recalls or pulling features.  

Cyberattacks. Investigators from the cybersecurity firm Mandiant reported that Chinese government-backed hacking groups breached local government agencies in at least six U.S. states over the past 10 months, illustrating the diversity of cyber threats facing government agencies.  

Acquisitions. Google announced a deal to buy cybersecurity firm Mandiant for $5.4 billion, adding the firm’s cloud security offerings to its cloud business. The acquisition comes amid a wave of consolidation in the cybersecurity industry and may be challenged by antitrust regulators. 

Facial recognition. Police departments are increasingly relying on facial-recognition tools to make arrests but are frequently not telling suspects and their lawyers that such tools were used, Wired reports. The failure to inform lawyers that the technology was used deprives them of the inability to challenge the use of a technology that has been shown to exhibit racial bias.  

Section 230. This week, in an opinion for a case against Meta, Supreme Court Justice Clarence Thomas argued again against the broad immunity given to internet platforms in the current legal system. Section 230 of the Communications Decency Act gives internet platforms legal protection from liability based on contents uploaded by their user. This is another similar argument out of many he made against this provision, marking his position as a tech-skeptical conservative in the U.S. government. 

Reports we’re reading

Learning from FOSTA’s mistakes. Quinta Jurecic, a fellow at the Brookings Institution, examines the politics of Section 230 reform and lessons from past efforts to reform the intermediary liability law.   

A final point

“I do think, over time, as we get used to companies operating as geopolitical actors, these kinds of decisions may get a little bit more structured and more intentional.”  

— Brian Fishman, the former director for counterterrorism at Facebook, reflects on the ad hoc nature in which technology companies are responding to the Russia crisis.  

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