The biggest tech company in Russia is in danger of going out of business, which would interfere with President Putin’s plans to promote Russian-grown alternatives to Western technology.
The biggest internet company in the nation, Yandex—often referred to as “Russia’s Google”—is best known for its ride-hailing apps and search browser. The New York Times reported that Yandex N.V., Yandex’s parent company based in the Netherlands, wants to leave Russia because of the potential harm the Ukrainian invasion could do to its business.
Putin would suffer a setback if Russia’s largest tech company left, as he has made a concerted effort to produce Russian goods and technology as access to Western suppliers has been restricted by sanctions.
In response to the current geopolitical climate, Yandex N.V. said Friday that its board had “started a strategic process to review options to restructure the group’s ownership and governance.”
In addition to developing some of its international divisions “independently from Russia,” Yandex said that it also had the option of selling off “ownership and control of all other businesses in the Yandex Group.” “This process is at a preliminary stage,” the company added.
The Times cited two unnamed sources familiar with the situation in reporting that Yandex N.V. would relocate its new businesses and most promising technologies, such as self-driving cars, machine learning, and cloud computing services, outside of Russia. The Bell is a Russian media organization. Those businesses would need access to Western markets, experts, and technology, all of which is unviable while the Russian invasion of Ukraine rages on and Western sanctions remain in place.
However, Yandex’s parent company might not be in a position to decide whether to relocate its young technology divisions. According to The Times, the company will need approval from the Kremlin to transfer tech licenses that are registered in Russia outside of the nation. Additionally, the overall restructuring plan would need to be approved by Yandex’s shareholders.
Since the invasion of Ukraine, Yandex’s business, which was once hailed as a rare Russian business success story, has struggled. The tale of the tech giant is similar to those in Silicon Valley. Yandex is frequently referred to as the “Google of Russia” and employed more than 18,000 people. It was valued at more than $31 billion. At one point, it even had offices in the heart of Palo Alto, California.
However, thousands of Yandex employees have left Russia as a result of Russia’s invasion of Ukraine, and the value of the company’s New York-listed shares dropped by more than $20 billion almost immediately after the conflict before Nasdaq suspended trading in its shares. Yandex’s shares, which are listed in Moscow, have fallen 62% over the past year.
According to a report by Al Jazeera, Yandex’s misfortune is a reflection of that of other Russian tech companies, which have struggled in the face of Western sanctions and the exodus of tens of thousands of Russian IT workers. Even Putin admits that the Russian IT sector will face “colossal” challenges as a result of export controls imposed by the US and 37 other nations that limit Russia’s access to technologies like semiconductors and telecommunications equipment.
Even before the Ukrainian invasion and its sanctions, Russia had an uphill battle to overcome its reliance on the global economy.
Although the Kremlin attempted to ban the use of foreign software by all government agencies in 2015, by 2019 only 10% of state-owned software was produced in Russia. Russia is reliant on more than just foreign technology. According to a 2021 note from Russia’s central bank, 65% of Russian companies relied on imports for their manufacturing. Most businesses work with foreign suppliers at some point in the supply chain, whether it be for office supplies or cars.