Not a luxury, but a means – Business – Kommersant
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The US government has imposed massive sanctions on the Russian technology sector. Washington has limited deliveries to Russia even of household appliances and electronics, which are now recognized as “luxury.” Large companies have also been hit. “MegaFon” – under relatively painless export restrictions, and “X Holding” and “KNS-Group” – the head structure of Yadro Group – into the blocking SDN list. However, Kommersant’s sources claim that in the year since the outbreak of hostilities in Ukraine, market participants have come to terms with the sanctions – some after the fact, and some ahead of time – and have learned to bypass them. But restrictions, experts believe, can exacerbate the already acute shortage of personnel in the industry.
Dual purpose hair dryer
On February 24, the Bureau of Industry and Security (BIS) of the US Department of Commerce expanded the list of luxury items that since March 2022 have been prohibited from being shipped or re-exported to Russia and Belarus. Now they include smartphones over $300, hair dryers and dishwashers for the home (regardless of price), as well as various types of household appliances (vacuum cleaners over $100, microwave ovens, domestic coffee machines, etc.) and computer peripherals (keyboards, laser and inkjet printers and hard drives over $300). The restrictions apply to US-made products. But such is any product in which 25% is accounted for by American technologies or components.
The restrictions will come into force on February 27 after publication in the register of legal acts of the United States, said Sergey Glandin, partner at NSP law firm.
The new sanctions in the field of electronics are connected with the US conviction that behind the import of laptops, smartphones and household appliances there is not an intention to resell the goods, but a desire to get to the chips, which are later used to develop weapons and military equipment, the head of international legal practice believes K&P.Group Anastasia Simonova. “It is important that now not only the supply of the equipment itself will be prohibited. Terms such as “components”, “parts” and “accessories” are introduced,” the lawyer emphasizes.
On the eve of the announcement of sanctions, US Deputy Secretary of State Victoria Nuland really stated that Russians “import a thousand percent more laptops, iPhones, dishwashers from third countries, but not because they have to work from home from a laptop, but in order to cannibalize equipment for the sake of advanced chips… to make more rockets.”
In practical terms, the imposition of new export restrictions means that imported consumer electronics from unfriendly countries are likely to be gradually replaced by goods from China, India and other advanced countries that do not use expensive American components and technologies and do not apply such restrictions in relation to the Russian Federation, suggests Vadim Perevalov, a member of the commission for the legal support of the digital economy of the Moscow branch of the Russian Bar Association.
However, a Kommersant source in a major supplier of consumer electronics doubts that the new restrictions will have a serious impact on the situation: “So far there have not been enough high-profile stories related to secondary sanctions, which means supplies will not change.”
He claims that the market has already built new chains, and the decline in demand for equipment in Europe has led to the fact that “suppliers themselves are happy to redistribute the share of the European market into the gray zone – Russia, Belarus.”
MegaFon and Vision Labs called to BIS
Export restrictions of the US Department of Commerce affected not only consumer electronics, but also dozens of Russian companies in the technology sector. The largest of the victims was MegaFon. There, “Kommersant” said that they “sincerely do not understand the motives and reasons for including the company in the list of export restrictions.” The operator does not see direct consequences for subscribers and customers in the new restrictions. “The presence of MegaFon on the list may affect the need to obtain additional licenses from the US Department of Commerce in case we decide to import something from this country. We continue to study the possible consequences of the restriction on our activities,” the company said, adding that they are considering challenging the decision of the US Department of Commerce.
The interlocutor of Kommersant in one of the major vendors of telecom equipment agrees that the sanctions against MegaFon “today will not affect the work of the operator.”
“In fact, since the spring of 2022, any foreign vendors before supplying telecommunications equipment to Russia had to request permission from the US Department of Commerce, regardless of to whom this equipment was supplied. So the inclusion of MegaFon in the list looks like a refinement of the already existing rule, ”says the source.
However, Sergey Glandin clarifies that now the policy of refusal (Policy of denial) is applied to the telecom operator: “That is, if MegaFon wants to buy in the USA controlled by EAR (Export Administration Regulations, export control rules.— “b”) equipment, the manufacturer may not even try to get permission – the regulator, that is, the US Department of Commerce, will refuse. The rule also applies to equipment with more than 25% American components, such as those made in China, the lawyer adds. “Driven by obligations to the American patent holder, the Chinese manufacturer will not sell such equipment,” Mr. Glandin explains.
Sanctions will not affect on the cost of MegaFon in the event of its sale, says Leonid Delitsyn, an analyst at FG Finam: “Such transactions are usually prepared by competent lawyers with experience in conducting global transactions, which already take into account risks at the initial stages.”
One of the largest Russian suppliers of facial recognition systems, VisionLabs (owned by MTS), also fell under export sanctions. It is included in the list of companies for which there are restrictions on the export of a number of technologies and dual-use goods, confirms the company’s CEO Dmitry Markov. “Of course, we have yet to explore the business impact of this decision. So far, no critical consequences can be named, since we do not import anything from the United States or from persons directly related to US residents, and all VisionLabs products and solutions are based on the company’s own algorithms, ”said the top manager.
Kommersant’s source in the face recognition systems market suggests that VisionLabs falling under sanctions will not affect its activities, since companies involved in the creation of such solutions are developing on open source software, the distribution of which cannot be limited by sanctions.
“The only possible consequence is a more wary attitude towards VisionLabs on the part of foreign contractors to whom it supplies its solutions,” he believes. “But such a turn of events looks unlikely: the main export destinations for face recognition systems are Asia, Africa and Latin America, and sanctions are treated with indifference.”
Direct hit on Yadro
The most severe sanctions against Russian technology companies were introduced on February 24 by the US Treasury. In particular, ICS Holding, as well as Bastion LLC, Citadel LLC and NPK Kryptonit JSC included in it, which develop telecommunications equipment and solutions in the field of cybersecurity, were on the SDN list. The enterprises also act as the largest suppliers of SORM equipment for Russian telecom operators within the framework of fulfilling the requirements of the Yarovaya package. The beneficiary of all structures is Anton Cherepennikov, who himself was simultaneously included in the SDN list.
Getting into the SDN list involves blocking assets in the US and on the accounts of correspondent banks in the US, as well as the termination of any financial and economic legal relations, Sergey Glandin explains.
He clarifies that companies from the SDN list will be able to conduct business and conclude transactions only with Russian persons, as well as persons from those countries that are not afraid to fall under secondary sanctions. But there are few of them, the lawyer emphasizes: Iran, the United Arab Emirates, Belarus, Cuba, Syria. “Settlements for transactions with blacklisted companies can only be made in Russian rubles or currencies of the same small list of countries that are not afraid of secondary sanctions,” he adds.
However, a Kommersant source in one of the sub-sanctioned companies believes that the inclusion of ICS-Holding and its subsidiaries in the SDN list “does not change anything significantly.” “Since 2022, both ICS Holding and other Russian developers of telecom equipment have experienced problems with the supply of components. In fact, for the last year we have been working in such a situation, as if we had already got into the SDN list. And updating the sanctions list is just the bureaucracy of American officials, ”the source of Kommersant is sure.
The long-term strategy of ICS Holding “is based on the development of the strongest domestic technology companies that complement each other,” a company representative told Kommersant: “We are consistently working to create the foundation for a successful high-tech business in our country for the coming decades. All of our long-term development plans will continue unchanged.”
Another technological asset of Mr. Cherepennikov, LLC KNS Group, the head structure of Yadro Group, one of the largest Russian vendors of computer equipment, also got into the SDN list, as well as main developer Russian base communication stations within the framework of the state “road map” “Modern and promising mobile communication networks”. Partially, Yadro Group of Companies has already been under sanctions in recent months: in September last year, the SDN list hit one of the structures of the Group of Companies is Yadro Fab Dubna LLC, the operator of a plant for the production of equipment under construction in the Moscow region.
“These events further encourage us to fulfill the mission of building a leading domestic engineering company, developer and manufacturer of world-class IT and telecom products for corporate clients,” a representative of the Group of Companies told Kommersant.
He assured that Yadro “will continue to fully fulfill its obligations to partners and customers with even greater energy, consistently implement plans for technological development and develop large-scale educational initiatives.”
Alexander Sivolobov, Deputy Head of the Skoltech-based NTI Competence Center for Wireless Communications and the Internet of Things, agrees that getting Yadro on the SDN list will not complicate the development of Russian base stations too much: “Back in the summer of 2022, Russian companies laid the most stringent business models sanctions restrictions, so one should not expect critical changes in their activities.”
Mr. Sivolobov claims that back in 2022, developers of telecommunications equipment managed to solve some of the problems associated with export restrictions: “If we talk about software, we manage to get the necessary software and libraries for it in a gray way. With production equipment, the problems have also already been solved: these are relatively simple machines that one way or another can be imported into the country, assembled and, if necessary, hacked.
However, the expert notes that the sanctions exacerbate the most serious problem in the IT industry – staff shortage: “High-class specialists are reluctant to work in Russian technology companies, even high salaries do not help pull them out of relocation.”
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