How to exploit Russia’s addiction to Western technology. The private sector must do more to help, 3 November 2023

...Western technology firms proved willing, even enthusiastic, partners for the Kremlin. Major multinational companies became key vendors to the Russian state, opening large offices in Moscow and winning billions of dollars in lucrative government contracts. In 2013 alone, Microsoft, IBM, SAP, Oracle, HP, and Cisco made more than $6 billion in revenue from Russian government contracts. Western technologies came to dominate many Russian industrial and knowledge-intensive sectors. In 2012, the Windows operating system was installed on 76.9 percent of new Russian servers, and in 2013, Cisco held a 75 percent market share in the Russian router market. Some top managers of Western technology companies working in Russia even transitioned to roles in state-owned companies or in the Russian government...

European companies have been equally complicit. Nokia, the Finnish telecommunications company, has assisted Russia’s security services in intercepting and analyzing the communications of ordinary Russians. From 2012 to 2017, Nokia supplied equipment and software to Russia’s largest telecom service provider, MTS. The Russian security services then used Nokia’s products to conduct digital surveillance. They have also used this system to track supporters of Russian opposition leaders and, in the past year, to silence antiwar voices inside Russia by intercepting telephone and Internet communications...

In 2014, Moscow annexed Crimea, provoked a war in the Donbas, and began transforming Russia into a militaristic dictatorship. In response, the EU and the United States imposed sanctions against Russia. Western technology companies, reluctant to lose the Russian market, continued to operate there. The Kremlin, satisfied that Western companies would stay away from politics, made no attempt to switch to alternative technologies. Life continued as before. Technology companies still prospered, signing government contracts and participating in Russia’s political and economic life...

Moscow maintained close ties with Western technology vendors until the onset of the Russian military intervention in Ukraine, when Western governments enforced unprecedented sanctions that severely hindered the operations of Western companies in Russia. Facing public criticism and backlash from customers, the largest Western tech companies bowed to the inevitable and ceased official operations in the Russian market...

The Kremlin has tried to compel state agencies and companies to use Russian alternatives, but they have periodically refused to do so because of the low quality of these technologies. Moscow cannot create competitive technologies because it lacks the necessary financial and human resources.

The Kremlin has no option but to turn to China. And Chinese technologies are rapidly increasing their Russian market share: in 2022, the share of Chinese smartphone sales in the Russian market was 55 percent; this year it is 70 percent. The share of Chinese laptop sales has also significantly increased, and the Chinese company Hikvision continues to dominate Russia’s video surveillance market. Chinese car brands now represent almost half the new car offerings on the Russian market...

But the transition from Western to Chinese technologies is not proceeding smoothly for the Kremlin. Numerous obstacles have arisen that prevent a complete shift.

The main stumbling block arises from the globalized nature of complex technological systems and their supply chains. Chinese companies themselves rely on Western technologies and are therefore vulnerable to Western sanctions. Fearful of being a Western target, some Chinese companies have felt compelled to place restrictions on their exports...Russia is similarly concerned that Chinese technologies might pose a threat to national security since Chinese companies are closely tied to the Chinese government...

Western countries occupy a unique position in technological leadership. At present, no nation aspiring even to regional dominance can manage without the West’s advanced technologies. To prevail in the great-power competition against China, the West must retain its lead in the technological race. Beijing is working to develop more advanced technologies and has already experienced success in areas including 5G network technologies. If it outstrips the West and persuades other countries to forgo Western technologies, that would deal a significant blow to the West’s standing in the great-power competition...

Western governments should never repeat the mistakes made with Russia. Western technologies should not be used to establish and reinforce authoritarian regimes, to violate human rights, to conduct wars of conquest, or to enable confrontations with the West itself. The indifference of Western technology companies to how their technologies are used is a weak point in the West’s great-power competition with China...

Transparency and accountability are key. Technology companies are often aware that authoritarian regimes misuse their technologies, but they prefer to conceal it. To end this practice, companies should be mandated to disclose information regarding their products’ use for human rights violations or military purposes...Western governments must open communications with private companies and hold ongoing discussions about the consequences of autocracies’ use of their technologies...

Private companies whose technologies continue to be supplied to Russia in circumvention of sanctions should also actively participate in government efforts to identify and disrupt such supply chains. While Western countries are trying to stop supplying Russia’s war machine with technologies, private companies must not ignore violations of export controls. If they continue to do so, Western governments should withhold privileges from these companies, including the chance to participate in government procurement or receive diplomatic support when operating abroad. There can be no more “business as usual.”