Google's Retreat From Moscow
Google confirmed today that it would move its engineering office out of Russia. That makes it at least the third major tech company to scale down its presence in the country this year. Although none of the three companies explicitly tied the decision to Russia's increasingly oppressive Internet policies, the decisions to leave can hardly be a coincidence.
In April, President Vladimir Putin, who by all accounts isn't an Internet user, declared that the global computer network had "emerged as a special project of the U.S. CIA and that's how it's developing." A little more than two months later, the Russian parliament, always looking for creative interpretations of Putin's messages, passed a law banning the storage of Russian citizens' personal data outside the country. All Internet companies were required to move the data to servers within Russia by September 2016. Although the Internet community protested -- obeying the letter of the law would deprive Russians of the opportunity to use Facebook or even buy plane tickets from foreign airlines through their websites -- legislators toughened the ban in September, bringing forward its implementation to January 2015.
Even as that change made its way through parliament, Adobe Systems, maker of Photoshop and other popular software, announced that it was closing its Russia office. Adobe gave an innocuous business justification: It was moving its applications to the cloud, where they would be available by subscription, as part of the global fight against piracy. It no longer needed a physical presence in Russia or in a few other countries, such as Taiwan and Turkey. Yet unofficially, company representatives said that Putin's increasingly tense relations with the West were keeping it from winning contracts in Russia, and that it wasn't prepared to move its servers to comply with the personal data law.
In November, Microsoft shut its Moscow development office for Skype, moving some of the Russian engineers to Prague. The official reason was a restructuring of the video chat service's development arm to make its logistics simpler. Skype, however, is a product that has long interested Russia's intelligence services. Last year, the Moscow business daily Vedomosti reported that spies had found a way to eavesdrop on Skype chats. Skype also keeps its users' personal data on servers outside Russia. Since the service had no Russian presence apart from the development team, it made sense to get rid of the Moscow office and relocate the best programmers.
And now Google. There is no reference to the data storage law in the official statement, which instead stresses Google's commitment to its Russian users and points out that the company's commercial office in Moscow isn't closing. Yet this clearly is another case of a tech giant not wanting to deal with the personal data law or any other present and future government efforts to control the Internet. Google had relocated engineers from the Nordic countries when personal data protection laws were passed there, and those rules are much softer than the Russian ones (Sweden's, for example, allow the transfer of data within the European Union and to some countries outside it that meet European security requirements).
Why are some tech companies only moving engineers out of Russia? Maintaining business offices exposes them to Russian government pressure, and Google and Microsoft don't plan to give up their business in a country with 76 million Internet users. One possible explanation is that the companies want to avoid complications of a specific kind. They don't want Russian security agencies to infiltrate their operations by coercing, bribing or otherwise suborning coders. The Russian government's efforts to control the Internet are intensifying: In another step toward the construction of a Chinese-style Great Firewall, communications providers may soon be required to install filtering equipment. Tech companies have every reason to believe that Russia would seek to establish full control over user activity, which essentially turns engineers in Russia into hostages. Sales executives are in a less precarious position: They cannot mess with the product.
Russia ranks 55th out of 86 countries -- between Uganda and Nepal -- on this year's Internet freedom and openness index compiled by the World Wide Web Foundation. The nonprofit was set up by Sir Tim Berners-Lee, the so-called father of the Internet. Sir Tim recently rebuked Putin for his CIA comment, pointing out that the network was developed by the academic community. Putin, however, is unlikely to make the distinction between U.S. Department of Defense sponsorship of ARPANET, an early version of the Internet, and CIA supervision.
The Russian parliament's recent decision to delay the implementation of the personal data law until Sept. 1, 2015 -- after foreign investors complained about the rules to Prime Minister Dmitri Medvedev -- isn't going to eliminate the climate of suspicion for tech multinationals in Putin's Russia. The three companies won't be the last to take precautions.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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