This past Friday Russian lawmaker Anton Gorelkin submitted to the State Duma, the lower house of parliament, a bill targeting “significant [online] information resources” with the capacity of “collecting information on [Russian] users.”
Should their foreign ownership exceed 20%, such “information resources” will not be allowed to conduct advertising activities in Russia – an implicit way to deprive them from their main means of existence. (Read the draft bill in Russian.)
Under this draft law, which if approved would come into force from Jan. 1, 2020, a government commission will determine which Internet resources should be considered as “significant.” This commission may also decide to allow foreign owners to control more than 20% of a company “based on a motivated request.”
Whether such foreign companies as Apple, Blablacar, Facebook or Google, which generate important traffic in Russia, could be concerned by the new law if adopted, is not fully clear. Written ambiguously, the draft targets companies that play a “significant role in the development if the Russian Federation’s information and communications infrastructure, as well as data treatment technologies.”
More obviously targeted are Russian companies like Yandex and Mail.ru Group, which are listed on Western exchanges (the NASDAQ and the LSE, respectively).
What is more, Yandex’s co-founder and CEO Arkady Volozh, who acquired Maltese citizenship in 2017, had 48% of the company’s voting rights as of late 2018 while he and Yandex’s early employees controlled 57% of the company.
Damaging a “national treasure”
The introduction of the draft law triggered a flurry of negative comments from all sides. “The adoption of this bill could destroy the unique ecosystem of Internet businesses in Russia, where local players successfully compete with global companies,” Yandex stated.
Mail.ru Group’s reaction was expressed in measured terms: “Mail.ru Group plans to take part in the discussion and is confident that the state will find a solution acceptable to all sides.”
Critical voices were heard even from the government. As reported by Reuters, Konstantin Noskov, minister of communications, said he “absolutely [doesn’t] support” this initiative, which he fears would hurt Russian companies by damaging their ability to compete globally.
“The companies against which the bill is directed, in particular, Yandex and Mail.ru, are our national treasure,” the news agency quoted him as saying on Monday.
Almost simultaneously, Russia’s Deputy Prime Minister Maxim Akimov called the draft law “destructive,” reported Reuters.
The immediate effect of such statements was to boost Yandex’s shares in New York and Moscow, which had initially suffered from the bad news from the Duma.
Gorelkin himslef seemed to step back Tuesday when he said his text should be “reworked” to take into account the opinions of market players including Yandex. “No one says that my bill in its current form is the ultimate truth,” Interfax cited the lawmaker as saying.
Kremlin priorities
Unnamed members of the presidential administration are behind the proposed legislation, according to Russian online publication The Bell. Just three months ago, President Putin signed a law on the “sovereignty of the Russian Internet.”
These initiatives suggest the Kremlin is willing to tighten further its control over the country’s Internet resources more than it is concerned to restore foreign investors’ confidence in Russia.
This confidence was seriously damaged in the past few years. Russian companies have been associated with increased risks since the country was targeted by Western sanctions, following the Ukrainian crisis in 2014 and the US election meddling in 2016.
The arrest of US investor Michael Calvey and other top managers of the international PE firm Baring Vostok, earlier this year, frightened even more the international investor community.
As a result, foreign investment in the Russian tech sector has fallen dramatically for the past five years, putting aside the creation of several Russian-Chinese investment funds with government support.
Sources: Reuters (1, 2), The Bell, Financial Times
