Russia seeks to cut dependence on IBM, Microsoft amid sanctions

Road traffic forms congestion on a highway beside the Moskva river and Kremlin, right, in the early evening in Moscow

Russia’s parliament is preparing new regulations to reduce its reliance on foreign technology suppliers after the U.S. imposed sanctions against some of its largest companies, a move that could hurt sales at vendors such as Microsoft Corp. and International Business Machines Corp.
The State Duma, Russia’s lower house of parliament, is drafting a bill to require government agencies and state-run enterprises to give preference to local providers of software and hardware, according to a document from the commission for strategic information systems obtained by Bloomberg News. The paper addresses criteria for tender processes such as favoring products that don’t have imported, licensed components.
“This all has to do with sanctions,” said Andrey Chernogorov, executive secretary of the commission, said in a phone interview. “Given the current international tensions, substituting imports with local software and hardware becomes the key to ensuring self sufficiency.”
The Obama administration on July 16 tightened sanctions on Russian banks, energy and defense companies to punish the country over its interference in Ukraine. In the same week, the downing of a Malaysia Airlines jetliner caught in the military conflict over eastern Ukraine, killing all 298 people on board, sent the Ukraine crisis into a new phase.
IBM, Microsoft, Hewlett-Packard Co., Cisco Systems Inc., Oracle Corp. and Germany’s SAP SE had combined revenue of 285 billion rubles ($8.1 billion) from Russia last year, according to estimates by the Russian Academy of Sciences included in the commission document. About 77 percent of the sales were contracts from the government and state-controlled companies, it said.
Spokesmen for IBM and Oracle in the U.K. declined to comment. Representatives for Microsoft, Hewlett-Packard, SAP and Cisco in Europe didn’t immediately return phone calls and e- mails seeking comment.
The commission intensified preparation for the bill after reports that American technology companies may cut off services to Russian banks and companies to comply with U.S. sanctions, Chernogorov said. The proposal may be submitted for a parliamentary vote in September, he said.
Russian companies that the U.S. imposed lending curbs on last week include energy giants OAO Rosneft and OAO Novatek as well as Vnesheconombank and OAO Gazprombank. Since sanctions against Russia were first announced in March, President Vladimir Putin has repeatedly called for substituting imports with domestic production to limit the threat to Russia’s economic growth.
With the lack of regulation in post-Soviet Russia that governs the award of technology contracts, foreign vendors account for 67 percent of software used in the country and about 90 percent of hardware, according to the commission. Foreign software may have hidden capabilities such as “bugs” and “backdoors,” giving suppliers access to confidential data, Chernogorov said.
Russia’s Communications Ministry is among agencies seeking to cut dependence on foreign vendors as it develops its e-government initiative, a unified database of personal data used to provide online services such as granting a license permit or assigning a child to school. Bloomberg

Ilya Khrennikov