The Ukraine conflict is eroding Russia’s tech future

After a bloody invasion of Ukraine, Russia was hit with severe sanctions and became an international pariah. The loss of the nation’s massive reservoir of IT expertise may be one of the most long-term impacts.

The Russian Association for Electronic Communications warned the Duma last month that up to 70,000 IT employees had already left the country, with another 100,000 anticipated in the next month. That’s around 13% of the sector’s employment, which is very important to the Russian economy.

 

To avoid being shut off from global internet platforms and unable to take payments from foreign customers, Russian software engineers are fleeing to Russia’s neighbours Armenia and Georgia, as well as Dubai. Many will end up in Germany, the UK, or the US.

 

Thousands of engineers have joined Telegram groups to provide suggestions on acquiring housing and work permits in new areas. “VC and Startups” has almost 600 members. “Don’t talk politics,” is the first rule in Armenia. Someone on Saturday sought help relocating their Russian startup to Armenia. “They will help,” said a group member with a snapshot of a local lawyer’s business card. Another group called “The Ark” has over 38,000 members who have volunteered to verify resumes or discover reputable local schools.

 

Russia’s engineers often top rankings for coding and algorithm design – the science of designing the mathematical processes necessary to calculate and interpret data. Russian coders are nearly as good as Chinese developers, according to HackerRank, a talent evaluation and recruiting firm.

In a country dominated by oil and gas exports, Russia’s IT sector is a tiny employer but a rising economic contribution. It employs roughly 1% of the workforce but contributes over 5% to the GDP. Outsourced software development businesses like Artezio LLC and Auriga Inc. sell roughly $9 billion worth of software to Russia.

 

It is conceivable that the loss of such a talent pool will have a longer-term effect on Russia’s GDP than losing oil exports. By then, whole engineering teams will have departed, and organisations will have migrated overseas or closed.

Other businesses, such as finance, oil and gas exploration, and manufacturing, would be affected by this. It would also hamper Putin’s efforts to reduce Russia’s dependence on Western technologies.

 

Dmitry Medvedev, the then-Russian President, lamented the country’s enterprises’ inefficiency and productivity in a key policy document released on the Kremlin’s website in September 2009. As a consequence, Russia’s worldwide economic power was diminished. “Relying on oil and gas markets to lead is impossible,” he stated.

 

Build an intelligent economy that produces and exports innovative technology while reducing dependency on raw commodities. Putin, then Prime Minister and soon-to-be President, seemed to welcome the “new economy.” But he froze. Due to widespread demonstrations in 2011 and 2012, he abandoned those intentions and returned to the original framework. As Alena Epifanova and Philipp Dietrich recently noted for the German Council on Foreign Relations, “Putin well knows that a wide diversification of the economy and rapid economic development would swiftly lead to a diversification of wealth and power with unmanageable actors.”

 

 

And during the following decade, Putin worked to isolate Russia’s internet from the rest of the world, while also developing autarkic semiconductor, cybersecurity, and networking technologies.

 

Partial success. The nation excels in cyber offensive and defence, and is building a splinternet, but lags in chips and other technologies. Despite this, over 4,000 IT businesses have sprung up to meet local and international demand.

 

The administration seems to be aware that the Ukraine crisis might terminate that ultimate global edge. To encourage young entrepreneurs to remain in Russia and create new firms, Prime Minister Mikhail Mishustin offered awards of up to 1 million rubles ($10,000). The government would also limit the monitoring of all technological businesses for three years.

 

Others may be influenced. The conviction that their nation will need them once Putin leaves. Thousands have already departed, countless more are on their way, and most will never return. And when the battle ceases, the Russian nation will need them most. –Bloomberg