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In Russia, the Internet is a “Strategic” Sector

internet.gifWe’ve written before on this blog about the Russian government’s declaration of “strategic sectors” in the economy, which is another way of saying that they are open game for state intervention, and foreign participation will be limited.  There are certain areas where this is logical – such as sensitive defense technologies.  There are other areas which make much less sense, such as energy, media, and internet.  The strategic sectors legislation has very little to do with the logic of reciprocity – Gazprom has snapped up assets across Europe, but foreigners aren’t allowed controlling stakes in energy projects.  Even Alexander Lebedev has a newspaper in the UK, but no foreign company can get involved in disturbing the Kremlin’s carefully managed flow of information to its citizens (how else can they guarantee that ridiculous propaganda documentaries would be shown to whip up anti-Americanism?).


Even though the strategic sectors commission is headed up by thecompetent Igor Shuvalov, he still has to do daily battle with the muchmore powerful group under the hand of Igor Sechin – as demonstrated by the attempted theft of the mining company Uralkali.  Most recently the strategic sectors commission has begun to show its paranoia over the internet.  Not only was Google prevented from doing business, and LiveJournal passed into the handsof Kremlin loyalist Alexander Mamut, but now Yandex, the largestinternet search firm, is negotiating with the government to give up a”golden share” which would empower the Kremlin with a veto overownership … just one proposed way for the company to maintainindependence (this was reported in an important WSJ article today by Greg White).

There are several worrying aspects to this news – not least that it isthoroughly anti-market and interventionist behavior from the statewhich will hamper Russia’s ability to compete in the future.  Whyshould a privately held company, which is only the business of freeflowing information, find itself in a supplicatory position to “negotiate“its autonomy?  Why should the Kremlin feel that Russian companies andonly Russian companies own the internet?  The answer to the first question is self-evident, and the second, I believe we can understand from a privacy perspective – should the Kremlin ever desire to obtain the user information of anyone publishing on the internet or otherwise censor certain activities, it would be much easier to do so with a local Russian company … over which it has the power to completely destroy.

For now, Russia is willing to let the internet run free, but for the future, they still wish to preserve their options for intervention and interference if the need should arise.