Putin backtracks on personal data law

By bne IntelliNews July 14, 2015

bne IntelliNews -


Russian President Vladimir Putin has suggested postponing the enforcement of a new law on storage of personal data of internet business clients after foreign companies expressed concerns, Kremlin press secretary Dmitry Peskov said.

Under the law on data storage signed by Putin in July 2014, all internet companies doing business in Russia must store client data on servers located inside Russia rather than abroad. Starting in September 2015, internet providers must exclude resources that cannot guarantee storage of data under the amended rules. 

"Considering the concerns expressed by representatives [of Western companies], the president has ordered that the possible reasons behind these concerns be clarified," the Russian legal information agency RAPSI quoted Peskov as saying on July 13. "The issue is being analysed, the conclusions will be submitted to the president."

The spokesman added that the issue was raised at Putin's meeting with business leaders during the St Petersburg International Economic Forum in June. According to sources cited by the Vedomosti daily, one businessman who asked him to delay the law's introduction was Jack Ma, the founder of Chinese e-commerce giant Alibaba.

It was reported earlier that the Association of European Businesses (AEB) also asked the Russian leader to place the amended law in a dormant status and to delay the penalty for not complying by one year, until September 1, 2016.

Facebook, Google and Twitter have millions of Russian users but mostly use servers outside the country to store data. In April, the online auction сompany eBay became the first US IT-company to agree to store personal data of Russian customers on local servers.

Chinese electronics producer Lenovo started the process in February and will use its own servers in-country rather than rent them. According to its director general Gleb Mishin the cost of the transfer operation was around $50,000.

The company was followed in June by South Korean electronics producer Samsung, which will use the Moscow data centre belonging to the DataPro company, which is reportedly owned by the family of former Rosneft oil company president Sergei Bogdanchikov. Samsung began transferring personal details of Russian clients’ accounts and smartphone apps, sources told Vedomosti

Russian authorities portray the personal data law as an essential measure against foreign threats and spying activities. However, rights advocates say the Kremlin is using the step to curtail freedom of information and tighten its scrutiny of Internet activity.

Yevgeny Fyodorov, a parliamentarian from the ruling United Russia party who co-authored a bill to speed up the law’s introduction to 2015, earlier described the Internet an instrument of “orange interventions", using a Russian term for Western-backed anti-government uprisings. It was therefore necessary to take such banks of information that could be used against the country “under national control”, Fyodorov told Izvestia newspaper in 2014 after Putin threw his weight behind the legislative changes.

However, the law if enacted could shave $5.7bn, or 0.27%, off Russia's GDP this year and jeopardize productivity in the long term, a study by the European Center for International Political Economy (ECIPE) found."Such a mandate disrupts data flows and economic production by forcing businesses to choose less efficient local suppliers to handle data within Russia," ECIPE, a Brussels-based think tank, said in a report given to the Moscow Times in June. 


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