Russian siloviki could devour limited IT resources

Russian siloviki could devour limited IT resources
Previously booming Russian IT is set to suffer as sanctions cut-off supply of western hardware and IT personnel leave.
By bne IntelliNews April 26, 2022

Amid the military invasion of Ukraine Russia will set up an anti-corruption information system Poseidon that will be co-ordinated by the presidential administration and operated by the Federal Guard (FSO), Kommersant daily reported citing a presidential decree signed by Vladimir Putin.

Notably, as covered by bne IntelliNews, Russia will see a short- to medium-term deficit of hardware and human resources, with the private and public IT/AI/tech projects having to compete for scarce imported resources such as servers and other data processing tools. 

bne IntelliNews already warned that the Russian authorities are preparing for a sharp deficit of servers and processing capacities to support state services, while preparing to buy out capacity from the private sector and "repurpose" the IT resources of the foreign companies pulling out of Russia.

Should Poseidon turn out to be a large-scale surveillance system, this could further shift the balance in Russia from tech companies (that are already forced to slash investment) to state behemoths (like Rostelecom) and even worse, bureaucrats and the infamous siloviki security apparatus.

A separate report by Kommersant claimed that Russia’s largest IT companies are stranded for servers and data storage capacities amid Western sanctions over the military invasion of Ukraine. Unnamed sources told the daily that internet major VK (former asked the Ministry of Digital Development to assist in server supplies.

Reportedly, VK ran into trouble when buying “tens of thousands of servers” and is asking for government support. Both current services and the expansion of IT infrastructure of the company could be affected. Russian internet major Yandex could also be facing difficulties with servers and other supplies, Kommersant believes, as the former tech frontrunner recently had to freeze all investment

In the meantime Russian state institutions have increased the volume of IT procurements by 12% in monetary terms from February 20 to February 24 to over RUB34bn, Kommersant wrote citing the state tender disclosure system. State purchases mostly covered IT systems and cybersecurity related products.

Market participants confirmed to the daily that there are no commercial B2B server supplies on the market at the moment, while all used equipment was swiped off the market already in March despite a jump in prices. Domestic server producers such as Elbrus and Baikal are reportedly running low on components. 

As far as human resources are concerned, the Federation Council digital development body admits there has been an unprecedented post-invasion brain drain and believes Russia needs at least 1mn extra IT specialists, from a 1.7mn estimated pre-invasion 2021 headcount, Kommersant wrote in another separate report. The 20-item roadmap prepared by the Council includes the previously discussed cancellation of military conscription for certain IT professionals, media campaigning for state IT work, and even the state-controlled redistribution of IT alumni to military and industrial complex.

Notably, apart from eating away the private sector’s limited resource base, the Poseidon news and the involvement of the presidential Federal Guard (FSO), a security unit controlled directly by the presidential administration, could confirm recent reports that Putin could be tightening the screws on his infamous “vertical of power”, all the while growing increasingly isolated and surrounded by a handful of close siloviki hardliners.

Poseidon's aim is to provide tech support to anti-corruption institutions, "including the analysis and verification … of compliance with restrictions, prohibitions and requirements established to counter corruption…", according to the decree.

The main objectives of the Poseidon system, as stated in the decree, are: automating data entry, providing access to data, information and analytic support for users of Poseidon, preparation of analytical materials, interaction with other anti-corruption information systems.

Previously the anti-corruption agenda of the Russian government was closely linked to the public services digitisation drive of technocrat Prime Minister Mikhail Mishustin. Western sanctions are likely to seriously undermine this drive, which could decrease transparency and further boost corruption.

The government’s representative in the judicial system, Mikhail Barshchevsky, warned earlier in April that Russia risks a “colossal” rise in corruption amid sanctions and the resulting strengthening of state control in the economy.

Mishustin has digitally revamped the Federal Tax Service (FNS) and introduced a wide array of digital systems that have allowed precision control of both b2b and b2c collection and made tax evasion in Russia virtually impossible and highly risky. Under Mishustin, the rapid digitalisation of Russian public services and governance has continued.