US tech giants don’t have much money at stake as they split from Russia

This does not mean that it would be a simple decision for them to leave Russia altogether. Many tech companies face complex ethical and reputational questions regarding freedom of expression as they deliberately consider leveraging powerful communication platforms that are used as much by dissidents and the media as by the Russian state. . While many companies have cut Russian state media and advertising, so far only Apple has shut down major operations in Russia.

Still, the financial momentum offers a rare opportunity for U.S. tech companies to appease policymakers around the world, including in the United States and Europe, without seriously hurting their bottom line.

Google, Facebook, Apple and Amazon are all facing an intensive bipartisan backlash in Washington as lawmakers examine their market dominance and role in spreading misinformation around the world. Acting against Russia could help them win goodwill from policymakers who have criticized them.

“There are political points to be made for tech companies if they demonstrate they take their human rights obligations seriously,” said Steven Feldstein, senior fellow in democracy and technology at Carnegie. Endowment for International Peace. “It’s important for them to stand firm against Russia and go public with their refusal and outweigh the small revenue they get from the Russian market.”

“The world is watching what tech companies do and whether they deliver on the promises they make,” Connecticut Democratic Sen said. Richard Blumenthal (D-Conn.), one of Silicon Valley’s most vocal critics on Capitol Hill. “It’s a unique opportunity because they have an extraordinary obligation. They have started, but there is still a lot to do.

Big tech companies have long kept only a “toe in the water” when it comes to the Russian market, said Dan Ives, a tech industry analyst at investment firm Wedbush Securities. Ives calculated the percentage of revenue companies would lose if they left Russia.

“For these tech companies, Russia is like bread crumbs on the table, compared to the whole pie,” he said. Ives predicted that tech companies will eventually pull out of the market altogether as Russian violence in Ukraine escalates. “Investors would welcome with open arms cutting Russia at all levels.”

Other industries are likely to feel much more pain. the list of global stocks with high exposure to Russia includes oil company BP – which announced its intention to leave Russia this week – and Citigroup investment bank, which this week said it has $10 billion in exposure to Russia as it leaves the country. Mastercard, which is pulling out of Russia in response to US sanctions against Russian banks, revealed on Wednesday that it received about 4% of his income from Russia last year. Russian titanium producer VSMPO-AVISMA supplies Boeing with 35% of its titanium.

Among the tech giants, Apple has so far taken the most ambitious action against Russia, stop all sales in the region and remove media controlled by the Kremlin RT and Sputnik from its app store. Ukrainian officials pressured Apple and Google to block access entirely to their app stores in Russia. (Apple Russia revenue in 2020 reached approximately $2.5 billionaccounting for less than 1% of Apple’s total sales that year.) Apple did not respond to a request for comment.

Others have taken steps to distance themselves from Russia. Google announced it would ban RT and other pro-Russian channels from YouTube and removed the RT and Sputnik apps from its app store. Facebook has taken similar steps to remove Russian propaganda from its platforms. Amazon in a blog post expressed “horror and concern” at the situation in Ukraine and pledged to donate $5 million to organizations helping on the ground, but did not mention his presence in the region.

The tech industry faces much more difficult financial and ethical calculations in other authoritarian countries. For example, technology industry supply chains are closely linked to Chinamaking it almost impossible for companies – especially Apple – to sever ties with Beijing despite call to do so because of the violence against Uyghurs in the country. And there would be serious consequences for the industry, for example, if China invaded Taiwan. More than 90% of the world’s advanced microchips come from Taiwan, which China claims as its own territory. Terry Daly, a senior fellow at the Fletcher School’s Emerging Markets Business Council, told POLITICO earlier this week that “it would be devastating” for the tech industry if Taiwan were cut off and “the entire core infrastructure network for communications” would suffer.

Amazon has a particularly small presence in Russia — limited to a small number of users who use Amazon’s cloud services for backup purposes, said Karen Kazaryan, chief executive and founder of Russian analytics firm Internet Research Institute. . Amazon does not have a Russian-specific e-commerce site; Russians use e-commerce platforms including Ozon and Yandex. Amazon did not respond to a request for comment.

Even so, some of the tech companies earn hundreds of millions of dollars a year in Russia. Google has the largest presence, with offices in Moscow and more than 100 employees in the country. Its YouTube video service is the leading social media platform in Russiaahead of Meta-owned WhatsApp and Instagram and Russian social media platform VK.

“From Google’s perspective, there’s a lot of money to be made by maintaining access to the Russian market,” said Justin Sherman, a member of the Atlantic Council’s Cyber ​​Statecraft Initiative, pointing out that between 80 and 85% of Russians use YouTube.

However, Google received less than 0.5% of their income of the Russian market in 2020, amounting to approximately $800 million that year. By comparison, he received $2.4 billion from the UK in 2020, which has about half of Russia’s population. And both are dwarfed by Google’s revenue streams in the US and Asia-Pacific. Google received 19% of its 2020 revenue from the Asia-Pacific region, much of it from Singapore and India.

And simply putting restrictions on widely used platforms like YouTube in Russia could present potential downsides to a complete withdrawal. The Kremlin could retaliate against companies for any moves to restrict access.

“Blocking Russian war propaganda would most likely trigger the Russian government to block all of YouTube, making alternative anti-war information inaccessible to Russian users,” said Sergei Hovyadinov, a former Google lawyer in Russia and in Eastern Europe. But, Hovyadinov added, Google has been remove content at the request of the Russian government for years. Google did not respond to a request for comment.

A Meta spokesperson said the company has no field staff in Russia. The company said it intended to keep its services, including Instagram and WhatsApp, active in the country.

“People in Russia use FB and IG to protest and organize against the war and as an independent source of information”, tweeted Nick Clegg, president of global affairs for Meta. “We believe that disabling our services would silence an important expression at a crucial time.”

This dynamic is compounded by incoming Russian regulations that would require US tech companies to establish local offices in Russia, an effort that would place companies firmly under the legal jurisdiction of the Kremlin and more pressure to comply with its executive orders.

The fact that Apple and Google have employees on the ground allowed Russia to send gunmen to Google’s Moscow offices amid pressure campaign to withdraw an application from Putin’s opponent last year.

Ives, the financial analyst, predicted that online services will either pull out of Russia or be expelled by the government soon. Just a few years ago, Russia blocked Amazon and Google IP addresses in a bid to shut down Telegram, a messaging service.

“The consumer in Moscow is going to be slowly disconnected from YouTube, Netflix, Facebook, Spotify, and it’s going to continue,” Ives said. “It’s going to get to a point where they’ll have more access to streaming services and e-commerce platforms on the space station than in Russia.”

Apple, Google and Facebook — all consumer-facing companies — are in a very different position than technology companies focused on enterprise software, said Kazaryan of the Internet Research Institute. He said Russians would be hit “where it hurts” if major US software providers cut their services from the country.

“The dependence on foreign software is so huge that right now things can break if American companies leave Russia,” Kazaryan said. Future sanctions will likely force these companies to at least start up their Russian business customers. He added that these services are “much more important” for the Russian economy.