Russia’s invasion of Ukraine has already dramatically reshaped European security. It is also likely to have significant repercussions for Russia’s economy and its technological development. The exit of large multinational companies, coupled with sanctions imposed by the United States and countries in Europe and Asia, particularly on high-tech exports to Russia, will hit right where it hurts — the crown jewels of Russia’s development — AI-enabled technologies.
AI is a personal issue for Russian president Vladimir Putin, who has been quoted as linking a country’s progress in AI-enabled technologies to its future global power status. To ensure that Russia is not left behind in the technological race of the 21st century, its government has pursued an ambitious strategy with extensive support to civilian businesses and defense corporations, numerous human capital initiatives and international cooperative ventures. This strategy has encompassed the development of unmanned transport, smart cities, medical applications, and much more.
In a recent paper CNA’s Russia Studies Program examined the “technological divorce” between Russia and the West because of sanctions imposed by the U.S. and countries in Europe and Asia on the Russian technology sector. While the full implications of this divorce will take time to be realized and understood, our research suggests the following early implications:
Despite the brave faces put on by Russian officials, Russia’s invasion of Ukraine caused seemingly irreparable damage in Russia’s international business reputation. Among the growing list of companies exiting the Russian market are numerous information technology giants. The departure of multinationals like Microsoft, Cisco, Oracle, Apple, Dell, Nvidia and Samsung, as well as Chinese companies like Lenovo, means no new sales (and potentially no servicing) of hardware or software to Russian businesses seeking to develop and expand domestic AI solutions. Western sanctions have also contributed to personnel turmoil in key Russian AI companies. For example, the CEO and co-founder of Yandex resigned after being personally targeted by EU sanctions. There are also rumors that Yandex may break up into two companies, in part because of the war.
Domestic development slowdown
While broad Western sanctions may cause significant harm to the Russian economy over the medium to long term, the restrictions on high-tech Western exports to Russia are likely already causing pain in the Russian AI sector. For example, like much of the world, Russian industry was already under stress because of the global shortage of microchip technology. Now, sanctions have cut off Russia from much of the world’s supply of microchips because of their U.S.-origin components. The ban has extended to TSMC, the Taiwanese company that manufactured several chips developed by Russian companies — a key bet for Russia’s AI industry. Creating domestic substitutes will prove difficult if not impossible in an environment where much of the world’s microchip technology is produced using some U.S.-origin equipment. Even worse for Russia, China’s aid with this problem is not assured. It’s possible that Russian technological progress will depend on Moscow’s ability to find grey-market routes for restricted technologies.
Human capital flight
Even before the war in Ukraine, one of the challenges with Russia’s progress on developing AI-enabled technologies was its dearth of skilled professionals. As part of a long-term strategy, the Russian government invested in relevant AI education at all levels and conducted AI competitions to try to reverse some of the unfavorable trends. However, the war has contributed to an even more significant outflow of tech professionals from Russia. The Russian government has developed simplified procedures for hiring foreign workers and crafted new incentives such as tax breaks, preferential mortgage rates, and draft deferments to incentivize Russian IT professionals to stay. There is anecdotal evidence that some Russian workers have returned, but only because they found themselves in dire financial straits abroad.
Shortages of Critical Technology
Before the war, Russia’s plan was to build a high-tech military for future conflicts. Putin himself has argued for the need for Russia’s future armament plan to improve “the qualitative and quantitative characteristics of armaments and technology” and develop “modern and future models of high-precision weapons and means of aerospace defense, active employment of artificial intelligence in developing military goods.” However, Russia’s development of military AI technologies was always intended to go hand-in-hand with its development of civilian AI technologies, also potentially drawing on them. But now, the Ukraine war has devastated the Russian military and its equipment. U.S. efforts in particular have focused on denying Russia technologies that could be used for military purposes, and headlines have suggested that shortages of critical technologies may have resulted in some challenges for the Russian defense sector.
Today, given the limits on software, hardware, components like microchips, and human capital, Russia’s implementation of ambitious civilian AI goals across the government and key enterprises is even more likely to stall. In response to Western actions, the Russian government has developed policies seeking to cushion the fall of the AI and information communication industry writ large. However, only time will tell whether its efforts will be successful.