Russian IT Sector Effectively Serves the Kremlin Despite Sanctions

Executive Summary:

• Moscow continues to leverage modern technology in its hybrid warfare against the West and in carrying out cyber-attacks despite sanctions.
• The Kremlin employs cutting-edge technologies to create an illusionary reality within Russia to promote propaganda about its war against Ukraine and has access to these technologies for developing advanced weaponry.
• Even without the ability to develop its own technologies, Russia still manages to utilize Western technologies for both hybrid and conventional warfare.

(Source: Муромцевский лесотехнический техникум VKontakte (Vk.com/mlesteh) via Verska.media)In recent months, countries bordering the Baltic Sea have faced a wave of unexplained incidents where underwater power and telecommunications cables have started to fail regularly (see EDM, February 5; Novaya gazeta–Europe, February 7). In August 2022, a major cyberattack on Estonia was recorded after the government decided to dismantle a memorial featuring a T-34 tank in Narva (ERR.ee, August 18, 2022). Additionally, Moscow has been actively disrupting GPS (global positioning system) navigation in the airspace of the Baltic states, with flights to Tartu particularly affected (Novaya gazeta–Europe, April 30, 2024). It remains unclear whether Moscow is directly involved in these incidents, but what is undeniable is that the level of sabotage—particularly cyberattacks—by the Kremlin has significantly increased since the start of its full-scale invasion of Ukraine.

Beyond acts of sabotage, Moscow extensively employs cyber tools for espionage. Last fall, Western journalists uncovered that hackers from the Main Directorate of the General Staff of the Russian Armed Forces (GRU) and the Russian Federal Security Service (FSB) had been spying on Georgian officials and companies for many years. The espionage campaign targeted the Ministry of Foreign Affairs, the Ministry of Finance, other government agencies, the National Bank of Georgia, energy and telecommunications companies, oil terminals, and television networks. Additionally, the hackers had the ability to shut down power plants across the country (Meduza, October 21, 2024).

Hybrid warfare against the West is not the only area where Moscow employs its latest technologies. Independent media have uncovered that Russian schools are opening virtual reality (VR) “SVO” (Special Military Operation) museums to provide an “immersive” experience for children on Russia’s war against Ukraine. The Nizhny Novgorod-based information technology (IT) company Digital Space has developed an immersive “SVO museum”—an online program that can be used with VR headsets and modern screen panels. The company has sold dozens of these “museums” to schools, universities, and youth centers across various Russian regions. Now, children can “experience” battle scenes in war-torn Ukrainian cities or take a test on their knowledge of propaganda (Verstka.media, February 6).

Over the past year, the United States has imposed a series of sanctions against Russia’s IT sector. The restrictions have targeted OCS, Rosatom Digital Solutions, and several other Russian IT companies, including facial recognition technology developer NtechLab. Additionally, the United States has banned IT consulting services in Russia and restricted access to several cloud computing services (Tadviser.ru, October 31, 2024).

Kremlin propaganda, in turn, insists that the imposed sanctions “will not have a critical impact” on the Russian market, which is increasingly shifting to domestic alternatives of Western technologies (Interfax.ru, June 13, 2024). Analysts from the pro-Kremlin Valdai Discussion Club go even further, claiming that Moscow is poised to become the center of a new techno-economic bloc, developing new platforms and cybersecurity technologies not only for itself but also for its allies (Youtube/@OneMoscow, May 26, 2024).

Even Russian IT-focused websites—ones not affiliated with the opposition, such as IT Media—acknowledge that the prospects for the country’s tech sector are far from optimistic. According to their authors, the IT industry is set to face several serious challenges in the near future. The most pressing issue is the outflow of personnel. Around 10–13 percent of highly qualified specialists have already left the country since the imposition of sanctions, and the exodus continues (It-world.ru, June 4, 2024). Meanwhile, the lack of access to Western technologies and underfunding of domestic research will stifle innovation, inevitably affecting the competitiveness of Russian manufacturers.

Independent economists also note that in the telecommunications sector, mechanisms for illicit sanctions evasion—referred to in Russia as “parallel imports”—help maintain production cycles and ensure the uninterrupted operation of services but undermine investment in development. Over time, however, the technological gap will only continue to grow (Re-Russia.net, March 26, 2024).

Russia is also entirely dependent on Western equipment for weapons manufacturing (see EDM, November 4, 2024, January 15). The problem, however, is that despite sanctions, Moscow still manages to acquire the machinery used to produce modern weaponry and its latest software (see EDM, June 26, July 25, 2024). This is most often done by purchasing equipment through intermediary companies in “third countries.”

If foreign machines lack GPS navigation, which could be used to track their location, intermediary firms themselves request software updates from sellers. In some cases, Russian buyers turn to “specialists” who can disable GPS tracking (Istories.media, June 13, 2024). Some companies, such as the UK-based Renishaw, however, allow all their customers—including those under sanctions—to install their software (Istories.media, March 7, 2024). Some Russian companies also retain perpetual licenses for Western software (Istories.media, June 13, 2024).

Even without the ability to develop its own technologies, Russia still manages to utilize Western technologies for both hybrid and conventional warfare. Journalist Kamil Galeev points out that this practice can be curtailed, as Western machinery is equipped with software and connected to the internet and internal local networks. “The critical moment for Russia’s machine tool industry will come if sanctions target the software,” he asserts (Istories.media, April 17, 2024). This reality makes limiting the maneuverability of sanctions essential as Russia finds new ways to circumvent these measures.