Podcast host Alexander Gabuev is joined by Janis Kluge, a senior associate with the SWP research facility in Berlin, and Alena Epifanova, a research fellow at DGAP—also in Berlin—to discuss the ideas of digital sovereignty and a sovereign internet, and the challenges to those concepts.
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This publication is part of a project carried out with the support of the Swedish Foreign Ministry.
Gabuev: Welcome, everyone, here is Carnegie Moscow Center English podcast, my name is Alexander Gabuev, I’m a senior fellow and a host. And as this year winds down, it looks like one of the buzzwords in Russia’s domestic policy, and foreign politics indeed, was sovereignty on everything, including on internet, and digital sovereignization was one of the major topics for government meetings, Vladimir Putin instructing his officials, sovereign internet became very visible and very prominent. So, here today we are very happy with two very knowledgeable experts to discuss all of these issues. Janis Kluge is a senior associate with the SWP research foundation in Berlin.
Kluge: Hey, great to be back on your podcast.
Gabuev: And then we are having a new guest, and that’s Alena Epifanova, who is research fellow at DGAP, also in Berlin.
Epifanova: Hello, and thanks for having me, Sasha.
Gabuev: Great to have you both.
Let’s start with the concept. Sovereign internet, digital sovereignty. To me, Alena, the bell rings around 2011, Bolotnaya, or probably Snowden, or probably 2014 annexation of Crimea and sectoral sanctions. Where did it all start, and what are the roots and drivers of this digital sovereignty narrative in Russian politics?
Epifanova: You actually already touched upon this bigger understanding of sovereignty in Russia, and I actually think that Russia’s understanding of digital sovereignty is tightly embedded in its view of sovereignty in a broader sense, and this began to take shape already in the early 2000s. So they see that if you follow the debate and arguments of the Russia’s leadership, and all the legislations, you can see that the idea of sovereignty is twofold. So, from one side it’s about the ability to implement domestic politics independently from any outside factors, and on the other side it’s about an active and self-determining participation in the world affairs.
And it also applies to digital sovereignty, and here I actually would suggest to distinguish between sovereign internet and digital sovereignty, because, you know, it’s a quite complicated term, and in Russia it’s also contested. And sovereign internet is practically about content security, limiting information which the political regime perceives as politically subversive on its domestic internet. And it’s also about technological control over society and all political activities in the country.
When it comes to digital sovereignty, it means independent technology industry, self-sufficiency in digital technologies and services, which strengthen a country’s ability to act in a more and more competitive global tech market. So, Russia wants to control information flows within its borders, on the one side, and on the other side it wants to be technologically independent from other great tech powers, and, actually, in the very best-case scenario, to belong to tech great powers.
So, you see that this approach, this narrative of the internet and information technologies applies externally as much as domestically in Russia. And I think this turn to digital sovereignty, to sovereign internet, happened during the 2010s. There are several events which determined this turn, and you have already mentioned 2011, 2012, the biggest protests in Russia since the 1990s, and we observed that these protests were greatly facilitated by the internet and social media. And it also resembled those protests of the Arab Spring, which happened just before the Russian protests. And I think the Kremlin took it quite seriously, and we also observed that there was a very strong push to more tight regulations over the internet within Russia.
Another turning point that I would stress here is the Edward Snowden’s revelation about the U.S. mass surveillance in 2013, and when we had the West’s sanctions against Russia after the annexation of Crimea in 2014. Two years later, NATO characterized cyberspace as a domain for military actions. So you see there are several events within the country and outside the country, and I think they all greatly influenced Russia’s call to establish sovereign internet. And I often hear in Moscow, when I talk to people from the IT industry and to the experts on the internet in Russia, that it also leads to so-called “fearmongers,” so, like, people or actors in Russia who exploit for the vulnerabilities of the political regime in Russia, who understand this securitization of the internet, of information technologies, and they promote more and more securitization of the internet and greater control over the information. So, I think this is about this internet sovereignty.
But I also think there are big economic factors behind Russia’s quest for digital sovereignty, and as you of course know, Russian economy heavily relies on the exports of oil and natural gas, and it’s also have proved as a vulnerable model in terms of global crisis, and here I also think about the year 2014, when Russia was hit hard when oil prices dropped radically. And also around this time we see that the Russian leadership tries to find an alternative driver for its economy, and we also see several initiatives and several regulations to develop its science technology and innovations policy. And digitalization and development of own information technologies have got a crucial role in this policy. And also Janis wrote in his recent excellent study that information and communication technologies is one of the fastest growing sectors of Russia’s economy, so it’s no surprise that Russia’s leadership turned to this sector to develop it.
Gabuev: Thank you so much. I wanted to bring in Janis, because I think that I agree with you, Alena, that the sovereign narrative and sovereignty in digital affairs has two components: one is control of flow of the content, another is control over hardware on which this digital information travels on the internet or is produced. And I think that the hottest debate recently in Russia was about 5G. And that’s the subject of Janis’s research, he has produced an excellent paper that definitely everybody should read.
I think that a couple of years back, when Russia was under sectoral sanctions, 5G was back then not part of the sanctions, but many people said, okay, in the Russian telecommunications industry foreign vendors are basically Nokia, Ericsson, Huawei, and a little bit Chinese ZTE. And now, because of the sanctions, it’s very likely that Huawei will dominate this market and will get the biggest chunk of the pie, and probably European vendors will be kicked out. That was my view at some point, but I think that I’m starting to change my view, and very soon a colleague, Leonid Kovachich, will publish his research where he shows some of the dynamics that makes this state of play much more murky, undecided, but one thing is sure: there is not a scenario where Russia just throws its lot with Huawei and goes all Huawei. And I think that Janis managed to capture this reality very well. So, Janis, do enlighten us, what’s going on there?
Kluge: Well, I really like how Alena just presented the sort of political logic and the political discourse on sovereignty, and I’m actually an economist by training, and I like to look at things through the eyes also of business. And so my impression is always that these political discourses in Russia are just completely detached from reality. I mean, to have the high living standards that we have in Russia today, and this is not only about the digital economy, but it’s also not about this, it is only possible due to unprecedented international cooperation and specialization. So, only because Russia is really very deeply integrated in these international supply chains, I mean, as a final consumer, is it possible to have high-end smartphones, for example, or LTE, or 5G internet at some point maybe.
The reason is that we just have, especially in the digital sphere, especially with regards to hardware, I would say hardware is even more tricky than software, we have these very-very complex and deep supply chains, where on every step of this chain there are monopolies of companies who are really specialized on one particular thing, and they control the whole world, and they can only exist at the whole world market, they can only exist because they address a huge market. And this means you simply cannot replicate all of this within Russia, this is impossible.
So, this is just, you know, it’s an economic fact that Russia and Russian leaders, Russian elites, have to accept at some point, that to have the current standard of living, they cannot be independent, they have to be dependent, they have to import these technologies, and they have to make a compromise, and they have to accept vulnerability. Which is of course very difficult to accept for Russia.
So what I’m observing in Russia right now, and we’ll get maybe to 5G in a little bit, it’s just that we have these two different worlds. We have, on the one hand, the security elites, who are, of course, rightly pointing out that there are very strong vulnerabilities. Now, if you use all this Western or Chinese hardware, there could be back doors in there, there could be sanctions, there could be a so-called “kill switch,” you know, that you just turn off the mobile internet in Russia at some point. So there are vulnerabilities. And, of course, according to the Russian logic, these vulnerabilities have to be eliminated. So they will try to replace these and do something to produce these things locally.
And then also, like Alena pointed out, I really like this, the fearmongers. There are, of course, companies in Russia, and one of them, I would say, is, for example, the big arms conglomerate Rostec, who know how to exploit this desire for sovereignty, to get access to subsidies. And they are doing this with regards to 5G. So they know, they promise something, that they will deliver something [at] some point in the future, which is crucial for national sovereignty, for security, and then they will get billions and billions of subsidies.
So this is a very-very interesting dynamic within Russia. Because, then again, you have also the market players, for example, in the mobile communications market, who understand that there is not going to be a Russian 5G alternative. We can speak about why a little bit later. They understand it, and so they have to deal with it.
So you have security elites, they want import substitution, you have market players who understand this is impossible, and now you have to sort of… You know, how do you solve this contradiction? And in the past the solution was always that, I would say, the Russian state sort of managed to fool itself. Fool itself in a way that something is Russian-made, although everybody knows it’s just 5 percent Russian-made and 95 percent imported. You could soften these rules, you could undermine the sovereignty rules, to make it possible for a modern economy to continue to exist in Russia, despite these ambitions for sovereignty and security, can extend deadlines again and again, push it out in the future, and just continue as you were before, with the international dependencies and the international equipment.
But the problem is right now that with the increasing significance, on the one hand, of security elites in general in Russia, and also, of course, the increasing significance of economic sanctions, this contradiction is becoming more painful. It’s really becoming a problem. And the economic actors who understand that they need the foreign corporation, they are finding it harder and harder to find a way out of these very, very strict rules. Like one rule, for example, is that, starting in 2023, so a bit more than a year from now, mobile operators in Russia should only use Russian-made LTE equipment. It’s not about 5G, it’s LTE. After that also 5G and so on. But this equipment does not exist. So, what do you do? How do you solve this? And I think this is the key problem.
I mean, with regards to Huawei, what you mentioned, it seems to some degree, I think, logical that Huawei might be a better partner for Russia than maybe the Western suppliers. Like, I don’t know, Ericsson, Nokia. But, of course, on the one hand, you could argue that also Russia doesn’t want to depend on only one actor, and if you choose who do you depend on, you could also say, maybe depending on the West is not so bad, because if the West introduces sanctions, you can go to court in the West and then maybe get some sanctions lifted, and there might be economic lobbies that you can address, who work against the sanctions, and so on. While with China, I mean, you have a much better relationship right now, but if they introduce any sanctions against you, you will not be able to go to court. So this is the question of choosing your dependencies.
But there is another problem. And it’s like sort of a rhetorical question. Have you tried to buy a Huawei high-end smartphone in Russia recently?
Gabuev: No, I haven’t, but I know the answer. Like, reading the statistics, it’s just exiting the market because of U.S. sanctions.
Kluge: Exactly. So, what we learned from this is that U.S. sanctions are so strong that they can cut technology ties between Russia and China. So if U.S. sanctions would be ramped up in a way that would make it impossible for Huawei to deliver, for example, 5G equipment, then not cooperating with Western partners also doesn’t give you any certainty that you will not be sanctioned.
So the bottom line is here. If Russia wants 5G, it has to accept that it has these vulnerabilities and it could be sanctioned. There is no other way around it, there is no way to just magically create your own stuff. The only thing that you can do is really diversify your dependencies and try to not have one player, which is actually what the industry had been doing so far.
Gabuev: And is it exactly the path that Russia is following now, judging by your observations? And is there also a tension where the regulators want to stick to the government’s line and say, “Import substitution, let Rostec do everything.” And then the market players, like we have “big four” cell phone operators, who are ultimately the consumers of these base stations for LTE and 5G, and who think that, “Oh, if I depend on just one vendor, then this vendor dictates the price, and then if I go all Huawei for 5G, that most likely means that I go all Huawei for 6G, and 7G, and then I’m in Huawei’s pocket.”
Kluge: I mean, yes, these path dependencies exist right now, so it makes sense for the mobile operators to stick, sort of, to suppliers that they have been working with in the past. There are some forms of upgrading from 4G to 5G which are much easier, which is sometimes even simply software-based. And this provides an easy way technologically, if you stick to the same vendor.
We also saw in the West, where in some countries Huawei was excluded from the market, that these rip-and-replace operations, when you switch from one vendor to another, that it’s quite expensive and quite, you know… It’s for a reason that, for example, in Germany there is a lot of resistance against excluding Huawei, because it’s very expensive to exclude a player from the market. And the same would be true if Russia would try to exclude Ericsson or would try to exclude… I mean, Nokia plays a smaller role, but Ericsson is quite important for the Russian market.
So, what I’m seeing right now is, I mean, of course, there is import substitution, like… You know, if you think about 100 percent import substitution [as] the ideal, and then there is maybe having foreign equipment, you can think of many intermediate solutions to this. And the role and the tricky situation of the operators, and also, of course, the MinTsifry, the communications ministry in Russia, who, I mean, they understand these things, they just have to navigate it, and it’s very complicated. They have to find a solution that sort of fits both, and there is very little space for such a solution. And what they are trying to do now is to talk to the big vendors, to make them maybe localize some of their production. This way is, again, I would say, an operation of the Russian state fooling itself, because it will not give the Russian state independence, but it will… You know, you can make a check under import substitution, and you can include it in the list where it says “import-substituted material,” and then everybody is happy. And you can continue using the material with the same dependencies.
So, for example, you can import, I don’t know, some parts and screw them together in Russia. Solutions like this are possible, you can… I mean, actually all three vendors have some research centers in Russia, some very small, Huawei has the biggest. And you could also say, okay, they are doing research, yeah, so some of their technology is somehow from Russia. This also doesn’t really solve the dependency problem, of course, because this dependency is still 100 percent, but you could argue that there is some kind of interdependency then, so… I mean, this is also another way how the Russian state could fool itself into believing that it’s independent from some foreign technology.
And so, I mean, there is sort of a gray zone, how strict you really enforce these import substitution rules, and how you formulate them, how many percent of the production of the value has to be created in Russia and so on. So there is always a way how you can soften it and mitigate it, but it’s really getting more difficult.
And we have spoken only about one problem, with 5G. I think maybe even the bigger problem is the question of radio spectrum. Where, again, we have a sort of this (inaudible) that the siloviki, the security elites, don’t want to let go of their frequencies, and Russia, or let’s say the economy, or the mobile operators, need these frequencies to create a modern economy in Russia. So, what do you do?
And I think these are not the only points where these two logics of security and economic development collide. And I think this is the basic lesson, and it is very-very visible in 5G, but it is just one example which, I guess, stands for large part of the Russian economy.
Gabuev: Alena, what’s happening in software then? We know that Russia has historical difficulties with hardware. Probably hardware was somewhat better developed during the times of the Cold War, when microelectronics industry was part of the military-industrial complex, so there was very powerful and rich consumers, and as a byproduct the civilian part also got something. But now it looks like Russia is 100 percent dependent on chips, base stations, so many things that Russia cannot produce. But software, it looks like, is a very different thing. Russia has some very powerful and successful domestic software companies, like we are talking Yandex and others, who are competing domestically with the global behemoths, like Google and other companies. And unlike in China, where Baidu is basically monopolist and Google is out of competition, Yandex competes with Google and does so quite successfully. There are other companies, like JetBrains or IHS, that are really global players in their niche markets of cyber security or creating program languages. So, you would assume that Russia could be more successful in import substitution and this digital sovereignty when it comes to software. Is it the case?
Epifanova: Well, no, unfortunately it’s not the case also in this area. And, Sasha, you are of course right, there are great Russian companies and great IT engineers and so-called “aytishniki,” which are in high demand everywhere in the world, and they are indeed able to produce high tech, and they do it. But I think it’s simply not enough to meet the great ambitions of the Russian state or the whole people behind this drive for import substitution. And I think that also the logic of these companies which you mentioned is completely different, so it’s also more about interconnectedness, more about global markets, and also cooperation in some areas. So I think we just can’t take these examples and put them into the logic of the IT import substitution of the Russian state. But the whole idea behind this IT import substitutions, it’s also not that super new, already in 2000 in Russia’s doctrine of information security the state assessed this high dependence on foreign IT, and also they already then recognized it as a vulnerability, and they also suggested to support Russia’s IT, but it actually never happened, until 2015, and what also Janis already discussed, this strong securitization of this area.
And the idea of this whole import substitution is to have everything, every software, Russian, and especially when it comes to the Russian authorities, to the critical infrastructure and state-owned companies, they are actually obliged to have Russian software. And there is a register for domestic software, which was passed in June 2015, and for now there are already more than 12,000 units.
So, when we look from now, from 2021, the results of this import substitution policy is quite modest. The share of Russian software in state-owned companies is about 10 percent, while the state defines a safe or enabling independence level as about 60 percent.
There are different reasons for that. First of all, many companies are reluctant to use this software, because they are not at the same level in comparison to foreign IT, and also, again, it’s about the production circles. I guess, Janis knows much more about it, but it’s also… You just can’t substitute the digital ecosystem of state-owned companies or Russian authorities just with one click, so that’s why it takes time first of all, and second, again, there is a lot of reluctance among these companies to introduce Russian software.
And also when it comes to Russian users, they enjoy this diverse digital market in Russia, so they can choose between Google Maps and Yandex search engine. And I think this is exactly the very valuable thing in Russia, and it’s also not that easy just to say “you have to use only this or that.” And, I guess, Russia’s internet users have quite high demands, and also, again, they are familiar that there are different options they have. And, I guess, the state is still reluctant to push too hard, to get rid of foreign companies, but we see the gradual approach towards that, and I assume it could happen that also the Russian state-owned companies will be forced to use, or Russian authority will be forced to use, only Russian software, and we already see, for example, also in Russian schools they are not allowed to use Zoom anymore. Again, not all the schools immediately switched to Russian alternative, but I guess this is the approach, to do it gradually and to try to push out the foreign IT companies out of Russia.
But again, also what Janis said, it’s the same situation with software. If you look at details, you just can’t substitute operating system. Because Windows is still the dominant actor in this field, and Russia does not have its own operating system. They have this Astra Linux, which is also developed on the open-source platform, so and Russia is not able to have its purely own software. And also one of the ideas behind this import substitution, how to develop Russian software without having it, is exactly to use open-source software, when you can take the code, you can take a certain product to modify it and to use it for your own purpose, and also to certify it as a Russian. So this is one of the ways how to get by these very strict rules and also to present it as a Russian, and also to tick the box, as Janis said.
Again, also here, very difficult to reach these very ambitious goals, but there are some ways how to do it partly Russian, but here also Russia can also achieve some results in digital economy, and also to have the Russian internet users happy, only if it relies on others, and only if it’s of use and to have this diversity on a digital market, which is just great, I think.
Gabuev: Final question goes your way, Janis. I think that I can agree with you that vulnerabilities and mutual dependency is something that you will have to face in life as a human being, and as a state, and as a company. But the lesson you learn from things like Huawei sanctions mean that at some point the U.S. might turn off your access to sophisticated chips, and then years and years of investing into this industry are gone, and it’s either you say, “Oh, sorry, I go home, and I kind of accept all the sunk cost,” or you double down to crack this challenge and arrive at your chips, and make yourself less vulnerable and more self-sufficient. And it looks like the Chinese are going this way, and probably they have a chance to be successful.
So, Russia definitely is very different. And I think that when we talk about sanctions, the key thing is, like, okay, if something happens in Ukraine, if all of the guys from Siberia, who, if we believe Western intelligence, are now somewhere in Crimea or in Rostov, go inside Ukraine to achieve whatever, there will be crushing sanctions. So the final point is this: Do sanctions on 5G or civilian cooperation in telecommunication or software ever pop up in Western conversations about sanctions? Because, it looks to me, that’s a huge myth that the scaremongers, that Alena has mentioned, are usually operating. Because usually what you read in the press and what you hear from American colleagues are sanctions against financial institutions; the backbone of Russian economy, oil and gas companies; some particular software companies that are engaged in malign activities, espionage or election interference, maybe weapons manufacturing, but I never heard anybody thinking, “We should sanction Russian 5G, and we should deny Ericsson and Nokia access to the Russian market.” So, is it just something which is invented in Russia, or there is some truth to that, that this could be part of the sanctions toolkit?
Kluge: I think it’s an excellent question, and it goes very far into the logic of how you devise sanctions and what your goals are. If we actually look at sanctions in the mobile communication sphere, it is clear that the consequences would be extreme and they would be felt by the Russian population. It might not be on the first day, maybe it will take a little bit, but if you, for example, ban any servicing for these networks and so on, it would be quite quick that there will be a problem with Russia’s mobile communication. In this sense the fearmongers are right, theoretically this exists, this possibility, but I personally have not seen it in discussions, because I think that the goals are a bit different. You know, when you think about the sanctions, you want them to be real and noticeable, but you want them to be, in the best case, reversible, so you want to be able to reopen, for example, access to capital markets if something, a certain condition, is fulfilled. And you want the damage for your own economy to be minimal and the damage on the Russian side, or the pressure, be the maximum. And so this equation works the best with regards to financial links.
And yes, these technology links, I mean, it is possible, and if we think of a really horrible scenario of an actual war that involves in some way Western military and Russian military, I mean, this is a possibility, yes, but it’s really very far down the road in nightmare scenarios. And this is maybe something where I would slightly have a more optimistic conclusion, a bit different from what you just said, in that, okay, I think it’s clear these dependencies exist, and Russia cannot go back to being the Soviet Union and this kind of autarky, it is impossible, and Russians, and the Russian elites, and Russian businesses, they are bound to find out about it. The more they try, the more they will find out, “Okay, we cannot get rid of these dependencies.” And because, you know, the way Russia’s economy works today, it’s only possible with international cooperation, and I would even say, it is only possible if Russia keeps up cooperation with the West. Now, this insight, to me, and these links, maybe at some point may make it less interesting or, you know, may make it seem less interesting to go down the path of escalation ever further.
So, I mean, I would say, the fact that Russia is not able to do these things itself, and other countries are also not able to do these things themselves… With China we have to see, I mean, China is still not able to produce the high-end chips, they come from Taiwan mostly. Without this international cooperation and economy, today’s living standards are impossible. And I think this might be, maybe not a life insurance for international peace, certainly not, but at some point people have to realize that without this cooperation the whole economy has to work differently, and it will be very basic and will basically be catapulted back to the level maybe of the 1990s.
Gabuev: On that happy note, I would add only that, as long as I can see, the import substitution in this country will continue, or at least the efforts to do something will continue. The sanctions are likely [to] continue, because the foreign policy of this country is not very likely to change very soon. That means that all three of us have something to talk about, we have some stuff to research, and we are employed. So that means we should reconvene in the future to discuss all of these fascinating topics. I thank you very much, Alena and Janis.
Epifanova: Thank you.
Kluge: Thank you very much.
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