A Technological Divorce: The impact of sanctions and the end of cooperation on Russia’s technology and AI sector

The economic consequences of Russia’s invasion of Ukraine will take weeks, months, and probably even years to be fully revealed. But the consequences for the technology sector in general and for Russia’s artificial intelligence industry are already clear. Economic sanctions imposed by the United States, the European Union, and key Asian countries such as South Korea and Japan have combined with the voluntary withdrawal of most major multinational corporations from their Russian projects due to the reputational costs of conducting business in Russia and/or cooperating with Russian partners. The withdrawal of these countries and entities will have a long-term negative impact on Russia’s technology sector and AI development in particular.

For context, it is useful to provide a brief sketch of the Russian technology ecosystem that existed before Russia’s invasion of Ukraine in February. The Russian technology sector has faced significant challenges for years. These include a top-down driven system with largely government funded entities, very limited private sector initiative in technology, and significant brain drain among Russia’s youth who are interested in working in the technology sector.

Russia’s leadership, and Russian president Vladimir Putin in particular, understand these challenges and were taking steps to boost Russia’s ability to compete internationally. These initiatives included passing legislation that would allow practical experimentation with new technologies and removing regulatory barriers, in addition to developing incentives to keep younger technology experts in Russia, educating Russia’s domestic populace on the importance of modernizing Russia technologically, and increasing the number of programs in the education sphere to bring people into the technology space. Despite these initiatives, the ability of the Russian technology sector to compete in the future remained uncertain and the current reactions to Russia’s invasion of Ukraine are certainly going to make this trend more negative.