Page 73 - Russia OUTLOOK 2024

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Russia’s automotive sector was probably hardest hit by sanctions that led to an almost collapse in production, but Russia’s tech sector was probably the hardest hit in terms of the ownership structure, as illustrated by the stories of the biggest search engine Yandex and its social media rival VK.
One of Putin's biggest oversights in the last two decades was, unlike the Chinese, not to take control of the internet. Unregulated and largely in private hands, RuNet, as the Cyrillic-based internet is known, has flourished and remains an open and unrestricted platform for what opposition there is. Jailed opposition blogger and anti-corruption activist Alexei Navalny regularly releases exposes of Kremlin corruption that get tens of millions of views and the Kremlin is powerless in its desire to suppress these reports.
Sanctions have presented the Kremlin with a golden opportunity to take control of the sector and Russia's invasion of Ukraine has caused a tsunami of M&A deals as Russia’s private companies scramble to restructure their businesses to cope with the tectonic changes.
Yandex is Russia’s innovative internet giant and with a pre-war market capitalisation of over $10bn, the most valuable tech company in all of Europe. Its name is a play on words: “Ya” means “I” in Russian, combined with the word for “index”. It has been the biggest victim of the changes.
With some 10,000 international shareholders, the stock was a market darling since its US listing in 2011, but now international investors can’t own a Russian business. After the invasion, Nasdaq announced it was suspending trading in Yandex’s shares.
The Netherlands-based parent company Yandex NV announced on November 25 it would divest its Russian assets in an effort to unblock its Nasdaq listed shares and allow its international shareholders to exit.
The Dutch holding will keep most of the group’s international assets and will be headed by Yandex founder Arkady Volozh, while former finance minister Alexei Kudrin will temporarily head the “Russia Yandex” that will own all the Russia-based businesses and be sold off to local oligarch investors.
That process is ongoing. Several of Russia’s biggest “stoligarchs” with good relations to the government have thrown their hat into the ring, but the deal is going slowly, as the Kremlin is trying to find a balance between control over the company and at the same time not killing off its creativity.
The management of the Russian Yandex have said they are not against new shareholders, but insist that the management team retain operational control, which everyone acknowledges is the secret of the firm’s success. That means inviting in a group of stoligarch owners, which is also hard to organise, but at the same time the Kremlin is wary of handing any one oligarch so much political power that the ownership of Yandex, and the ability to shape its message, represents. The Kremlin is still smarting from the late 1990s, when
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