Yandex purchase by Kremlin loyalty
How Russia says goodbye to its future
By Nils Kreimeier
February 10, 2024, 11:31 a.m
Yandex was once Russia’s most innovative IT company. It has often been compared to Google. Now the Amsterdam-based parent company is selling its Russian business – under pressure, at a ridiculous price and to Russian oil barons. The technology nation Russia is dismantling itself.
When Russia attacked Ukraine at the end of February 2022, a mass movement began within a few weeks. Thousands of IT specialists, software engineers and web designers left the country. Some because they opposed the war. Others because they were afraid of being drafted to the front. But most of them probably mainly because their work, like that of hardly any other industry, depended on cooperation with companies, colleagues and partners in the West. And again and again one company was at the center of this exodus: Yandex. A software and platform giant that includes its own search engine, email offerings, map services, but also a transportation service, a giant in the entire Russian-speaking world. His employees flocked to Georgia, Turkey or Western Europe – and many of them simply continued to work for their company from there.
Yandex had a parent company registered in the Netherlands and, until the Russian attack, was successfully traded on the Nasdaq technology exchange, with a market capitalization of $30 billion at its peak. Co-founder Arkadi Wolosch actually developed the search engine at the same time as Google, which is why Yandex is often compared to the US giant. If there was a Russian company that could compete internationally in modern technologies and did not come from the oil and gas business, it was the Moscow company.
The raw material bosses are taking over
But all of that is over now. After long negotiations, the Dutch company announced at the beginning of the week that the entire Russian business, the heart of Yandex, would be handed over to a consortium of Russian investors. “The Yandex Group and our team have faced extraordinary challenges since February 2022,” its boss John Boynton was quoted as saying. “We believe we have found the best possible solution for our shareholders, our teams and our users under these unique circumstances.” The buyers include Argonaut, an investment vehicle of the oil company Yukos, and the oligarch Alexander Ryazanov, who also made his money in the oil and gas business. So Yandex has now arrived where everything in Russia has to arrive if it is to be brought under control: in the raw materials business.
The purchase price is 475 billion rubles, which currently corresponds to a sum of 4.9 billion euros. The company makes no secret of the fact that this in no way corresponds to the actual value of Yandex, but is a political price. The discount is said to be “at least 50 percent”. The reason: If companies from countries that the Russian government considers “hostile” sell their Russian holdings, they simply have to accept such a devaluation under the current Russian legal situation.
The brand remains in Russia
The money from the sale remains with the original Yandex parent company and its owners, as well as some foreign startups from Yandex founder Wolosch. The Dutch company will lose its brand name. However, the remaining projects are about promising topics – such as autonomous driving, cloud services and online education.
Volosh, whose fortune is estimated at $1.5 billion in the Forbes list, left Russia in 2014 – the same year Moscow annexed the Ukrainian peninsula of Crimea. Since then he has lived in Tel Aviv, Israel, where he regularly appears at conferences and is also involved in setting up technology companies.
He has criticized the war against Ukraine more clearly than most other Russian super-rich: In August 2023, Volosh said in a public statement: “Russia’s invasion of Ukraine is barbaric. I am firmly against it.” Nevertheless, the company founder is on a European Union sanctions list – also because, from the point of view of the Europeans and Americans, Yandex continued to spread Russian war propaganda. Volosh no longer has an operational role at Yandex.
Symbol of division
In the end, Yandex becomes a symbol of the division between Russia and the West: the business units continue to operate separately, the purchase price amounts to political punishment by Russia and the brilliant company founder has retreated abroad where he is trying to save his reputation.
At the same time, however, the separation also marks a further decline for the technology nation of Russia. A company that once could compete with the Silicon Valley giants – at least in the post-Soviet space – has been mutilated and robbed of its intellectual core. And many of its best people have gone abroad. It is not a good sign for the future of a country if it allows such mutilation.
The article first appeared at Capital.de