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International recognition—or perhaps wariness—of Russia’s demonstrated technological skills is prevalent. However, Russia’s advanced cyber capabilities are not a new development by any means. Russian scientists have been at the forefront of technology for decades. Russian technologists invented the first digital computer, the laser, and the transistor, among many other devices. More recently, Russia demonstrated its advanced technical capabilities in its interference into the 2016 presidential election. Yet, despite the country’s enormous technological potential, Russia plays a microscopic role in the commercial technology industry. The promise of technological revolution hasn’t yet materialized in Russia.

Russia’s global share of high-technology exports is a meager 0.3 percent. Around the world, consumers generally opt to purchase devices from companies based in the US, South Korea, China, and Japan. Much of Russia’s lag in the international technology market stems from Soviet legacies of highly-centralized, state-controlled institutes whereby scientists received funding based purely on the interests of political leaders. Cold War pressures meant the majority of state funding went toward missile and nuclear development instead of toward the more commercial products that Russian citizens preferred. In the same period, US companies continued to expand into consumer technologies, which eventually led to the rise of today’s American technology titans, such as Apple and Microsoft.

Following the collapse of the Soviet Union and the onset of the dot-com boom in the late 1990s, there was a lack of political interest and ability to decentralize technology industries. In the 1990s, President Boris Yeltsin faced skyrocketing inflation as he attempted to liberalize markets, which fractured the once-secure Russian technical intelligentsia. When he first became president in 2000, Putin seemed less excited to galvanize the scientific community and instead relied on Russia’s massive oil reserves for state profits. Russian scientists, unable to reach a consensus on what the future of Russian science should look like, failed to initiate consumer-oriented reform. The first serious promise of a technological revolution did not manifest until 2008 under President Dmitry Medvedev.

"Russia’s global share of high-technology exports is a meager 0.3 percent. Around the world, consumers generally opt to purchase devices from companies based in the US, South Korea, China, and Japan."

After being elected, Medvedev announced plans to build a Russian Silicon Valley, which he dubbed “Skolkovo.” The “tech city” would have cost $4 billion to construct and was intended to house 50,000 of Russia’s brightest researchers and provide free university tuition to STEM students. Skolkovo presented an opportunity for Russia to diversify its economy and enter the international technology market.

The early success of Medvedev’s technological revolution increased potential for competition with US firms, but the project failed to have a real impact on retention rates of Russian scientists. Today, many CEOs and technologists in Silicon Valley are Russian emigrants who left in search of greater opportunities. If Skolkovo had been able to retain more scientists, Russia’s entrance into the IT market could also have presented cheaper, more modern services to worldwide customers, adding new competition to—or even displacing—dominant US companies. While this would have been painful in the short run, retaining Russian tech talent might have eventually pushed US firms to more aggressively sponsor and support domestic STEM programs to foster homegrown talent, and might have increased product quality as a result of greater competition. Ultimately, however, Medvedev’s technological revolution was unsuccessful. Skolkovo failed to attract a significant number of Russian scientists, as the specter of state interference in research continued to haunt the Russian tech community.

However, Medvedev did push new legal protection reforms, including changes to Russian federal law to allow the intellectual property rights of inventions made under government-funded research to be transferred to a contractor. This reform would have enabled technologists to work increasingly with private investors. But the reform was ultimately rendered inadequate primarily because intellectual property was transferred via government auctions, and the state was able to earn an outsized profit. More importantly, it did not apply to defense or security technology, and failed to explicate a process for cases of noncompliance or patent theft.

When Putin was re-elected for a third presidential term in 2012, he reversed virtually all progress made by Medvedev. Whereas Medvedev had viewed technological innovation as fundamental to improving Russia’s economic future, Putin cut Skolkovo’s funding and suspended several of its executives who had been accused of embezzlement and misappropriation of state funds after Kremlin anti-corruption agents raided their offices. Such actions sparked a new wave of Russian emigration abroad: From 2013 to 2014, the number of Russian scientists applying for US visas nearly doubled.

"Putin’s state address seems promising—but then again, so did a similar speech by Medvedev in 2008."

However, Putin has recently promised a new technological revolution. In March 2018, he announced that Russia must “develop a progressive legal framework and eliminate all barriers for the development and wide use of robotic equipment, artificial intelligence, … e-commerce, and Big Data processing technology,” and promised to build new tech cities in Gatchina and Dubna. Putin’s state address seems promising—but then again, so did a similar speech by Medvedev in 2008.

The policies necessary for Russian scientists to reduce dependence on state funding and enter foreign markets will involve both broad scale economic liberalization and top-down political reform. The Russian tech sector must be free to innovate and develop products in response to market demand rather than state needs. This is troublesome given that the motivation Putin cited in his 2018 speech is to ensure that Russia can compete with other countries’ development of weapons. In fact, the Politburo, the policy-making body under the Soviet regime, made the same mistake of investing in technological development for the sole purpose of militarization during the Cold War.

While Russia needs to gradually reduce the tech industry’s dependence on the state, it is crucial to make sure that this transition happens in a measured manner, so as to avoid industry collapse or permanent stagnation. In addition to funding STEM programs at the secondary and university level, the state should take other active measures, such as facilitating relationships with foreign firms and experts and providing incentives for young talent to stay in the country.

Finally, Putin must avoid geopolitical conflicts and combat perceptions that his administration is illiberal. Putin’s annexation of Crimea in 2014 and other scandals including the poisoning of an ex-Russian spy in Great Britain and attacks on Syria, led US and European states to impose sanctions, withdraw their tech ties, and scare new generations of technologists out of Russia.

It remains unclear whether this fresh attempt at a Russian technological revolution will be successful. Even if fledgling companies are able to produce competitive products, they will still have to contend with established international firms. The good news is that, if successful, a Russian tech renaissance would not only foster greater competition among global firms but also would likely increase economic and political freedom as a result of the policies needed to bring it to fruition.

Photo: “Putin at Yandex’s Moscow Office