Kremlin admits Russia is not ready to lose access to foreign software

U.S. threats to impose tough technology sanctions in the event of a Russian invasion of Ukraine with a ban on the supply of chips and a possible disconnection from foreign software cause concern among the Russian authorities.

The newspaper Kommersant reports, citing sources in the Russian government and in the IT market, that the Russian Cabinet of Ministers is working on possible scenarios in the event that the supply of microelectronics to Russia is stopped, and Russian companies lose support for foreign software.

The first technological exercises in preparation for IT sanctions were held by Sberbank. The country's largest bank, which holds every second ruble of deposits of the Russian population, simulated scenario of being disconnected from the support of foreign software and electronics supplies, including Microsoft, Nvidia, VMware, SAP, Oracle and Intel.

Despite the Russian government strategy of import substitution, Russian state-owned companies, including those responsible for critical infrastructure, remain seriously dependent on foreign suppliers.

The plan for the transition of the Russian economy to domestic software has failed. Instead of the planned 50-70%, the share of domestic software in the public sector at the end of 2021 averages 30-35%.

The worst indicators are for VTB Bank, Aeroflot and Russian Railways which use less than 10% of domestic software, said in late December, Ilya Massukh, Director of the Competence Centre for the Import Substitution of Information and Communication Technologies.

According to him, the Russian oil giant Transneft also remains "very serious dependent" on foreign software. Transneft is the monopoly operator of Russian oil pipelines that deliver abroad all the oil produced in Russia.

The Russian national airline Aeroflot is also critically dependent on the foreign software. "The planes are at our airfield, but without SAP, Oracle, etc., they simply will fly," Massukh admitted.

“Many Russian companies hoped that with Donald Trump becoming the U.S. president in 2016 relations with the U.S. would normalize and import substitution would not be needed, and then waited for the situation to improve after his departure,” Massukh said.

But these hopes were not destined to come true. Russian state-owned companies can be disconnected from foreign software at any time, Russian President Vladimir Putin warned in late November.

"Colleagues should understand that at some point even what they use today for well-known reasons can simply be shut down, and all of them will not be ready. And if they are not ready, they will be responsible for this," Putin said.

  Kremlin, USA, Russia