“The security services want more levers of control, and Yandex is going to be saddled with more obligations,” says Sarkis Darbinyan, who works for a digital media watchdog. “Many people are going to decide that Yandex can no longer be a safe service for the exchange of personal or comparative information. Users will leave.”

Under Russian law, internet companies have to provide access to state security services upon request, but Yandex said the keys that the FSB sought were a step too far, granting more than the law requires. In a further unusual step, a deputy prime minister backed Yandex publicly, arguing that the tech company – Russia's largest – must be protected. The debate highlights the tension between traditional security demands and the hopes of at least some state officials that Russia’s most important global company should not be hobbled by credibility-wrecking collaboration with secret services.

In early June, when the FSB security agency gave Russian internet giant Yandex 10 days to surrender the encryption keys for its main services, the company appeared to balk. That is highly unusual in the security state that is Russia.

Russia has always been some version of a national security state, in which individuals, companies, and other group interests are expected to unquestioningly submit to the needs and demands of state agencies.

So, most experts say they were surprised it was even reported publicly this month that the Federal Security Service (FSB) had demanded that digital services giant Yandex, Russia’s largest company, hand over its encryption keys to comply with the country’s increasingly tough internet laws.

As surprising, if not more so, was that Yandex seemed to resist the FSB’s demands – with the backing of some government officials. Though the debate has now moved out of the public sphere, for a brief moment the fault lines were laid bare between traditional security demands and the hopes of at least some state officials that Russia’s most important global company should not be hobbled by credibility-wrecking collaboration with secret services.

“Yandex moved very fast to create the impression that the problem had been solved, and that the privacy of its users would be protected,” says Alexei Mukhin, director of the Center for Political Information, a Moscow-based think tank. “I don’t believe it has actually been solved. It’s a very complicated issue, and one that deeply affects the core of Yandex’s business model, which is to ensure privacy for users.”

FSB vs. Yandex

Yandex operates under a business model roughly similar to that of Google, offering email, search engine, navigation, commercial applications, and other digital services. It is incorporated in the Netherlands, but it maintains much of its infrastructure in Russia and has most of its customers in the Russian-speaking countries of the former Soviet Union. Experts say it has no choice but to comply with Russia’s ever-toughening internet security laws.

Yet in early June, when the FSB gave the company 10 days to surrender the encryption keys for its main services, Yandex appeared to balk.

“The law talks about providing information ‘necessary to decode messages,’ which does not entail a demand for [encryption] keys to be handed over which are needed for decoding all of the traffic,” Yandex said in a statement to the Russian media. “We consider it important to observe the balance between security and user privacy, and also to take into account the principles of equal regulation for all market participants.”

Even more surprisingly, Deputy Prime Minister Maxim Akimov, on behalf of the Russian government, stepped in to back the company’s apparent defiance. “Yandex is very important for the national and even global economy,” he told the Interfax agency. “We should do everything in our power to ensure that business entities that maintain Russia’s leadership in a number of critical areas don’t suffer in any way.”

Yandex is not alone among global digital giants in finding itself being assailed by lawmakers and governments seeking to bring them to heel in pursuit of national and geopolitical goals. Last month Google was compelled to stop much of its cooperation with the Chinese telecom Huawei amid the Trump administration’s escalating trade war with China. The U.S. and some other Western governments cite security concerns in cracking down on Huawei. Other digital giants like Facebook, Twitter, and YouTube take measures to restrict accessibility to their services by alleged agents of foreign propaganda, disinformation, or extremist speech.

“There are different points of view about this at the top, but in Russia those who think that national security is the top priority are stronger and will likely prevail,” says Alexei Kondaurov, a former KGB general turned opposition politician. “It’s already been made clear that IT companies need to settle the issue of cooperation with the state. Of course there will need to be a compromise. The special services will insist they are not fighting dissidents, but protecting the country from terrorism. Nobody is going to dispute the need for that,” he adds.

Russia’s IT sector

Roskomnadzor, Russia’s state communications watchdog, has already suffered a certain amount of humiliation in its failure to force the messaging app Telegram to provide backdoor access to security services. In fact, Telegram appears to be more popular than ever among Russians, and many people say they get most of their daily information from the multitude of unfettered news channels that it hosts.

Telegram’s founder, Pavel Durov, took to his own personal channel last week to promise that he will create a new, censorship-free news aggregator to compete with Yandex, as the Russian giant struggles with increasing state encroachment. He warned that official interference threatens to cripple Russia’s hitherto growing IT sector, and hand its business over to the Western-based companies.

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Russian law prohibits companies from revealing the extent of their cooperation with the state. Yandex will need to navigate carefully if it wants to convince its users that their data is not being shared with Russian security agencies, says Sarkis Darbinyan, legal officer for Roskomsvoboda, a grassroots digital freedom watchdog.

“The security services want more levers of control, and Yandex is going to be saddled with more obligations,” he says. “Many people are going to decide that Yandex can no longer be a safe service for the exchange of personal or comparative information. Users will leave. Just the fact that this piece of news has broken, that Yandex shares data due to these dubious Russian laws, is bound to hurt the reputation of Russia’s strongest company and damage its competitiveness in the world.”