Top 3 dilemmas that Yandex is facing due to Russia – Ukraine crisis


Since the start of the crisis between Russia and Ukraine, there have been a lot of sanctions on the former. The European Union and other countries with economic powers globally have been sanctioning Russia. In fact, some of these sanctions are to the detriment of the sanctioning nations. However, these countries no longer want to do business with Russia. Nevertheless, there are some areas where they will still collaborate with Russia and this is mainly in the space missions. In this regard, Russia says it will not cooperate with any of these countries that are sanctioning Russia. These sanctions could allow Russian internet giant, Yandex to deplete its inventory of critical semiconductors for servers.

Yandex

Russian internet giant Yandex is the internet company with the most users in Russia. This company is also one of the top ten search engine companies in the world. Within 12 – 18 months, Yandex NV will run out of semiconductors for servers that power Yandex’s business due to import restrictions. In addition, the sanctions are mainly aimed at dual-use technologies, with Yandex’s autonomous vehicle division being the hardest hit. Let us now take a look at the top three difficult situations that Yandex will have to face due to the crisis

Top 3 effects of Russia – Ukraine conflict on Yandex

1. Yandex’s market value fell to $6.8 billion

Since the outbreak of the Russian – Ukrainian conflict on February 24, Yandex has been in crisis due to the Russian government’s increasing internet censorship and rejection in foreign markets.

Yandex executive, Tigran Khudaverdyan was forced to step down following EU sanctions. Also, two of its board members resigned and the company’s ties with international partners gradually crumbled. After the outbreak of the Russian-Ukrainian conflict, Yandex’s market value has also hit a new low from a record $31 billion in November 2021 to $6.8 billion.

Khudaverdyan is now facing sanctions from the European Union for attending a meeting in the Kremlin. Coincidentally, the day of the meeting is the same day as the commencement of the  Russian-Ukrainian conflict.

In the Russian-Ukrainian conflict, Russian law prohibits reporting of “special military operations” as otherwise. Anyone who violates the law will pay a fine or go to jail for up to 15 years. On the one hand, Yandex was punished by the Russian government for not complying with this regulation. On the other hand, Yandex is facing criticisms by Western media for suppressing independent news.

At present, the Russian government has banned its services in Russia due to violations of Facebook and Instagram. Google also began planning to shut down its services in Russia and move employees out of Russia.

2. Yandex may sell its news division and social media platform Zen to VK

Businesses such as Yandex’s cloud business, search engine, music streaming service and online store are all facing server shortages. This year, with Russia or a downturn in the economy, Yandex is likely to consolidate its domestic leadership in its own field.

Yandex is seeking to become a partnership again to reduce the risk of sanctions for its employees. Though details of the new partnership structure are still under wraps. In addition, Yandex is in talks with state-controlled Russian social network VK. The company is hoping to sell its news division and its social media platform Zen to VK.

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In addition, Yandex has an option to spin out autonomous driving, its technology-intensive division.

Yandex’s technology-based segment business was also affected by U.S. sanctions. The Yandex Self-Driving Group’s self-driving vehicles have driven more than 10 million miles, its taxi fleet has gained a foothold in the United States, and its robots are delivering food on a handful of U.S. college campuses. In March 2022, Yandex’s U.S. operations, including its partnership with Grubhub, a large U.S. food delivery company, were terminated.

According to Bloomberg, Russia may turn to other countries such as China for semiconductors and other technical support in order to mitigate the impact of sanctions.

In early March, U.S. Commerce Secretary, Gina Raimondo announced that it would vigorously enforce export controls to Russia. Raimondo said the U.S. would be wary of semiconductor companies trying to circumvent U.S. sanctions and export controls.

3. Russia will lose 70,000 to 100,000 programmers

Another dilemma that Yandex will probably face is the massive loss of programmers. After the outbreak of the Russian-Ukrainian conflict, American investors were very resistant to Russian companies. Yandex shares in the U.S. have been frozen since early March 2022.  A few weeks ago, the Russian government is working through the Russian economy ministry to delist the depositary receipts of foreign companies. This will only affect companies that are not active in Russia at the moment.

Yandex claims it did not have the money to redeem the $1.25 billion of bonds that it could have swap for common stock. Yandex now has advisers to help it negotiate with bondholders after U.S. This is coming after the suspension of its stocks and it’s necessary for investors could get full repayments.

The sanctions also created a serious brain drain for Russia. Russian tech workers are looking to move away from Russia’s growing economic isolation, and more Russian tech workers are looking to emigrate.

Interfax reported last month, citing the Russian Association for Electronic Communications, that between 50,000 and 70,000 programmers have left Russia. This is only the first wave. This month, there may be 70,000 to 100,000 programmers immigrating out of Russia.

Conclusion: sanctions against Russia may have a chain reaction

At present, the European Union has imposed sanctions on Russia and the chip giant has cut off supply. The semiconductors used in the servers of the Russian network service portal company Yandex may only be able to support 12-18 months.

Russia’s inventory of key semiconductors is insufficient, and its data centres, cloud computing services, and network services are all suffering. In addition, the Russian economy is down, and tens of thousands of programmers plan to emigrate. After the sanctions, Russia’s scientific and technological talent is facing a serious dilemma. Furthermore, the Russian information industry may fall into an even greater catastrophe. The global chip supply shortage is getting more intense and with the Russian sanction, chip supply may become a problem for Russian companies. In addition to Internet companies, Russia’s aerospace, marine and electronics industries will also feel the heat of the sanctions.

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