Why digital sanctions are the latest geopolitical battleground

Lenin once said there are decades where noth­ing hap­pens and weeks where decades hap­pen. This cur­rent peri­od appears to be of the lat­ter type. Just as the effects of the pan­dem­ic seemed to be on the wane, reignit­ed geopo­lit­i­cal ten­sions in Europe exposed once again the vul­ner­a­bil­i­ty of glob­al mar­kets.

While the Ukraine cri­sis has thrown sup­ply chains into chaos, caus­ing soar­ing wheat prices and send­ing petrol costs to an all-time high, the impact has been far-reach­ing in the dig­i­tal space too.

Glob­al tech­nol­o­gy providers have pulled their ser­vices from the Russ­ian mar­ket in droves. Mas­ter­card and Visa have restrict­ed the use of Russ­ian-issued cards out­side the coun­try, while Google Pay and Apple Pay have been lim­it­ed for cus­tomers of sanc­tioned banks, lead­ing to queues in the Moscow sub­way as com­muters were forced to pay with cash. 

The plug has also been pulled on oth­er dig­i­tal assets: some of them self-imposed such as Russia’s ban­ning of Face­book and Twit­ter, while Net­flix, Pay­pal, Adobe, Ora­cle, Ama­zon Web Ser­vices, Microsoft and SAP have all intro­duced their own restric­tions on ser­vices in the coun­try, mak­ing ‘busi­ness as usu­al’ almost impos­si­ble.

While these actions may be aimed at penal­is­ing the regime of Russia’s pres­i­dent Vladimir Putin, they also affect con­sumers, star­tups and small busi­ness­es – the vast major­i­ty of which have noth­ing to do with the inva­sion and are them­selves suf­fer­ing the con­se­quences. So notes Nigel Green, founder and CEO of finan­cial ser­vices busi­ness deVere Group, which con­tin­ues to oper­ate in Rus­sia.

“A few hun­dred, named Russ­ian indi­vid­u­als are on the inter­na­tion­al sanc­tions list and, of course, we strict­ly adhere to it,” Green says. “But we’re not going to roll out a blan­ket ban on ordi­nary, inno­cent Russ­ian users. The sit­u­a­tion is inevitably going to get worse, with poten­tial­ly dev­as­tat­ing con­se­quences, as they’re frozen out of the finan­cial sys­tem.”

Sanctions against digital services

This build-up of dig­i­tal sanc­tions has been slow but steady. In 2019, a raft of new sanc­tions against Venezuela meant that Adobe ser­vices were no longer acces­si­ble in the coun­try. Microsoft’s soft­ware sales in Rus­sia were affect­ed by pre­vi­ous US-led sanc­tions over the Crimea dis­pute, while devel­op­er plat­form GitHub was forced to block users in Syr­ia, Crimea and Iran.

There’s lit­tle that busi­ness­es affect­ed by these dig­i­tal sanc­tions can do, oth­er than await the out­come of a request for exemp­tions via the US Office of For­eign Assets Con­trol, the author­i­ty in charge of over­see­ing sanc­tions com­pli­ance.

For every­one else, there’s pira­cy. Before Adobe was grant­ed an exemp­tion to oper­ate in Venezuela in late 2019, design­ers in the coun­try reluc­tant­ly turned to soft­ware theft because they had no oth­er choice. Rus­sia is con­sid­er­ing leg­is­lat­ing this approach by re-eval­u­at­ing its copy­right laws, as the Min­istry of Eco­nom­ic Devel­op­ment pro­pos­es relax­ing pira­cy rules to off­set dam­age from dig­i­tal sanc­tions.

Mean­while Rus­sians are turn­ing to vir­tu­al pri­vate net­works (VPN) to access dig­i­tal ser­vices, says Cor­neliu Bjo­la, author of Dig­i­tal Diplo­ma­cy: The­o­ry and Prac­tice. But this workaround may be short-lived. “The most pop­u­lar VPN apps are based in France, the UK and US, so in prin­ci­ple they could become part of the pack­age of dig­i­tal sanc­tions as well,” he points out.

There are also rumours that Rus­sia will cut itself off from the glob­al inter­net, mak­ing a ‘splin­ter­net’ – where coun­tries choose to silo web access by nation­al bor­ders – seem clos­er than ever.

And this soft­ware flight may rip­ple into unde­sir­able longer-term con­se­quences for the West, such as a strength­en­ing tech­no­log­i­cal rela­tion­ship between Rus­sia and Chi­na, born from sheer neces­si­ty, and a recal­i­bra­tion of pow­er in the dig­i­tal sphere.

“Chi­nese author­i­ties are tak­ing notes about how these sanc­tions are imple­ment­ed and how it might be able to pro­tect itself against some­thing sim­i­lar if the rela­tion­ship with the US dete­ri­o­rates in a sim­i­lar fash­ion,” Bjo­la says.

He high­lights that China’s dig­i­tal yuan could the­o­ret­i­cal­ly bypass SWIFT pay­ments. “At the moment, the amount of inter­na­tion­al tran­si­tions seems to be low, but the mat­ter could change rapid­ly if Russ­ian com­pa­nies dis­cov­er ways to use it to evade sanc­tions.”

That makes Chi­na a coun­try to watch, since it is not clear whether its com­pa­nies will com­ply with the US/EU/UK sanc­tions, says Bjo­la. “The Biden admin­is­tra­tion has already sig­nalled its deter­mi­na­tion to sanc­tion Chi­nese com­pa­nies if they aid Rus­sia, so it will be inter­est­ing to see how Chi­na reacts to this. Pur­chas­ing Russ­ian tech com­pa­nies at a dis­count may prove tempt­ing for some Chi­nese com­pa­nies.”

Planning for the worst

As moves are made on the geopo­lit­i­cal chess­board it is usu­al­ly ordi­nary cit­i­zens who suf­fer. Of course, the imme­di­ate impact of dis­place­ment, death and region­al insta­bil­i­ty has right­ful­ly tak­en prece­dence in head­lines dur­ing Russia’s inva­sion of Ukraine. But organ­i­sa­tions need to focus on resilience and busi­ness con­ti­nu­ity plans.

Although it’s “hard to plan for such a dev­as­tat­ing event”, busi­ness­es should always have a dis­as­ter recov­ery plan in place, says Siob­han Aalders, vice-pres­i­dent of glob­al com­mu­ni­ca­tions for free­lance mar­ket­place Fiverr. As ten­sions ratch­eted up in mid-Jan­u­ary, Fiverr raced to secure the safe­ty of its staff by evac­u­at­ing its Kyiv employ­ees – com­pris­ing 15% of the company’s world­wide devel­op­ment team – to safer regions in Ukraine or out­side the coun­try.

Devel­op­ers in Fiverr’s Tel Aviv head­quar­ters also backed up areas of the busi­ness the Kyiv team were focus­ing on. “As we devel­oped a plan for our employ­ees, we knew the R&D cen­tre in Tel Aviv would be able to pick up any slack and exe­cute on our roadmap,” Aalders explains.

Mean­while, as rumours per­sist­ed that Putin could take down com­mu­ni­ca­tions and dig­i­tal ser­vices in Ukraine, Fiverr’s oper­a­tions cen­tre was stand­ing up alter­na­tive means of com­mu­ni­ca­tion for employ­ees in the coun­try in case con­nec­tiv­i­ty was com­pro­mised.

Shane Hen­ry, CEO of dis­as­ter risk con­sul­tan­cy Recon­nais­sance Group, says it’s vital that busi­ness­es plan for the worst kinds of risk, from nat­ur­al dis­as­ters to man-made crises. That means con­duct­ing a “real­i­ty check” on the cul­ture of an organ­i­sa­tion, tak­ing stock of its cur­rent stan­dard of pre­pared­ness and being open to blunt feed­back from inter­nal and exter­nal stake­hold­ers. 

“How is it set up to calm­ly pre­pare for a cri­sis, what­ev­er that cri­sis may be?” asks Hen­ry. “And what is the impact on our peo­ple?

“A core com­po­nent of that is to look at your lead­ers – not your exec­u­tive team, but peo­ple that will prob­a­bly emerge as lead­ers at all lev­els. We see that, between earth­quakes, the after­math of hur­ri­canes and polit­i­cal fall­out, com­pa­nies have had peo­ple emerge as lead­ers at all lev­els. 

“That rais­es the ques­tion: what can you do before­hand to help you iden­ti­fy poten­tial­ly emer­gent lead­ers? Because they’re the peo­ple you’re going to rely on in the after­math.”