Under the Kremlin's cloud: can Russia's internet industry sustain its growth?

Blogger accountability

Another restrictive legislation expected to come into force from August 1 is aimed at bloggers with daily audience of 3,000 and more readers. They are to be legislatively regarded as mass media, which makes every more or less noticeable blog writer subject to requirements and regulations mandatory for professional journalists.

Although there are arguments supporting this move. After all, at long last, some bloggers will be introduced to a concept of fact checking. The bloggers will also have to attach their real names to every single entry and not to hold back any information which may represent social significance. Hosting companies won't go without a piece of restrictions as well: their new obligation will be to provide personal data on writers on authorities' demand.

Our short legislative round up concludes with the law that instilled pure terror in Russian facebookers' hearts. Currently within the legislative pipeline, the law forbidding Russian citizens' personal data to be stored on foreign-based servers starting from September 1, 2016 hasn't been signed by the President yet.

If it passes the final frontier with the stamp of the President's approval, Russian internet dwellers will be deprived of opportunities to buy from foreign online stores, to transfer funds outside the country, to use foreign hosting providers, to download apps from Google Play or App Store, and to use dating, booking and other e-services.

Notwithstanding its downright idiocy and potentially grave consequences, this law was supported by 325 of total 450 members of the State Duma (the lower house of Russian parliament). Everything seems to be right in place for the "i-ron curtain" scenario, where Russian Internet turns into absolutely controllable isolated countrywide intranet. Has the industry gone too far to meekly succumb to the worst-case outcome?

Turbulent stability

In five years between 2008 and 2013 Russian Internet audience has increased by 29% and currently amounts to 68.7 million people spread all over the country, according to research conducted by the independent Russian Public Opinion Fund.

The Russian Association for Electronic Communications (RAEC) and the National research university "Higher school of economics" (HSE) ventured to explore economic relations involving these millions of internet inhabitants and came to forecast that by the end of 2014 the overall turnover of Russian internet-related markets will make up 5.2 trillion rubles (about $151 billion, £88 billion) or 8.5% of the state's GDP.

Starting his presidency as an international enigma back in 2000, Mr. Putin is now reputed to be a person of practical mind (at least by Russian political pundits). And one can hardly think of something more impractical than squandering an industry worth 8.5% of your GDP just to make an argument in a squabble.

Especially when your economy is mostly driven by export of unrefined natural resources and you are desperate to make it more up-to-date: both Vladimir Putin and Russian Prime Minister Dmitry Medvedev present themselves as strong advocates for economic modernization.

Preserving a valuable sector

So far, the internet can be listed among few Russian industries which has proved to be both innovative and lucrative. Besides, since Vladimir Putin's cousin joined the board of directors of Russian private cloud computing company, internet became the President's family business.

Regrettably, the subtleties of Russian internal affairs are not so obvious for those looking from outside. As a result, Russia has already dropped out of the list of 25 countries with the most attractive investment climate based on the research carried out by consulting firm A.T. Kerney.

The Global Attitudes Project by Pew Research gives a wider perspective on the dramatic deterioration Russia's global image has suffered, partly as an outcome of Ukrainian crisis: 72% of Americans, 63% of Brits and 79% of Germans are now share an unfavorable view on their eastern neighbors.

The good thing is that it makes the officials concerned. By the fall the Russian Ministry of Foreign Affairs is going to come up with its public relations strategy aimed at dealing with "Cold War" prejudices toward Russia and giving a positive spin to the way the country is perceived internationally.

Return to Cold War era?

Unfortunately, the mere idea that a country's global image can be drastically improved by means of positive media representation alone can remind you of a kind of "Cold War" prejudice itself. Now, when the world has the internet it is impossible to stifle all the sources of information which refuse to follow your line of reasoning.

Supporting local internet industry could prove much more effective in the way of promoting the national brand. So far this notion has eluded the Russian government. Trying to plant the right seed and carrying on no matter what look like the only options available for Russian internet business at the moment.

By and large, it has been so since the founding days of internet industry in Russia and yet we manage to survive. There is always a possibility that some risk-prone investors may deem this as an indicator of stability.