Yandex is Russia’s Google. In addition to being the country’s leading search engine – with a market share of 62% compared to Google’s 37% – it offers 90 services that dominate much of Russia’s digital world, including an email product and a taxi app. It beat back Google’s attempts to catch up by offering superior localized services, including maps and messaging.
Russia’s invasion of Ukraine squeezed Yandex’s management. The company has attempted to depoliticize and divest from its most toxic assets, the Yandex.News and Dzen blogging platforms, which distributed state propaganda. Both were sold to the de facto state-owned VK Internet group. After the official annexation of Ukrainian territories, Yandex maps stopped showing international borders.
Even before the war, parent company Yandex N.V. was registered in the Netherlands and listed on the NASDAQ. In 2021, American funds increased their stake in the company. Arkady Volozh, a co-founder of the company, lives in Israel. His family trust owns an 8.5% stake in the company, with 45.1% of the voting rights.
After February 24, Yandex employees began to flee the country en masse. By August, about 10% of Yandex employees (roughly 1,900 people) had left Russia. Yandex employees even created a separate YNDX Family social network for colleagues scattered around the world. Tel Aviv became the main gathering point, hosting much of the top management. In May, Russian media reported that three Israeli ministers asked the country’s prime minister to help Yandex move its headquarters to Tel Aviv.
Yandex founder Volozh wants to transfer projects abroad, including self-driving cars, autonomous delivery robots, a cloud service, and Yandex Practicum educational tool. Yandex already operated its taxi service Yango and its logistics division Yango Delivery outside of Russia. Volozh’s idea is to split the company into two parts. Yandex-1 would remain in Russia and continue to develop its core services there under Kremlin control. Yandex-2 will take over the foreign subsidiaries and be located in Israel, where Volozh lives.
But Yandex is finding it tough even for its foreign operations to escape its Russian roots. In March, the EU imposed sanctions against Tigran Khudaverdyan, the CEO of the Russian division of Yandex. In July, the EU sanctioned Volozh. Both men resigned. NASDAQ suspended trading in Yandex shares. International contact suspended partnerships. Finland disconnected Yandex’s Finnish data center, while Latvia and Estonia banned its activities as a taxi operator.
A number of significant obstacles remain to transfer Yandex projects abroad. More than 90% of the company’s intellectual property remains in Russia. Kremlin approval is required to send it abroad. In addition, the company’s international businesses remain unprofitable and funds earned in Russia cover the losses.
Despite its efforts to stay out of politics, Yandex remains an integral part of state propaganda. After the full-scale invasion of Ukraine, the former head of the Yandex.News called the platform a key element “in concealing information about the war.” Yandex removes information dangerous to the Kremlin’s image from search results and hands over the personal data of Russians at the authorities’ request.
Yandex defends itself, saying it discloses user data only upon “legitimate” requests from law enforcement agencies. The company automatically aggregated from licensed media in accordance with the requirements of current Russian law, explained Ilya Grabovsky, head of the Yandex communications department. The search engine removes search results only if the Russian federal agency Roskomnadzor bans them, and, like Western tech companies, publishes a transparency report detailing the percentage of government requests to hand over data.
“Yandex itself does not remove anything from the search results,” says Grabovsky. “According to the law, search engines are required to exclude links to sites and their ‘mirrors’ as soon as Roskomnadzor enters them into the register. Synchronization with the registry occurs automatically.”
The Kremlin has long been attempting to take full control of Yandex. In 2014, Vladimir Putin expressed his dissatisfaction with the company’s foreign registration. At that time, Yandex had already given Sberbank a “golden share,” which allowed the state-owned bank to block the purchase of 25% of the company. The relationship with Sberbank soon deteriorated and a Public Interest Fund was created to exercise state control over the company.
A top Kremlin aide Sergey Kiriyenko is now leading negotiations to decide the company’s fate. Ex-CEO Volozh is reportedly prepared to relinquish his stake in exchange for keeping intellectual property for foreign business development. Under this plan, the Russian division will be transferred from the Netherlands to Russia. President Vladimir Putin reportedly has approved the proposed plan. Yandex is considering “various development options,” according to spokesperson Grabovsky, cautioning that its foreign shareholders must approve “all significant changes.”
The company’s future remains uncertain. Its search engine remains an impressive 85 million monthly users. But the company’s capitalization, $22 billion before the war, now stands at only $10.7. Although the most valuable parts of Yandex will remain in Russia, it has lost many skilled employees and looks set to come under total state control.
Putin’s war in Ukraine has not just destroyed much of Russia’s traditional manufacturing and service industries. It also has thrown a bomb into its most promising digital business.
Alena Popova is the Public Policy Fellow at the Wilson Center and founder of the Ethics and Technology think tank.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
