Window on Eurasia: Kremlin Seeks Veto on Foreign Ownership of Russian Internet Providers

Paul Goble

Baku, March 6 – The Russian government wants to declare the Internet-- along with traditional publishing houses -- a “strategic” national asset and has submitted draft legislation that will allow the authorities to block foreign ownership of and even investment in both new and old media.
According to a report on Gazeta.ru yesterday, the Duma, where the party of power dominates, likely will go along, it notes that “experts consider it both harmful and senseless” and suggests that some deputies will object both on those grounds and because the government has sent the measure to a committee that lacks expertise in this area.
Given the ability of website operators to shift providers to ones based abroad, this measure may not have the impact the Kremlin seeks, and given its decision to have the measure discussed in the construction committee rather than in media committee is already raising questions (http://www.gazeta.ru/politics/2008/03/05_a_2658464.shtml).
The first reading of the bill governing foreign ownership of “strategic” sectors took place last fall; the second is scheduled for March 19. And the government has presented its plans for new restrictions in the form of an amendment to the measure before the deputies take it up next week.
The proposed amendment would force foreign companies wishing to acquire 50 percent or more of enterprises involved in Internet work to secure the permission of the government before proceeding. Foreign firms with partial government ownership would be subject to even more restrictive handling.
(The measure’s provisions giving the government the power to pass on potential foreign buyers of traditional media are somewhat simpler, Gazeta.ru reports. Restrictions would kick in only if the Federal Anti-Monopoly Service concluded that such firms would have a dominant position in the market they served.)
While some deputies welcome this step as an indication that incoming Russian president Dmitry Medvedev will seek to have the government play a larger role in communications, others are concerned that this measure will simply drive web operators to use foreign IPs or go underground where they will not be as easily regulated.
But at least some deputies have expressed incredulity about the government’s ignorance on how the Internet works. Gennady Gudkov, for example, said that for the Internet, “the location of servers in general does not have any importance.” They can be anywhere, and thus trying to control things this way won’t work.
Most outside experts were similarly doubtful that the new measure would do much except signal the Kremlin’s desire to tighten the screws. Thus, they suggested, it may be more an act of intimidation of those who do not know the business than an effective means of exerting control.
One of Russia’s leading Internet specialists, Anton Nosik, for example, told Gazeta.ru that “the Internet is an open world. If the government prevents foreigners from investing in the Russian Internet, then Russia will simply cease to be the metropolis of the Russian language on line.” Operators and surfers will simply go elsewhere.
To the extent that happens, the Kremlin will likely achieve exactly the reverse of what it seeks. But both as a form of deference to Russia’s increasingly vocal “national patriots” and as an act of intimidation against those who do not understand the Internet, the new measure may nonetheless provide Moscow with some gains to offset any losses.