Russia's Iron Curtain Descends on U.S. Tech Firms
By Leonid Bershidsky
The Russian parliament is likely to limit purchases of Western computer hardware and software by public companies and government agencies -- a response to Western sanctions that would cost billions to the likes of Microsoft, Hewlett-Packard and IBM. Russia surely can do without the big brand products. The question is why so much Western technology was bought in the first place.
The parliamentary commission for strategic information systems, formed last year before President Vladimir Putin's Crimea adventure, and apparently dormant for months afterwards, has now reared its head. In a document obtained by my colleague Ilya Khrennikov at Bloomberg News, it has called for reform of government purchasing laws to reduce Russia's dependence on Western tech solutions and equipment.
According to the data compiled by the commission, most Russian industries are hooked on Western information technology: Retailers, for example, are estimated to be 90 percent dependent on Western technology, compared with 60 percent for government agencies. It is, however, state-controlled entities and government agencies, not supermarket chains, that account for most of the U.S. tech corporations' Russian revenues. (I converted the rubles in the table below into dollars at the current exchange rate):
Of the companies the commission identified, Hewlett Packard appears to be doing the most business in Russia, with $2.2 billion of its $3.4 billion in 2013 Russian revenue coming from public and state-controlled entities. In April, the Russian branch of the corporation agreed to plead guilty to U.S. charges of bribing Russian officials to secure a $100 million contract with the prosecutor general's office.
HP sold computers and other products to a Russian intermediary, then repurchased them at a markup, paying the intermediary additional fees for "services." The company then resold the hardware to the prosecutor general's office. They worked hard for their money. "Hewlett-Packard subsidiaries, co-conspirators or intermediaries created a slush fund for bribe payments, set up an intricate web of shell companies and bank accounts to launder money, employed two sets of books to track bribe recipients, and used anonymous e-mail accounts and prepaid mobile telephones to arrange covert meetings to hand over bags of cash,” said U.S. deputy assistant attorney general Bruce Swartza in a statement. That web of deals took place back in 1999. It took U.S. prosecutors a long time to investigate because Russia is a distant, deeply corrupt country and because HP had done its best to cover its tracks.
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http://www.bloombergview.com/articles/2014-07-22/russia-s-iron-curtain-descends-on-u-s-tech-firms
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