Tuesday

4th Oct 2022

Russia data law to cost billions, silence dissent

  • Russia risks losing up to 0.3 percent of its GDP because of a new data law (Photo: Alex F)

Russia is moving toward a data storage regime set to cost its economy billions and to help authorities crack down on civil rights.

The new law, an amendment to Russia's privacy legislation, was enacted in July last year and enters into life on 1 September.

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It allows data to flow out of Russia.

But article 18.5 of amendment FZ-242 requires all companies in Russia, whether they are national or international, to use only Russian-based data centres when collecting or processing the details of Russian citizens.

Hosuk Lee-Makiyama, the director of the European Centre for International Political Economy, a think tank in Brussels, said it’s designed to give authorities greater snooping powers.

“The real reason is not necessarily that they want to keep the Americans out. They want their local security agents in”, he said.

Lee-Makiyama, who co-authored a report on the issue, out this week, has calculated the law could cost Russia up to 0.27 percent of its GDP, or some 286 billion roubles (€4.7bn).

Forcing companies to localise data means they’ll no longer able to run certain types of online services.

“It can be enterprise, resource planning, it can HR software, industrial software - they can’t run it in Russia anymore”, Lee-Makiyama said.

He noted, for instance, that around five percent of costs in machine manufacturing are related to some form of data handling.

“If you are running a factory with a 5 percent profit margin, which is not that unusual by the way, basically it means your entire profits just disappeared and you go out of business”, he noted.

He added that some big companies, such as Russian airline giant Aeroflot, are against it and that they will try to pass the extra costs to clients.

“It’s misguided economic nationalism”, he said.

Architects of madness

Data localisation gives the Russian government greater control over all forms of online activity.

Civil rights organisations, opposition members, investigative journalists, LGBT rights activists, are at greater risk of being exposed because of it.

Sergei Mitrokhin, the leader of Yabloko, a Russian opposition party told this website that FZ-242 is the latest in a series of laws designed to suppress dissent.

Other legislation increases scrutiny on NGOs which are designated as “foreign agents”. It also gives authorities sweeping powers to eject or arrest journalists or activists who are deemed “undesirable”.

The Kremlin wants to “suppress all connections between Russian citizens and Russian organisations [civil society]”, Mitrokhin said.

“It’s the policy of an authoritarian state”.

Authoritarian state

If the law enters into force, it will make Russia the first advanced economy to impose a data localisation scheme.

Similar laws exist in India, Indonesia, and Vietnam.

China is also considering to restrict big data firms by limiting storage to inside the country.

Brazil toyed with the idea a few years ago, with the so-called Marco Civil law, but then dropped it.

Europe, in 2011, also mooted the creation of a Great Firewall or Virtual Schengen border, by reference to its Schengen free-movement zone. But the proposals were dropped after howls of complaint by civil society.

Joe McNamee, director at European Digital Rights, at the time described the virtual Schengen idea as “absurd”.

“Despite all of the costs in terms of democracy, freedom of speech, and even the economy, there is no analysis of any benefit or expected benefit that, even mistakenly, the architects of this madness expect to outweigh the cost,” he said.

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