Hackers are destroying the internet as “Russian Davos” adjusts to the new reality

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  • Russian companies are causing a stir, but Western companies are missing
  • The deputy prime minister speaks of a “painful” step towards proprietary technology
  • Energy giant seeks government funding while gas prices are high

JUNE 17 (Reuters) – Hackers delayed the start of President Vladimir Putin’s speech at Russia’s flagship economic forum on Friday, without strong Western participation as Russia adjusts to the “new reality” of life under Western sanctions.

State-owned companies made a point of signing contracts publicly, and many firms had booths with floor-to-ceiling screens and glamorous visitors at the 25th International Economic Forum in St. Petersburg, set to rival the World Economic Forum in Davos.

But the western investors and investment bankers who had emerged in previous years were conspicuously absent.

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“New business from the Italian side is just frozen,” Italian businessman Vincenzo Trani told Reuters on the sidelines of a session titled “Western investors in Russia: new realities.”

“New investments are just impossible and people don’t increase investments.”

Kremlin spokesman Dmitry Peskov said a denial-of-service attack, which involves flooding servers with fake traffic, hit the forum’s accreditation and licensing systems. He did not admit blame, but the situation in Ukraine was emerging.

When Russian forces invaded Ukraine on February 24, Kyiv called in “hacktivists” for help. Ukraine did not immediately respond to the so-called “distributed denial of service,” a basic form of digital disruption heavily used by both sides of the Russia-Ukraine conflict.

Internet connectivity and speed suffered at the forum, and Putin’s speech, in which he accused the West of annihilating his country with an economic “blitzkrieg,” was delayed by just over 100 minutes. Continue reading

Western sanctions against Russia over its actions in Ukraine coupled with related supply chain issues have severely altered Russia’s export-import dynamics, with the country now looking to countries like China and India and turning away from the West.

Major banks have lost access to the global payment system SWIFT, Western brands are shunning the country and selling in a hurry, writing off billions of dollars in assets – and the European Union has promised an embargo on Russian oil.

Deputy Prime Minister Dmitry Chernyshenko lamented Russia’s technological backwardness and said Russia’s “painful process” of switching to its own technology was underway.

“You’re competing with global companies that have surpassed you by generations,” he told an audience of Russian business leaders.

BUSINESS OUTLOOK DIFFY

The CEO of Russia’s top lender Sberbank (SBER.MM) summed up the situation with grim irony.

“They say everything is fine with the business in Russia, there are only small problems: there is no one to buy and no one to sell either, it is impossible to pay and impossible to deliver,” German Gref said on Friday. “It’s a joke, but it reflects reality.”

Tadzio Schilling, chairman of the Association of European Businesses, which brings together hundreds of companies inside and outside Russia, said the losses for those doing business in Russia “can be colossal these days”.

“The near-term prospects for companies are bleak,” he said.

Leonid Mikhelson, CEO of Russian energy giant Novatek (NVTK.MM), called for more government support.

A global fall in gas prices has created a window that Russia, which is heavily dependent on its huge fossil fuel exports, must seize before it shuts down, he said.

But his company couldn’t get a compression line up and running – a key element of its industry, without components now barred from sale to Russia by sanctions.

“We need to create domestic liquefaction technology for this,” he said. “It requires a full-fledged localization program that is fully funded.”

“LOUD SILENCE”

Russian companies usually offer interviews and make big announcements at the Forum, the most important event on the Russian corporate calendar, but this year the speakers were few and far between.

Many Russian firms are struggling to manage their communications, said Ksenia Kasyanova, R&D director at PR firm CROS.

She said they are torn between wanting to restore demand and fearing comments might not be released with as much context as they would like.

“Finally, faced with this dilemma, businessmen settle for the complicated task of ‘silencing aloud,'” Kasyanova said — bringing the company into the public domain, but minimizing communications and publicity.

Italian investor Trani, who founded one of Russia’s largest carsharing companies Delimobil, said Russian and international companies yearn for stability.

“No company can develop aggressively during this period,” he said. “We must wait for peace.”

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Reuters reporting; Edited by Kevin Liffey and Philippa Fletcher

Our standards: The Thomson Reuters Trust Principles.

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