Oracle, SAP suspend business in Russia amid invasion

As Moscow tries to retain IT talent with military exemption, a three-year tax suspension for biz


Russia, scrambling to deal with economic sanctions imposed in response to its invasion of Ukraine last week and to staunch the hemorrhaging of businesses and talent, will exempt IT companies from taxes for three years and will excuse specialized tech workers from military service.

This retention effort takes shape as major technology companies are suspending Russian business operations. In response to Ukrainian Vice Prime Minister Mykhailo Fedorov's request to Oracle and SAP that the companies cancel engagements in Russia, Oracle said it has already suspended all operations in the Russian Federation.

SAP also answered the call.

"Like the rest of the world, we are watching the war in Ukraine with horror and condemn the invasion in the strongest possible terms," said Christian Klein, CEO of SAP SE, in a blog post on Wednesday. "An act as inhumane and unjustified as this is an attack on democracy and humanity. Its consequences affect us all.

"We are stopping business in Russia aligned with sanctions and, in addition, pausing all sales of SAP services and products in Russia."

Amazon, Apple, Airbus, Boeing, Disney, Google, Ford, and Nike, along with financial services, entertainment, and oil firms, and others, have limited the availability of their services and products in Russia. Spotify has closed its office in Russia indefinitely.

Chip giants AMD, Intel, TSMC, and GlobalFoundries have suspended shipments of components to Russia. Dell, HP, and Lenovo have also stopped shipping products to the country. This comes after the US placed fresh sanctions on Russia for occupying Ukraine.

Fedorov also urged "all game development companies [to] temporarily block all Russian and Belorussian accounts," pressured the esports world to freeze out Russian and Belorussian teams from international events, and said Sony and Microsoft should pull PlayStation and Xbox, respectively, out of Russia.

According to the government-run Russian news agency TASS, Russian Prime Minister Mikhail Mishustin on Wednesday said all IT companies will be exempted from paying income tax and from inspection by regulatory authorities for three years.

What's more, IT firms in Russia will be able to take out loans for continuing work and new projects at a rate not to exceed three per cent. Mishustin also reportedly said tech employees will have the opportunity to receive a favorable mortgage and IT specialists will receive a deferment from military conscription – a requirement up to age 27 – while they work for Russian IT companies.

Maxim Mironov, a finance professor at IE Business School in Madrid, Spain, via various social media channels opined that Russia faces economic collapse as a result of the invasion backlash and is trying to avoid a talent shortage.

"Everyone who can leave the country will start to leave," he wrote, as algorithmically translated. "The government understands this, which is why they introduced a bunch of measures today to keep IT people. Only they won't work. Therefore, it is very likely that exit visas will soon be introduced for certain categories or completely … will close the country."

Wealthy Russians outside the country may not find much safety, at least for their assets. The US Department of Justice on Wednesday announced the formation of Task Force KleptoCapture, an interagency effort to enforce the broad sanctions imposed on Russia.

"The Justice Department will use all of its authorities to seize the assets of individuals and entities who violate these sanctions," said Attorney General Merrick B. Garland in a statement. "We will leave no stone unturned in our efforts to investigate, arrest, and prosecute those whose criminal acts enable the Russian government to continue this unjust war. Let me be clear: if you violate our laws, we will hold you accountable."

Task ForceKleptoCapture will focus on investigating and prosecuting violations of new and future sanctions related to the Ukraine invasion and Russian aggression and corruption. This includes attempts to bypass restrictions in transacting with Russian finance firms and using cryptocurrency to evade sanctions or launder money. The Feds explicitly contemplate using civil and criminal asset forfeiture laws to seize assets of those found to be flouting the law. ®


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