Tag Archives: Sanctions

Exclusive: Russian high tech project flounders after U.S. sanctions
October 17, 2018 12:00 pm|Comments (0)

MOSCOW (Reuters) – U.S. sanctions targeting Russia’s nascent high tech industry have caused a Russian microchip company significant financial woes and delayed the launch of an initiative meant to produce substitutes for Western products, the firm’s owner said.

FILE PHOTO: Russian Prime Minister Dmitry Medvedev visits a plant of Russian microchip company Angstrem-T in Zelenograd near Moscow, Russia August 3, 2016. Sputnik/Dmitry Astakhov/Pool via REUTERS

President Vladimir Putin has stressed the need to develop Russia’s domestic tech industry to make it less dependent on Western equipment. But Moscow’s efforts to manufacture Russian microchips and other high tech products have been thwarted by U.S. sanctions against a string of Russian tech companies.

Angstrem-T, which makes semi-conductors, has accumulated significant debts and is set to be taken over by state development bank VEB after failing to reimburse an 815-million-euro ($ 944.75 million) loan dating back to 2008, said Leonid Reiman, chairman of the company’s board of directors.

Reiman, Russia’s former minister of communications and information technologies, said the company’s inability to reimburse its debt was in part tied to U.S. restrictions on the import of dual-use technologies and its addition to U.S. Treasury sanctions in 2016.

The U.S. moves were prompted by Russia’s annexation of Ukraine’s Crimean peninsula in 2014 and its support for separatist rebels in eastern Ukraine. It has imposed further sanctions against Russia since 2016 over other issues.

Prior to the sanctions Angstrem-T purchased most of its equipment from U.S. multinational firm Advanced Micro Devices and bought a license from IBM to produce chips.

The company is heavily reliant on U.S. products, but the sanctions now bar it from doing business with U.S. firms.

“Although we initially received the (U.S.) State Department’s consent for this project and the delivery of the technology here, the sanctions caused the deadlines for its completion to be drawn out,” Reiman told Reuters.

“The factory is working, the products are being produced, but the question of procurement remains.”

FILE PHOTO: Russian Prime Minister Dmitry Medvedev visits a plant of Russian microchip company Angstrem-T in Zelenograd near Moscow, Russia August 3, 2016. Sputnik/Dmitry Astakhov/Pool via REUTERS

VEB, which Reiman said could become the majority owner of Angstrem-T by the end of the year, declined to comment.

IMPORT SUBSTITUTION

When Angstrem-T began producing its first chips in 2016 after nearly a decade of false starts and delays, Prime Minister Dmitry Medvedev depicted the initiative as a way Russia could surmount already existing U.S. sanctions.

“It’s good that we are starting to produce these ourselves,” Medvedev said at the factory’s opening, a month before Angstrem-T itself was targeted by the U.S. sanctions. “It’s a question of import substitution.”

Reiman would not disclose the magnitude of Angstrem-T’s debt. According to a Russian database that aggregates company data, the firm had 87.4 billion roubles ($ 1.34 billion) in debt last year. During the same period it recorded revenues of 101 million roubles.

A source in the field of microelectronics in Russia said the sanctions and repeated delays in the project had caused Angstrem-T’s products to become outdated.

The market for the 90 and 130-nanometre microchips it produces has significantly shrunk in recent years, according to the source.

A draft Russian government roadmap for the development of the microchip industry seen by Reuters says that once VEB’s takeover is complete, Angstrem-T should shift its production to the more modern 28-nanometre chips.

Such chips are used in products made by companies like Apple, Samsung and Sony.

The ministry has for several years lobbied for Russia to build a modern microchip plant, but to no avail.

Reporting by Maria Kolomychenko; Writing by Gabrielle Tétrault-Farber; Editing by Gareth Jones

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U.S. probing Huawei for possible Iran sanctions violations: sources
April 25, 2018 6:08 pm|Comments (0)

NEW YORK/LONDON (Reuters) – Federal prosecutors in New York have been investigating since at least last year whether Chinese tech company Huawei Technologies Co Ltd [HWT.UL] violated U.S. sanctions in relation to Iran, according to sources familiar with situation.

FILE PHOTO: The Huawei logo is seen during the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Photo

The prosecutors have been investigating alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said on condition of anonymity.

The probe, first reported by the Wall Street Journal on Wednesday, is being run out of the U.S. Attorney’s office in Brooklyn, the sources said. John Marzulli, a spokesman for the prosecutor’s office, would neither confirm nor deny the existence of the investigation.

The Department of Justice in Washington declined to comment.

Huawei, which makes handsets and telecommunications network equipment, said it complies with “all applicable laws and regulations where it operates, including the applicable export control and sanction laws and regulations of the UN, US and EU.”

News of the Justice Department probe follows a series of U.S. actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp (000063.SZ) to the U.S. economy amid allegations the companies could be using their technology to spy on Americans.

In February, Senator Richard Burr, the Republican chairman of the U.S. Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called “counterintelligence and information security risks that come prepackaged with the goods and services of certain overseas vendors.”

Republican Senators Marco Rubio and Tom Cotton have introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or ZTE, citing concern the Chinese companies would use their access to spy on U.S. officials.

U.S. authorities last week banned American companies from selling to ZTE (000063.SZ) for seven years, saying the Chinese company had broken a settlement agreement related to Iran sanctions with repeated false statements – a move that threatens to cut off ZTE’s supply chain.

The ZTE ban was the result of its failure to comply with an agreement with the U.S. Commerce Department reached last year after it pleaded guilty in federal court to conspiring to violate U.S. sanctions by illegally shipping U.S. goods and technology to Iran.

In 2016, the Commerce Department made documents public that showed ZTE’s misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.

In a 2016 letter to the Commerce Department, 10 U.S. lawmakers said they believed F7 to be Huawei, citing media reports.

In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.

Reporting by Arjun Panchadar in Bengaluru, Karen Freifeld in New York, Eric Auchard in London; Editing by Frances Kerry and Paul Simao

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Keeping the competition out: Iran startups thrive despite sanctions
October 6, 2017 12:00 pm|Comments (0)

LONDON (Reuters) – Low on cash but high on hope, Iran’s technology entrepreneurs are learning to live with revived hostility in the United States and growing suspicion – or worse – from hardliners at home.

Their startups and e-commerce apps are flourishing, driven by government infrastructure support and young Iranians educated both in the country and abroad. Some are even drawing foreign investment in a way that Iran’s dominant oil industry has yet to achieve since most international sanctions were lifted early last year under a nuclear deal with world powers.

Life remains tough despite the easing of Iran’s international isolation. The atmosphere in Washington has soured again, with President Donald Trump signing legislation tightening domestic U.S. sanctions on Iran and threatening to pull out of the nuclear accord.

On top of this, Google and Apple have withdrawn some services temporarily or indefinitely for Iranian users in recent months for reasons including the U.S. sanctions.

Still, the absence of U.S. giants such as Amazon and Uber has allowed their Iranian equivalents Digikala and Snapp to grow rapidly. Many other local internet firms are following suit.

Ramin Rabii, chief executive of Turquoise Partners, which facilitates foreign investment in Iran, said Trump’s rhetoric could paradoxically help the tech sector.

“If he keeps talking about sanctions, that would increase the risk of investment in Iran, but at the same time it will keep a lot of competition out,” he told Reuters in a telephone interview from Tehran. “Major global players are not here.”

No figures are available on foreign investment in Iranian tech firms. Rabii, however, estimated it at hundreds of millions of dollars since the nuclear deal came into force.

By contrast, an expected rush into Iran’s huge energy reserves has yet to materialize. French group Total is investing in a gas project but Tehran has yet to seal any major oil deals with international partners.

Foreign investment in Iranian tech remains modest compared with regional mega-deals such as Amazon’s purchase in March of Dubai-based retailer souq.com. Amazon did not reveal the price but beat off a rival offer worth $ 800 million.

Still, Rabii sees a bright future. “Many foreign investors ask me what is the best performing sector in Iran for the next decade. I always name e-commerce and the tech sector,” he said.

LOCAL INCARNATIONS

After the relative isolation of the international sanctions era, the tech sector has attracted many young Iranians back from the United States, Canada and Europe. They hope to marry their experience of the startup scene with locally-educated talent.

Reza Arbabian left Canada, where he went as a teenager, to join his family textile business in Iran. But in 2012 he launched Sheypoor, the Iranian answer to Craigslist, a U.S. classified advertisements website.

Sheypoor now employs 200 and recently marked its fifth anniversary. Cash, however, remains tight.

“Many foreign companies are still hesitant and Iranian investors don’t understand the value in e-commerce. They cannot accept that they need to wait for five years for a startup to make profits,” said Arbabian.

Some outside Iran, especially in Europe where the sanctions net is not quite so tight, are nevertheless willing to take the plunge. Swedish-based Pomegranate Investment, for instance, has taken a 43 percent stake in Sheypoor.

On a larger scale, Sarava, Digikala’s main shareholder, is 45 percent-owned by foreign investors. These include Pomegranate, which raised its stake to 15 percent with a 41 million euro ($ 48 million) investment in 2016.

Following the Amazon model, Digikala has grown into Iran’s biggest internet company with a market share of 85-90 percent, according to Pomegranate. Staff numbers have leapt in the past two years from 800 to more than 2,000.

INFRASTRUCTURE

FILE PHOTO: Employees work with their laptops at Takhfifan company in Tehran, Iran January 19, 2016. REUTERS/Raheb Homavandi/TIMA/File Photo

Iran came late to mass internet access but has invested heavily under President Hassan Rouhani, hoping to attract foreign cash and create more jobs.

According to the Measuring Information Society of Iran, a government-linked portal, more than 62 percent of households were connected to the internet by March 2017. This was up from only 21 percent in 2013, the year Rouhani took office.

Smartphone ownership has also rocketed. Iran, a country of 80 million people, had only two million smartphone users three years ago but the number hit 40 million in 2016.

Such developments encouraged Kamran Adle, an Iranian born and raised in London, to move to Tehran last year.

“Iranian infrastructure has dramatically improved in recent of years. 3G and 4G is much more commonplace than it was a couple of years ago,” said Adle, whose firm Ctrl+Tech invests in early stage startups and helps them to develop apps.

Some Iranian apps are copies of foreign equivalents, made out of the reach of international lawyers. But the years of isolation also forced domestic talent to be more innovative, and Adle says there is no shortage of app developers.

One such is Farshad Khodamoradi, who has designed the app for a job-hunting startup being launched this month. Unlike traditional sites, “3sootjobs” will use an algorithm-driven matching system to connect candidates with the right employers.

FILE PHOTO: Employees work with their laptops at Takhfifan company in Tehran, Iran January 19, 2016. REUTERS/Raheb Homavandi/TIMA//File Photo

Khodamoradi complains about difficulties in accessing foreign tech services, many of which are U.S.-based. “The main problem is that the global services Iranian startups are using can be cut off overnight,” he told Reuters from Tehran.

He cited Google’s Firebase, a platform used to generate push notifications – such as messages to passengers that a taxi has arrived to pick them up – without their having to open the app.

This was unavailable in Iran on a number of occasions in June and July, disrupting startups including taxi hailing apps, he said. Google did not respond to Reuters requests for comment.

Although technology firms can gain exemptions from the sanctions, U.S. corporations appear unwilling to risk involvement in Iran. In August, Telecommunications Minister Mohammad Javad Azari Jahromi threatened to take legal action over Apple’s removal of Iranian apps from its app stores. Apple did not respond to Reuters requests for comment.

MESSAGE FROM OBAMA

All this seems in contrast to U.S. promises after the nuclear deal. In March 2016, in a message to the Iranian people, then President Barack Obama said ending international sanctions “would mean more access to cutting-edge technologies, including information technologies that can help Iranian startups”.

Since that message, anti-U.S. Iranian hardliners have followed the growth of startups suspiciously, branding them as vehicles of enemy infiltration. Two foreign-based tech investors have also ended up in prison.

Nizar Zakka, a Lebanese information technology expert with permanent U.S. residency, was jailed in 2016 for 10 years for collaborating against the state. He had attended a conference in Tehran the previous year at the invitation of one of Iran’s vice presidents, only to be arrested by the Islamic Revolutionary Guards Corps as he was going to the airport to leave the country.

Iranian-American businessman Siamak Namazi also got 10 years in 2016 on charges of cooperating with the United States. While under arrest, Namazi appeared in an Iranian documentary seen by Reuters in which he said his mistake had been to accept money for his startup from an organization linked to the U.S. Chamber of Commerce.

The Revolutionary Guards, a military force that runs an industrial empire, largely control telecommunications in Iran.

However, tech entrepreneurs say the environment is generally supportive. “We haven’t come across any of those governmental push-backs,” Adle said.

In the longer term, the sanctions would make using the souq.com model to cash in on Iranian investments much harder.

But Eddie Kerman, of London-based Indigo Holdings which links retail investors to Iranian tech firms, is optimistic.

“American companies like Amazon might not be able to enter the Iranian market, but there is a significant possibility that European or Asian companies buy the larger Iranian players,” he said.

Reporting by Bozorgmehr Sharafedin; editing by David Stamp

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