Russia’s AI Quest is State-Driven — Even More than China’s. Can It Work?

More than Western governments and even more than China’s, the Russian government is trying to position itself as a facilitator of innovation in artificial intelligence, the technology that Vladimir Putin said will lead whoever masters it to global advantage. Russia seeks “to go our own way,” said Prime Minister Dmitry Medvedev, borrowing Lenin’s 1917 words about various anti-capitalist ideologies to describe his government’s 21st-century attempt to shake the world. 

Those who doubt that this uniquely state-heavy approach can succeed would do well to remember that today’s internet and mobile telecommunications grew out of Pentagon-funded research, that the Soviet Union led the Space Race for a decade, and that U.S. astronauts currently ascend to orbit atop Russian rockets.

And even as it was putting the finishing touches on its national AI strategy, which calls for funding data management, education, and science initiatives across the country, Putin’s government was increasing its six-year budget for the campaign from $1.3 billion earlier this year to the roughly $6.1 billion announced when the strategy was rolled out in October.

One of the questions that faces Russian high-tech development is just how much brain-drain and an anemic “start-up culture” retard technological breakthroughs. Even members of Putin’s cabinet acknowledge the “lack of innovation cycle” for the country’s young entrepreneurs, the absence of hi-tech infrastructure, financial support and legal frameworks. Yet for all the brain-drain, Moscow still has a STEM-educated workforce — capable and smart young people across Russia brimming with ideas who, given the right conditions, could propel Russia into the ranks of high-tech trend-setting nations. 

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But they need the right mix of mentoring and financial support – which is why the Russian Federation is in the midst of an unprecedented program to literally lift itself by its “hi-tech bootstraps.” 

One of such better known efforts is Skolkovo Innovation Cluster, often billed as the Russian “Silicon Valley”, which aims to help its participants develop and commercialize their IT products. Yet Skolkovo — launched in 2010 by then-President Medvedev as a model “national project” — met with the reality that Russian hi-tech market was simply too small, underdeveloped, or immature to properly absorb such results. This led many Skolkovo AI developers to take their accomplishments “on the road,” seeking partnerships with European, American and Asian companies. 

So the Russian government has been trying to foster its own domestic markets for the products. One such effort is the National Technology Initiative, a nationwide program that identifies and supports new technology markets. NTI aims to create and give logistical and financial support to special infrastructure and technical centers that aim to bring together Russia’s hi-tech and start-up community. For example, NTI is funding Russia’s National AI Center at MIPT, one of the country’s best STEM universities.

Indeed, there are already private-sector AI successes in Russia, a growing list of companies that have won global respect and recognition despite the state of the country’s entrepreneurial culture,. These include NTechLab, which does facial recognition; Yandex.ru, Russia’s largest Internet search engine and the nation’s closest equivalent to Google; and Zyfra, a provider of data analysis solutions to the extractive industries. 

Despite these market successes, government funding is poised to play the largest role in AI research for the foreseeable future. In the finance industry, for example, the leading commercial adopter of AI is the nation’s largest state-supported bank, Sberbank. Earlier this year, the bank partnered up with an early-stage venture fund and accelerator 500 startups to provide a platform for Russian startups to make their debut in Silicon Valley. Even more to the point, the bank ran the drafting and development of the national AI roadmap. This heavy government hand has been decried by critics, who sought a larger role that the Russian private sector in this effort.  

Other ways the state is funding high-tech research include 1) NTI’s partnership with the state-owned Russian Venture Company, whose 30 billion ruble fund—roughly $450 million— aims to “create a mature venture capital market that will make Russia a leader in the global technology development” and 2) the Russian Direct Investment Fund, another major effort to support more private sector companies developing AI.

These and other efforts by the Russian state to generate hi-tech AI “start-up” results deserve attention for three reasons. 

First, this is a top-down effort by the state to mimic the flexibility and responsiveness of the U.S. private-sector market. Russian government structures and bureaucracies are hardly known as nimble or adaptive. It is also unclear whether Russian state bureaucracies will be able to properly manage the vast funding earmarked for such projects — and remember, the planned amount quintupled this year. Such massive government budgets have often been a magnet for misappropriation.

Second, the Russian state’s relationship with its budding private sector has been mixed at best, and it will be interesting to observe how much Russian entrepreneurs will put their trust in government institutions. This is all happening against the backdrop of growth in Russia’s larger information communications technologies that is attracting the attention of international partners and investors. 

Finally, most Russian academic institutions where AI development may be taking place—such as MIPT – are state-supported and state-funded universities, once again highlighting the hand of government where more nimble private-sector efforts once prevailed in the West and elsewhere. These schools include some of the world’s best STEM universities, yet they can be affected by government and state issues and concerns.

At this point, the United States is in a unique position when it comes to AI—its private sector has since matured to the point where it can even dictate their terms to the U.S. military. However, other nations are pursuing different paths—with significant state support and funding, where private sector plays a minor, if growing, role. 

Today, Russian state and society have embarked on a major experiment—jump-starting their hi-tech innovation culture. Equally important in the near future will be the development of the hi-tech private sector in Russia that is independent of state support, despite some of the difficulties it is encountering along the way. 

This publication was made possible (in part) by a grant from Carnegie Corporation of New York. The statements made and views expressed are solely the responsibility of the author.