How Russia and Ukraine are wielding hi-tech weaponry to win the war

One of the few welcome surprises of Putin’s invasion of Ukraine was the speed and apparent effectiveness of western governments’ imposition of conventional sanctions on his country. In short order, half of Russia’s $600bn foreign reserves held in western financial institutions was immediately frozen. The country was expelled from Swift, the vast messaging network that banks use to transfer money across the world. PayPal, Visa and Mastercard abruptly ceased to work in Russia. There was an immediate ban on technology transfers from the west. Then there was the sudden sanctioning of Putin-friendly oligarchs and those who service them in London, though Ben Elliot, the Tory co-chair and Quintessentially, the “concierge service” for the super-rich that he runs, seem to have been exempted from the strictures.

Trebles all round, then? Only up to a point: some of the successes involve measures that in other contexts are deeply toxic. Russian troops, for example, have been nabbing high-end John Deere tractors in Ukraine and shipping them back to Mother Russia. But when the lucky beneficiaries of these wondrous machines attempt to start them up, they discover that John Deere has remotely “bricked” them – ie turned them into multi-ton paperweights. Which is why many western farmers detest John Deere. Having paid a fortune for their new tractors, they find that they are not allowed to repair them themselves and any attempt to download bootleg software to diagnose malfunctions may get them into legal trouble on intellectual-property and user-agreement grounds.

Similarly, Ukraine has been using another toxic technology – facial recognition – to identify dead Russian soldiers. Forbes magazine reported in March that Mykhailo Fedorov, vice prime minister of Ukraine and minister of digital transformation, had confirmed on his Telegram channel that the country was using the software to find the social media accounts of deceased Russian soldiers, allowing authorities to contact their friends and families. The aim, he said, is to dispel misinformation surrounding the war in the country and, specifically, Russian claims that it is just a special operation with few losses. He did not specify which particular technology had been used, but his department later confirmed to Forbes that it was Clearview AI, which the American firm had provided to the Ukrainian government free of charge.

So what’s the problem? Only that Clearview AI, a company backed by PayPal co-founder Peter Thiel, among others, is pretty controversial back home. In February, a group of US senators and representatives issued a call to federal agencies to avoid using its “particularly dangerous” technology, which “poses unique threats to Black communities, other communities of colour and immigrant communities”.

Thus technology taketh away and technology also giveth, as the Old Testament might put it. But the tech that is suddenly on everyone’s mind in relation to sanctions and Russia is blockchain, the software that underpins cryptocurrencies such as Bitcoin, Ethereum and the like. These currencies have been proliferating like wildfire for some years, and I long ago lost count of them all, but in essence they all have one thing in common: they’re decentralised payment systems that can enable anyone to transfer value to someone else anywhere. And because every part of the process is heavily encrypted and unsupervised by any authoritative institution such as a central bank, cryptocurrencies are clearly useful for money laundering – and for evading sanctions.

Whatever else it is, Russia seems to be a crypto-savvy country. An official government estimate puts local holdings of cryptocurrencies at $200bn, which is, at a guess, 12% of the world total. Another survey, by a Singapore-based crypto payment gateway, concluded that 17 million Russians own cryptocurrencies and that upwards of half a million computer programmers work in the industry. And Russia is currently third in terms of Bitcoin network-mining activity – apparently with government backing; Putin has called for the use of surplus energy for crypto mining.

Given that, it would be surprising if the regime did not have a strategy for using cryptocurrencies as a way of dodging or undermining sanctions. This would be a viable option for individual Russian citizens seeking to trade with others outside the country (or even to protect their savings at a time when the rouble has crashed). But for an economy the size of Russia, crypto transactions on the scale required to offset the impact of sanctions would be much too large to conceal from western governments. For once, there’s no technical fix for the problem that Putin has created for his country… and for the world.

Majestic meal
The Queen’s Touch is an unmissable 1996 New Yorker essay by Paul Theroux.

President takes the podium
Joe Biden’s speech to the annual White House correspondents’ dinner. A few good jokes, too.

The shipping news
A Yacht Owner’s Worst Nightmare is an interesting piece by Olga Khazan in the Atlantic on the tricky business of seizing oligarchs’ yachts.

Comments are closed.