Analytics
EUREN Brief 2
B
Digital Transformation: (re)constructing
EU-Russia dialogue (the case of AI)
Being extremely complex in nature, borderless,
and challenging, digital technologies require a more profound international cooperation and
dialogue. Russia and the European Union are no exception. Despite existing contradictions, both
sides are interested in the development of advanced digital solutions and their effective – but
socially and environmentally responsible – use, especially considering the USA's and China's
dominance of the Internet and digital economy. This implies neither compromising dialogue with any
other nations, nor abandoning core political positions; rather it means accepting the realities of
mutual interests in the areas of science, technology (S&T) and the economy.
May 2019
Considering the "5S" factors, AI may not look
like the best choice for cooperation. However, several issues should be kept in mind.
Limitations for cooperation
However desirable EU-Russia cooperation on
digital transformation is, it has clear limitations and constraints, especially in the post-2014
realities. We can identify several factors, which may be labeled as the "Five Dark S[igmas]" (5S).
1. Sanctions – EU-Russia cooperation now is very limited, with some formal
and informal restrictions in place which are becoming even less clear considering the new US
sanctions legislation.
2. Security issues – these dominate discussions on
both sides and make the EU and Russia cautious about technology leaks or revealing their
vulnerabilities.
3. Suspicions – there is almost a complete lack of trust,
including in the digital realm. Hacker attacks and other episodes are preventing cooperation in any
area that might look "sensitive". Since digital technologies are ubiquitous and may cause strong
spillover effects, almost any effort might look to be "sensitive".
4. Market
Superiority – Russia, the EU and European nations and companies from respective
territories have their own plans for future markets and do not want to enhance competitors.
5.
The Slump of the Russian economy – this is partly due to sanctions and global energy
market trends, and partly because of institutional challenges. The current economic situation in
Russia makes it less attractive to European partners.
These limitations do not imply that
cooperation is impossible, but "5S" are here to stay in the coming years. Any realistic efforts to
(re)construct EU-Russian digital dialogue needs to take them into account.
Artificial Intelligence (AI) – is Russia an attractive partner
Considering the "5S" factors, AI may not look
like the best choice for cooperation. However, several issues should be kept in mind. Firstly,
almost any digital solution now implies some use of AI. Secondly, AI is an umbrella term for a
different set of technologies – from voice recognition up to complex data analysis – where Russia
and the EU may find "safe" cooperation harbors. Finally, competence synergies are possible (Russia
enjoys strong S&T positions in some areas related to AI), while market trends in Russia
shouldn`t be ignored (see below).
The Russian AI landscape looks ambiguous since the nation
lags behind the USA, China and the EU in the development of AI, but it is evolving fast.
At
present, Russian AI and machine learning markets are estimated to be less than 1% of the global ones
– €9.5-10.5 million in 2017.[1]
Assessments of the future Russian market size differ significantly – from €380 million in 2021 to
more than €425 million in 2020.[2]
But all analytical bodies – including PwC and Microsoft[3]–
agree that the pace of growth will be impressive double-digits – up to 70-80% per year depending on
the sector. The AI market drivers include the biggest banks; Internet businesses (search and
associated services, e-commerce and other platforms), and to a lesser extent, retail. Manufacturing
related markets also have potential[4]
– the Special AI Working Group of the Russian Union of Industrialists and Entrepreneurs (RSPP) even
forecasted it will reach $380 million in 2021 (a figure which seems to be overestimated).[5]
The AI business landscape is presented by a mix of different entities. Among the key actors
are Sberbank (one of the biggest and most digitalized Russian banks), big multinational Internet
(Yandex, Mail.ru, etc.) and software (like ABBYY) companies, and state-owned Rostelecom
(telecommunication infrastructure and services). Several state-owned enterprises – like Rostec
(civilian and defense manufacturing) and Rosatom (nuclear engineering, construction and power) are
also actively engaged due to the existing technological assets and competences. The Russian
community of AI startups is not significant yet (less than 2% of global, around 350 companies)[6],
but it is growing. Due to competence reasons, these companies appear to be niche leaders in image
and speech recognition, business optimization software, and some other domains.
The
assessments of AI use in the economy differs too. Microsoft considers Russia's big enterprises to be
among the leaders of AI use (~30%), while Higher School of Economics, PwC and some other analytic
centers indicate there is a lag between the number of Russian and the global companies investing in
AI (35 vs 54%).[7]
But, again, the future pace is considered to be higher than the world`s average, while AI is
becoming more widespread in different industries and enterprises, from Sberbank to Beru and
Wildberries (e-commerce leaders), and from Magnitogorsk Iron and Steel Works to Gazprom companies.[8]
Research efforts are also on the rise. SAP estimates that before 2017 only 1386 research
projects were enacted in Russia – most of them (1229) were non-commercial, and just ₽23 billion
(~€400-500 million) invested (2007-2017).[9]
Since 2017, the situation has been gradually changing, with the Moscow Institute of Physics and
Technologies (the Fiztekh, now a Competence Center for AI), Skoltech University and Higher School of
Economics (HSE) at the AI S&T forefront.
The Government has intensified its AI efforts
since 2016. First systematic policies were embodied in the National Technology Initiative (NTI,
which were a set of PPP measures focused on SMEs, technology, networking and competence-building).
The next important milestone was the "Digital Economy" National Project, enacted in 2017-2018. A
total of₽1.6 trillion (~€22 billion, 2/3 from the federal budget) will be invested or contracted up
to 2024, with more than₽280 billion (~€3.8 billion) channeled to support so-called end-to-end
technologies, where AI is among the top priorities.[10]
Investments in AI basic research are also to be made in the "Science" National Project. Finalizing
AI's political build-up, President Vladimir Putin declared on February 27, 2019 the development of
the National AI Strategy (to be presented on July 1, 2019) with additional federal stimulus for AI
high-tech projects.
Smart Cities should be also mentioned among the AI-related efforts. It
is estimated the market will reach ~€1.1 billion (IKS Consulting)[11]
with unclear short-term, but significant long-term prospects. Rosteleсom has already announced its
Smart Cities program for 2019-2024, with the National Competence Centre created in January 2019 in
partnership with Rostec and Rosatom. An important role is being played by the Moscow Government,
which is responsible for almost 90% of all respective national investments and expenditure. In
parallel, the Ministry for Construction has developed a special Smart Cities "standard", declaring
that it will ask for₽35 billion (~€500 million) from the federal budget for the renovation of
cities.[12]
AI may also be seen as a "testbed" for other
digital and broader high-tech cooperation in the era of geopolitical controversies.
Areas of Cooperation
The Russian government sees AI as a key emerging
technology, which along with other digital solutions (like Big Data and Quantum Computing) may
increase efficiency and drive the structural transformations of the Russian economy. International
cooperation is still not articulated in federal policies due to the current geopolitical situation
and some techno-nationalist approaches. But the position and statements of Dmitry Peskov (the
President`s Special Representative for the Digital Development), Sberbank, Moscow Government and
other key business and governmental entities clearly indicates that international AI cooperation is,
or will be, welcomed. A set of drivers may be identified: competence-building; cost-sharing;
possible synergies (also through access to the world`s best solutions). AI may also be seen as a
"testbed" for other digital and broader high-tech cooperation in the era of geopolitical
controversies.
However, considering "5S", it must be clear that in the short-term any
cooperation will be project-based, and, most likely, linked to a basic, pre-commercial applied
research (not mentioning pure commercial activities). There are also some operational challenges on
the Russian side: direct foreign participation in the "Digital Economy" National Project is
unlikely, and the general political framework and instruments for a deeper AI cooperation are
unclear. Still, these problems are not unsolvable.
We may identify several areas of
possible cooperation.
For science, the classic options are at hand: granting programs in
support of curiosity-driven AI research for joint EU-Russia teams or (better still) collaborations
between Russian and EU universities/academic institutions. Here we shall mention that the EU member
states and Russia, as well as companies from the respective countries, still have some cooperation
in the AI S&T. Yandex and HSE are partners in the Large Hadron Collider`s LHCb collaboration
with a strong AI part. Siemens supported AI Lab in St. Petersburg Polytechnic University, while SAP
Labs CIS opened 2 D-shops in Russia. In 2017, ERA.Net RUS Plus and the Russian Foundation for Basic
Research announced AI-related grants. Finally, in the fall of 2018, the First Deputy Minister for
Science and Higher Education, Grigoriy Trubnikov, noted that Russia is negotiating some AI-related
research with the EU.
Another promising area is what could be called "AI for research",
which is developing AI-enhanced IT solutions for R&D. Among the options are:
1.
Megascience. EU, EU member states and Russia have very successful collaborations in this area – from
particle physics facilities (like LHC, Exfel, FAIR or NICA) up to the International Space Station
and space science. No less important is the megascience pioneered use of AI in its research. Here we
envision synergies with Russia's ambitious plans to develop mega-science facilities.
2.
Pharma and other healthcare R&D, including bioinformatics – the accent on human health makes
this area relatively safe for cooperation. This may be paralleled with Russia's increasing efforts
in support of the national pharmaceutical industry and the industry`s own digital efforts. For
example, a "National Database for Medical Knowledge" association (developers and users of AI systems
and data in healthcare) was formed in 2018 with the support of the Russian Venture Company.
As a next step, more institutionalized collaborations/partnerships may take place in areas that are
related to Smart Cities and other Smart infrastructures, with accompanying dialogue on AI
regulations.
The development of standards for Smart Cities
(also Grids, Roads, etc), the financial sector and other areas are also important – including
anti-crime and safety issues (which are already in development by NTI's SafeNet group)