Last week, Russian President Vladimir Putin instructed his cabinet to launch a new investment cycle “to ensure economic growth rates above the world level.” Yet just a few weeks earlier, he recommended the legislature pass laws to protect investments in Russian industry—specifically highlighting the need to protect Russian data. (As with all of Putin’s “recommendations,” it came with a deadline attached: April 30.)
Russia is not the only country scrutinizing foreign investments in its domestic tech while simultaneously pushing for economic growth. The United States, Israel, China, and other countries are seeking to build better screens.
Justin Sherman (@jshermcyber) is an Op-ed Contributor at WIRED and a Fellow at the Atlantic Council’s Cyber Statecraft Initiative.
State inspection of foreign investments at home isn’t novel. Probing NGOs and mandating registration of foreign lobbyists are just two decades-old examples. What’s different today is that countries are accelerating and expanding these powers where they already exist, or freshly architecting them altogether. It’s a way for governments to address two things: perceived foreign influence over their domestic technology spheres, and perceived risks of foreign governments using investments and acquisitions to access sensitive data.
Let’s start in the States. Acronyms are the lingua franca of government bureaucracy, and the US’ process for vetting foreign money poured into American firms is no exception: CFIUS, or the Committee on Foreign Investment in the United States.
Established in 1975 through a Ford administration Executive Order, CFIUS is composed of representatives from State, Treasury, Defense, and numerous other agencies. The whole point is to balance myriad interests—broadly, economic and security goals. Of all entities within the executive brand, it has primary responsibility for watching foreign investment in the States. Its recommendations can lead to blocking covered transactions that threaten US national security—and even undoing those already completed.
CFIUS’ members and authorities have shifted and expanded over time, but the notable expansion—and use—of its powers during the Trump administration typifies the growing scrutiny applied to overseas money seen around the globe, specifically in tech. The administration has blocked deals for everything from semiconductors to flight services. In 2018, a Chinese firm’s acquisition of an American payment company imploded after CFIUS refused to clear it.
Lately, CFIUS has zeroed on deals centered on data, like when it informed Chinese company Beijing Kunlan Tech it had to sell the dating app Grindr. Information on sexual preferences and activity, the logic went, is too sensitive to risk falling into the Chinese government’s hands. And while the last time CFIUS publicly released investigation statistics was 2015, those numbers and recent press reports indicate a growing and heavy focus on Chinese investments in US tech.
Israel is now trotting a similar path. As Chinese money in Silicon Valley caught more attention in Washington, a “honeymoon” period resulted for Israel: The country was glad to source new investors as Chinese actors happily pumped money into the Israeli tech sector. Pressure from the Trump administration ended this brief vacation.
In late October 2019, Prime Minister Benjamin Netanyahu’s office issued a statement on the planned creation of what is essentially an Israeli CFIUS. Its aim: “finding the appropriate balance” between economic prosperity and national security vis-à-vis investments. Also like CFIUS, the panel will be composed of finance and defense officials and will consult other stakeholders across foreign policy and intelligence. Nobody explicitly called out China in the announcement, but for anyone watching the Trump administration’s view of Beijing, the primary target of this change is hardly in doubt.
For his part, Putin has long been suspicious of Western technology influences within Russia, as have his close advisers. Foreign investments in Russian media companies, for instance, are already limited. Putin’s latest recommendations follow a series of moves to shrink perceived foreign threats specifically to Russia’s tech sector. Yandex—the internet company with a global presence unusual for many Russian tech firms—is a relevant case study.
Tactfully managing its international business presence against the Kremlin’s domestic wishes has been a years-long and continuous project for Yandex, as well-documented in books like The Red Web. The latest step in this dance came last fall. After the media reported that Kremlin officials welcomed further limits on foreign investments in tech companies, Yandex’s share prices sharply fell. Further discussion of possible legislation aimed at companies who “collect information on [Russian] users” increased Yandex’s uncertainty.
Then, in December, Yandex’s share prices were record high: As the Financial Times reported, Yandex’s founder announced a deal with the Kremlin to provide key authorities larger (though, officially, not directly Kremlin-run) influence over investments in the company. “It reassures the Kremlin … [Yandex] is not a possible mechanism for someone to attack the state in their interest,” said one person involved in the talks.
Such cases evince how the flow and storage of data is increasingly considered a national security issue by countries large and small, governments democratic and authoritarian. Corporate data collection has allowed a select few players to assemble massive troves of data on citizens around the world. In the shadows, a horde of data brokers further compile, analyze, and package this kind of data for sale to whomever is buying. Many of these firms hold sensitive information—whether identity characteristics like gender or religion, or metadata like call histories and travel patterns—making the security and privacy risks of such data consolidation all the more urgent.
In tandem, more governments are laying internet filtering systems over the web, creating and fortifying capabilities to intercept data crossing their geographic borders. Sophistication varies, yet in the most intrusive cases, governments can monitor not just traffic attributes like source and destination, but the content of communications themselves. Other, new laws in places like Vietnam and China grant law enforcement greater unchecked access, in certain cases, to that corporate data stored in their borders.
These growing policies to investigate and block foreign investments in domestically incorporated tech companies reflect these kinds of concerns about adversarial data access—that a company might begin storing or routing data in compromising ways, for example, or that a government like China might use its companies’ tech investments to get backdoor access to otherwise inaccessible systems.
As talk of US-China “decoupling” remains in vogue—at least in certain Washington wonk circles—it’s worth realizing that numerous world leaders are exploring ways to limit security risks posed by investments in technology companies. Nonetheless, that doesn’t mean all those efforts are necessarily well-scoped or well-executed in practice. Paranoia and misperception of actual foreign government capabilities and intent to access data abound in certain cases.
The question for policymakers, then, becomes: What kind of investments cross the line? Developing these clear criteria—and, in the US, in ways at least slightly more transparent than those in the current, largely opaque CFIUS process—can at once help to better inform the public about these processes and to better balance economic interests with those pertaining to data flows and national security.
WIRED Opinion publishes articles by outside contributors representing a wide range of viewpoints. Read more opinions here. Submit an op-ed at email@example.com.
More Great WIRED Stories
- Algae caviar, anyone? What we'll eat on the journey to Mars
- Deliver us, Lord, from the startup life
- A code-obsessed novelist builds a writing bot. The plot thickens
- How a space engineer made her own rotary cell phone
- How to share files securely online
- 👁 The secret history of facial recognition. Plus, the latest news on AI
- 🏃🏽♀️ Want the best tools to get healthy? Check out our Gear team’s picks for the best fitness trackers, running gear (including shoes and socks), and best headphones
WIRED is where tomorrow is realized. It is the essential source of information and ideas that make sense of a world in constant transformation. The WIRED conversation illuminates how technology is changing every aspect of our lives—from culture to business, science to design. The breakthroughs and innovations that we uncover lead to new ways of thinking, new connections, and new industries.
More From WIRED
- Wired Staff
- Press Center
- Contact Us
- Customer Care
- Site Map
- Accessibility Help
- Condé Nast Store