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Russia Takes Heavy Hand To Internet To Block Messaging App

Russia Admits to Blocking Millions of IP Addresses

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Data Recovery, encryption
The website of the Telegram messaging app is seen on a computer's screen in Moscow, Russia, Friday, April 13, 2018. A Russian court has ordered the blocking of a popular messaging app following a demand by authorities that it share encryption data with them. VOA

The chief of the Russian communications watchdog acknowledged Wednesday that millions of unrelated IP addresses have been frozen in a so-far futile attempt to block a popular messaging app.

Telegram, the messaging app that was ordered to be blocked last week, was still available to users in Russia despite authorities’ frantic attempts to hit it by blocking other services.

The row erupted after Telegram, which was developed by Russian entrepreneur Pavel Durov, refused to hand its encryption keys to the intelligence agencies. The Russian government insists it needs them to pre-empt extremist attacks but Telegram dismissed the request as a breach of privacy.

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Alexander Zharov, chief of the Federal Communications Agency, said in an interview with the Izvestia daily published Wednesday that Russia is blocking 18 networks that are used by Amazon and Google and which host sites that they believe Telegram is using to circumvent the ban.

Countless Russian businesses – from online language schools to car dealerships – reported that their web services were down because of the communication watchdog’s moves to bloc networks.

Internet experts estimate that Russian authorities have blocked about 16 million IP addresses since Monday, affecting millions of Russian users and businesses.

Representational image for telegram app.
Representational image. Pixabay

In the interview, Zharov admitted that the authorities have been helplessly trying to block Telegram and had to shut down entire networks, some of which have over half a million IP addresses that are used by unrelated, “law-abiding companies,” he said.

Russia’s leading daily Vedomosti in Wednesday’s editorial likened the communications watchdog’s battle against Telegram, affecting millions of users of other web-services, to warfare.

“The large-scale indiscriminate blocking of foreign IP addresses in Russia in order to close the access to the messaging app Telegram is unprecedented and bears resemblance to carpet bombings,” the editorial said.

Zharov also indicated that Facebook could be the next target for the government if it refuses to comply with Russian law.

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Authorities previously insisted that Facebook store its Russian users’ data in Russia but has not gone through with its threats to block Facebook if it refuses to comply.

Zharov said authorities will check before the end of the year if the company is complying with its demands and warned that if it does not, “then, obviously, the issue of blocking will arise.”

Elsewhere in Moscow, a court on Wednesday sentenced a member of the punk collective Pussy Riot, who spent nearly two years in prison for a protest in Russia’s main cathedral, to 100 hours of community work for a protest against the Telegram blocking. Maria Alekhina and a dozen activists were throwing paper planes outside the communications watchdog’s office on Monday.  VOA

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Russia’s Alternative to Western Credit Card Debuts in London

Russia will next year diversify its foreign currency holdings in its National Wealth Fund

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Employees demonstrating a payment card
Employees speak while demonstrating a payment card during a tour at a branch of VTB bank in Moscow, Russia. VOA

A Russian backed bank payment card, introduced after Western sanctions upended Russia’s financial system five years ago and prompted Visa and Master card to deny electronic services to some of the country’s leading banks, is set for its European debut on London Wednesday, when a pilot project will be launched in collaboration with the Dutch global payment company PayXpert.

Moscow authorities hoped to get the MIR card accepted eventually in foreign markets, but progress has been slow outside Russia for the MIR payment system,  which operates outside of Western-controlled international financial systems such as Swift, which banks use to transfer money.

The pilot project with PayXpert “will lay the foundation for new promising trends in the foreign expansion of Russian payment cards,”  according to Vladimir Komlev, the head of Russia’s National Card Payment System, which operates the MIR system.

De-dollarization efforts

The effort is seen by analysts as part of the  Kremlin bid to de-dollarize the Russian economy to lessen the sting of Western sanctions. A Russian Finance Ministry official this month told Reuters that Russia will next year diversify its foreign currency holdings  in its National Wealth Fund, which supports Russia’s public pension system, aiming to lower the share of dollars in the fund’s reserves.

Dmitry Dolgin of the Dutch banking group ING said in  a report this month that de-dollarization efforts are now obvious across most sectors, including local business loans and bank-held international assets, although he said the dollar’s role  has actually increased in company and household savings and cash assets, partly because dollar interest rates have been higher than those offered for euros.

Credit Cards offers unique features
American Express, Visa and Master Card is displayed in this image. Each Credit Card offers unique features and benefits, along with unmatched privileges. Pixabay

U.S. authorities have been able advance sanctions by targeting companies that use dollars, and the establishment of electronic payment systems not tied to the dollar or largely controlled by U.S. businesses is one way for the Kremlin to reduce the impact of the West’s serial punishment of Moscow. Washington and the European Union have imposed a wave of sanctions since 2014 to punish Russia for the 2014 annexation of Ukraine’s Crimean peninsula, alleged meddling in the 2016 U.S. elections, and the poisoning of a defected Russian spy in England.

Komlev told Reuters this year that “In the next three years we want MIR cards to be operational in countries where Russians are used to traveling.” He projected MIR cards would be operational at some banks in at least a dozen countries by the end of this year. Turkish banks started to conduct transactions this year with MIR, which means both “peace” and “world” in Russian.

MIR was launched initially as a national payment system, with the first cards issued in December 2015. Russia’s leading bank, state-owned Sberbank, started issuing them in October 2016, and by the end of last year more than 70 million MIR-based cards had been issued by 64 Russian banks. The Kremlin has mandated that state welfare and pension payments must be processed through the system by next year, along with salaries paid to civil servants.

The card has a long way to go before it rivals VISA our Mastercard internationally. It is not accepted by international shopping platforms or major online booking services for airlines and hotels, although APEXX Fintech, a British start-up global payment company, said Thursday it would now start working with the MIR system. Among smartphone applications only Samsung has concluded an agreement with the MIR system.

Meanwhile, de-dollarization has been moving quickly. Russia’s Central Bank has currency swap deals in place with Iran, China and Turkey, allowing direct trade to be conducted in local currencies instead of U.S. dollars. Russia reportedly lost $7.7 billion in its bid to reduce dollars held in its reserves. Some of the dollars were turned into gold, and since January the bank has purchased 96.4 metric tons of gold.

People stand in line as they wait to enter the bank with their card
People stand in line as they wait to enter a branch of Sberbank of Russia bank. VOA

Alexei Zabotkin, head of the Russian Central Bank’s monetary policy department, has conceded that it would be impossible to completely empty the country’s foreign exchange reserves of dollars, as this would be  “fraught with excessive risks.” According to central bank data the  National Wealth Fund has $45.5 billion, 39.17 billion euros and 7.67 billion British pounds.

In August, the state-controlled Rosneft oil giant announced it would stop using the U.S. dollar for its export contracts.

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Nonetheless, analysts say there are limits on how far Russia can de-dollarize – the ruble is highly volatile and remains unattractive for investors and de-dollarization brings additional and sometimes prohibitive trading costs.

European regulators will be watching the London project closely. EU officials have been sympathetic about Russia’s de-dollarization bid, suspecting that as a spin-off the euro will be boosted as an international currency. In June the European Commission concluded that “the euro clearly stands out as the only candidate that has all the necessary attributes of a global currency that market participants could use as an alternative to the U.S. dollar.” (VOA)