Thread by @AlexGabuev

THREAD Huawei is on its way to cement dominance in the Russian&Eurasian 5G market. A new testimony to the trend is today's interview of Vice-Premier Yuri Borisov, the defense industry czar, to @Vedomosti, a leading Russian business newspaper. Let me dissect it: 1/

2/ When asked about his take on recent Putin's decision to develop 5G in 4,4-4,9GHz range, Vice-Premier Borisov justifies it citing high cost of moving the military populating 3,4-3,8GHz to another frequency range. vedomosti.ru/politics/chara…

3/ Borisov: This decision will also give the Russian industry an incentive to decrease dependency on foreigners in hardware, maybe create partnerships with leading vendors.
@isafronov: But the main vendor in 4,4-4,9GHZ range is just Huawei...
Borisov: What's wrong about that?

4/ Borisov goes on telling that his hope for the Russian industry is to get a slice of 5G equipment contracts in partnership with Huawei, because "no one in the world does this fully independently," but admits that becoming a meaningful partner for Huawei will be "a challenge."

5/ This exchange is remarkable for one simple reason: Borisov represents the faction in the Russian elite (defense industry dominated by Sergey Chemezov + the army) that is the most positive about indigenous manufacturing, and that has been historically very Sino-skeptic

6/ Reading between the lines of Borisov's interview, and based on my recent conversations with Russian officials and business executives, I conclude that consensus in the Kremlin is tilting towards a simple line: if Russia is to build 5G, dependency on Huawei is inevitable

7/ Huawei has been cultivating Russian and CIS markets for years, and tis all over 4G networks in this part of Eurasia. All the major cellphone operators in Russia (MTS, MegaFon, Beeline) experiment with Huawei's 5G equipment, the only exception is Tele2 that works with Ericsson

8/ Part of Huawei's success in Russia beyond quality of its products& prices is ability to play on the Russian pride. The Kremlin wants to project an image that local companies are part of Huawei's global supply chain, including on the high end, and Huawei is happy to play along

9/ Huawei has some senior executives who know Russia well, understand the market and psychology of local leaders, and put this knowledge to Huawei's advantage. Key figure here is senior vice-president Lin Ruiqi 林睿琦, former head of Moscow office and a fluent Russian speakers

10/ Since Xi's visit to Russian in June 2019 and amid escalating US-China tensions, Huawei was in talks with the Russian government to install Russian Aurora OS (based on initial Nokia design) on Huawei devices to potentially offset problems with Google's Android.

11/ This experiment will be limited, and so far only use of Aurora on Huawei-supplied tablets for Russian population census is agreed. But the Kremlin gets a symbolic gain, and Huawei uses it to position itself as a benevolent partner for Russia in 5G reuters.com/article/us-hua…

12/ Huawei is also interested in integrating Russian IT specialists into its supply chain, and has announced plans to quadruple its R&D personnel in Russia by 2024 bringing total to 2,000 engineers. caixinglobal.com/2019-08-19/san…

13/ Huawei is also trying to buy into existing high-tech companies looking for cheap and reliable Russian technologies that could advance its R&D in China and help to offset the effect of Trump's sanctions. rbc.ru/technology_and…

14/ What drives China-skeptics in the Russian government into ranks of Huawei-supporters is breakdown of Russia's relations with the West, and EU/US sanctions. People in Moscow are not naive don't want to find Russia in Huawei's pocket, but they believe there is not much choice

15/ "We can't do 5G equipment locally, maybe just a little. So the basic choice is simple: do we buy hardware from the West or from China? And are we bugged by NSA or by MSS?" a senior Russian official once explained to me.

16/ The concern of the Kremlin with regard to 5G is not that much an ability of foreign intelligence services to use the new networks for intelligence gathering, and they know Huawei hardware is unlikely to prevent NSA from being able to spy on Russian civilian-use networks.

17/ What worries the Kremlin the most is ability to use the "killer switch," or knock out some of 5G-enabled services in Russia because of implants in Western equipment. The Russians believe China won't do it because, unlike the West, it doesn't seek regime change in Russia.

18/ At the end of the day, Russia and some other countries of former USSR (in Central Asia and Southern Caucasus) are likely to be part of Huawei's orbit, and Chinese technical standards for 5G will become the default standards in large part of Eurasian landmass.