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What is wrong with the exit of Prosus from the Russian market and why should the Europeans prevent the sale of Avito?

Thursday, 29 September 2022, 14:20

Large-scale Russian military aggression against Ukraine led to the beginning of a massive outflow of foreign businesses from Russia, which adequately responded to the introduction of anti-Russian sanctions.

One of the companies that decided to renounce Russia was the Dutch holding Prosus, which is part of the South African media giant Naspers and owns the largest online classifieds platforms in Russia (Avito) and in Ukraine (OLX).

At the end of March, Prosus shareholders announced the beginning of the separation of the company into two independent entities, with Avito continuing to operate as an independent Russian entity managed by local management.

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Subsequently, in May, after the completion of the operational division of the company, Prosus announced its intention to finally leave the Russian market and started the search for a buyer of the Avito platform.

However, the exit situation of Prosus from Russia and the sale of Avito seems not as good as it might seem at first glance. And the problem is not even that the sale of Avito, announced four months ago, has not yet taken place.

The fact is that despite the attractiveness of Avito for a potential buyer in pre-war conditions, the isolation of the Russian market after February 24 led to the fact that one of the most profitable Russian IT companies became completely uninteresting for Western investors. Before the start of the "special operation" Bloomberg estimated Avito at $6 billion, and already in June most analysts were leaning towards an estimate close to $1-1.5 billion.

In such conditions, numerous sources called the VKontakte group the most likely candidate for the role of the buyer of Avito, which was justified by the latter's interest in acquiring a large classifieds and the affinity of the companies, because 25% of the shares of VK Company Ltd belong to the Dutch Prosus. In the end, the publicized letter of the auditing company "B1" (the Russian division of Ernst & Young) confirmed that Prosus is indeed negotiating with VKontakte, and that Sberbank will finance the deal.

It is worth noting that Avito is a platform with a monthly audience of more than 90 million, to which certain informational content can be broadcast with the help of electronic ads service. For example, calls for war support, humiliation of certain national or ethnic groups, praise of the existing political regime, offers to participate in cyber-terrorism, denial of historical facts, etc. That is, Avito, being under the control of certain persons, can be used as a propaganda tool for the formation of one or another public opinion.

Ever since the beginning of spring, Avito has been accused of posting numerous ads about recruiting soldiers to the Russian army and private military companies to participate in the war on the territory of Ukraine. Based on Russian mass media reports, which were quickly deleted on someone's initiative, the court in Amsterdam even recognized Prosus as an accomplice of genocide in Ukraine due to the fact that the company did not prevent the spread of hate massages on the classifieds service controlled by it.

In addition, from a technical point of view, Avito is a database that contains phone numbers, email addresses, bank card details, private correspondence and other personal data of tens or even hundreds of millions of users of the platform. It is quite obvious that access to such data creates an opportunity to use it, including for illegal purposes: fraud, blackmail, intimidation, etc. Therefore, protecting this data from unauthorized access and from falling into the hands of persons with illegal intentions is an important task of the platform owner.

In this context, it should be understood that VKontakte is currently de facto controlled by the Kremlin. In case Avito comes under the control of this structure, the Putin regime will receive not only an effective tool for propaganda and the formation of military units, but also a huge database of users personal data of this platform, which will surely come in handy in light of the announced mobilization and fight of the criminal regime against dissidents.

Taking into account such perspectives, the intention of Prosus to exit the Russian market by selling Avito to the pro-Kremlin VKontakte is no longer a "gesture of goodwill" in support of European values, but rather an aspiration to obtain any financial benefits, turning a blind eye to the terrible violations of human rights to which such sales will lead.

Property binds and imposes on the owner the duty to do everything possible to ensure that such property does not harm others. And that is why Prosus, determining the conditions for the operation of the Avito ads platform, in particular by implementing an information policy and monitoring its compliance, and assessing the consequences of the company's transition to the control of VKontakte or another Russian structure, must undoubtedly take all possible measures to ensure that the operation of the platform does not cause harm others and did not lead to violation of human rights.

So if Prosus is ready to ignore the duties assigned to it, then surely the issue of the sale of Avito should become a subject of control by the relevant European institutions, because Prosus is a European company and the operation of Avito concerns not only residents of Russia, but also persons with resident status in many countries EU.

First of all, this concerns the European Council and national data protection commissions, which are entrusted with the supervision of compliance with the legislation in the field of personal data protection, in particular EU Regulation 2016/679 (GDPR). After all, the disclosure of personal data of Avito users in the event of its sale to a pro-government Russian structure threatens irreparable consequences and a significant strengthening of the digital dictatorship in Russia.

These same circumstances, combined with the obvious impact of propaganda content on fundamental human rights, necessitates the intervention of the Council of Europe Commissioner for Human Rights and regional commissioners of European states.

In addition, taking into account the introduced sanctions regime, the legal sale of Avito to any Russian company is currently considered impossible. However, the publicized scheme of the probable agreement between Prosus and VKontakte demonstrates a sufficiently complex structure of transactions, which allows formally circumventing existing prohibitions and restrictions thanks to the laundering of Russian funds through a Luxembourg bank. Probably, such operations should come under the strict control of the Financial Action Task Force on Money Laundering (FATF) and Interpol.

Over the past six months, Ukraine has proven to the international community that the aggressor can be stopped, but only with joint efforts. And every European state that does not want the Russian occupier to set foot on its land in a few months or years has to make such efforts. The ability of the Kremlin to implement its aggressive plans depends on the ability to keep its own population within the perimeter of a distorted information matrix, which diametrically changes the very concepts of good and evil. And also from the opportunity to spread "Russian morality" in European society, by any available means. Especially at the household level. For example, such as a platform for private ads.

At the same time, I express my hope that the competent European authorities will stop perceiving the sale of Avito as a purely private-business story, because there is as much private and business in this story as there is truth in the loud statements of Russian politicians.

Disclaimer: Articles reflect their authors point of view and do not claim to be objective or to explore every aspect of the issues they discuss. The Ukrainska Pravda editorial board does not bear any responsibility for the accuracy of the information provided, or its interpretation, and acts solely as a publisher. The point of view of the Ukrainska Pravda editorial board may not coincide with the point of view of the articles author.
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