Weekly 10 October 2020

Russia’s largest bank is using school canteens to collect children’s biometric data

Hello! Our top story this week is Sberbank harvesting biometric data from hundreds of thousands of Russian schoolchildren. We also discuss Russia’s cautious approach to the conflict between Armenia and Azerbaijan, and look at why Moscow is resisting a second lockdown, even as the country reports record numbers of new coronavirus cases.

Russia’s largest bank is using school canteens to collect children’s biometric data

Russia is still a long way from achieving China’s level of online control over its citizens. But if it is going to catch up, it seems that Sberbank will play a leading role. The state-controlled lender is steadily transforming its Soviet banking monopoly into a modern digital empire. This week The Bell learned how the bank is harvesting biometric data from hundreds of thousands of Russian schoolchildren — using methods that even state officials regard as dubious.

  • Sberbank’s ‘Ladoshki’ project is a system that enables children to pay for school meals without cash. But instead of using a standard bank card or smartphone, children are identified by the vein patterns on the palms of their hands. To pay for a meal, a child simply places their hand on a scanner in the canteen and chooses their food. The money is then automatically taken from an account which has been linked to their handprint.
  • Мore than 600 Russian schools have already signed up for the system, which Sberbank started developing in 2015, and hundreds of thousands of children are involved. The scheme is funded by food suppliers, who pay a commission of 3-3.6 percent on transactions.
  • Several parents have complained that they were forced to sign up for the service, even though schools in Russia are legally obliged to accept cash payments. It then took the parents several months to opt out of the system and to be able to continue paying with cash. But the service is helpful for school administrators, as it makes it easier to monitor revenues and cashflow. In one city where the scheme operates, The Bell was told that 95 percent of students had signed up.
  • In each of the participating schools, parents signed legal agreements on behalf of their children regarding the processing of their biometric and other personal data. This contravenes Russian law, which clearly requires individuals to consent to the processing of their own data, except in the case of government services, like getting a passport. Sberbank believes it is acting within the law. It told The Bell that the parents are legal representatives of their children and that restricting their ability to consent would deny children the right to access the service.
  • Sberbank — which has spent several years buying up all kinds of digital services and last week announced that it was dropping “bank” from its name — is aggressively compiling a database of Russian citizens’ biometric information. In 2018, the bank — whose services are used by 100 million of Russia’s 146 million residents — launched a scheme to start collecting clients’ biometric data. In regional branches, customers even feared they would not be able to use their bank accounts without having their biometric information added to the database. Little news about how that project is progressing has been made public, but a few months after its launch Sberbank CEO German Gref boasted that several million people had already submitted their biometric information. Russia’s Central Bank is rolling out a similar system, but is gathering data at a far slower pace.

Why the world should care

Russia’s internet companies lag behind their U.S. counterparts in many areas, but the American giants could only dream of getting access to this kind of data on such a large scale.

Why Russia is staying on the sidelines of the Nagorno-Karabakh conflict

The long-running conflict between Azerbaijan and Armenia over the disputed Nagorno-Karabakh region boiled over into serious military confrontation more than two weeks ago. But Russia is only now ready to take a more active — diplomatic — role in the crisis. This weekend, the warring parties signed a truce brokered by Moscow. But this year’s Karabakh conflict is notable as the first instance in a number of years where Russia has opted not to play a more active role in a territorial dispute in the former Soviet Union.

  • Moscow has long preferred to take a hands-off position regarding the Nagorno-Karabakh conflict — even though Armenia is officially a military ally of Russia. Both countries are members of the Collective Security Treaty Organization, the only military alliance Russia plays a leading role in. It was established by a handful of former Soviet states in 1993. Back then there were nine members, but today there are just six: Russia and Armenia, along with Belarus, Kazakhstan, Kyrgyzstan and Tajikistan.
  • After Armenia and Azerbaijan first went to war over the region in 1988 — a conflict which lasted until 1994 — Russia effectively took Armenia’s side. It arranged the negotiations which resulted in Armenia retaining de facto control of the territories it captured. In exchange for that support, Russia gained a military base in Armenia. Popular sentiment in Russia also tends to be on the side of Armenia. But in 2020 the situation is different. Although there have been three telephone conversations between President Vladimir Putin and his Armenian counterpart Nikol Pashinyan, Moscow did not say or do anything during the first two weeks of the conflict.
  • The uncertainty of Moscow’s position is demonstrated by the coverage of Russia’s state-controlled media in the two countries. Sputnik, for instance, has newsrooms in both Armenia and Azerbaijan — and both have been stridently one-sided in their accounts of the conflict. Sputnik Azerbaijan published its material under the tagline: “The liberation of Azeri soil from Armenian occupation.” Its headlines talk of the “heroic warriors of Azerbaijan landing crushing blows on the enemy.” Sputnik Armenia, meanwhile, writes of “Baku’s failed blitzkrieg” and discusses Azerbaijan’s links with terrorists.

Russian experts identified two key reasons why the authorities were quietly distancing themselves from Armenia.

  • First, the Kremlin is not about to enter into conflict with Recep Tayyip Erdogan’s Turkey, which is actively supporting Azerbaijan. The two nations have spent five years building an alliance and Ankara is one of Russia’s last remaining big partners — sometimes even dubbed “Russia’s agent in NATO.” The partnership was not even affected when direct clashes between Russian mercenaries and Turkish proxies in Syria resulted in casualties.
  • Second, Moscow is annoyed by Armenian Prime Minister Nikol Pashinyan, who came to power following mass protests that the Kremlin regards as another color revolution. Russian propaganda has tried to connect Pashinyan to George Soros, a long-standing bogeyman for the political right and autocrats. Yevgeny Prigozhin, the Kremlin-affiliated sponsor of the Wagner private military company, reiterated that very point in an interview he gave to a Turkish newspaper published by Erdogan’s party — just a few months after Turkish troops were fighting Prigozhin’s mercenaries in Syria.

Why the world should care

Russia’s stance on the Nagorno-Karabakh conflict is the latest indicator of Vladimir Putin’s global ambitions. His partnership with Turkey is more valuable to him than preserving the reputation of the sole military alliance within the former Soviet Union.

A new coronavirus record, but no new quarantine

Russia set a new record number of daily COVID-19 infections this week, in another sign of the accelerating spread of the coronavirus around the country. The country saw more than 12,000 new cases Friday — the most in a single day this year. As usual, Moscow has more confirmed cases than any other city or region, but authorities are still hesitating over whether to introduce strict new quarantine measures. One reason might be the difficulty of persuading Putin that the city actually needs to shut down following the president’s announcements over the summer that Russia had defeated the coronavirus and officially registered the world’s first vaccine.

  • Russia reported 12,126 new cases of COVID-19 on Friday — an all-time record for the pandemic. Some 3,701 of the new infections were in Moscow. However, this time around the pandemic is far less tightly concentrated in the capital. During the previous peak in May, Moscow accounted for 60 percent of the country’s new cases.
  • That’s one reason why Moscow authorities are not rushing to impose a new quarantine. From April to early June, most Muscovites faced a strict ban on travel around the city. Those taking public transport had to obtain a digital permit and there were fines for violating the restrictions. So far, those tough measures have not been reintroduced, but lighter steps to control the spread have been adopted. Authorities have advised those over 65 to stay home and temporarily blocked their free travel passes for the city’s transport network. Employers have been threatened with fines if they do not ensure at least 30 percent of their workforce are working remotely. And schoolchildren are on an extended two-week vacation until Oct. 19.
  • But if things don’t improve, next week could see city authorities introduce a “full isolation” regime, Vedomosti (Rus) reported. One of the paper’s sources lamented that it isn’t easy for the capital to reintroduce more radical measures while Putin is receiving positive reports about vaccine development and is repeatedly being told that the situation is under control. “City Hall is in a difficult situation — it has to find the right way to explain that the coronavirus is back and that serious restrictions are needed,” the source said. Russia registered a vaccine for COVID-19 in August, before full clinical trials had been completed. Those trials are now rapidly proceeding, but Moscow mayor Sergei Sobyanin said Friday that the vaccine would not be widely available for several months.
  • The economy is another reason to hesitate. There are fears that Moscow’s businesses will not survive another lockdown. Half of the government’s programs to support small businesses expired at the end of last week, while a moratorium on bankruptcy was extended for firms in the worst-affected sectors. Last weekend Sobyanin said that the most effective business support measure would be to avoid a second shutdown.

Why the world should care

All the talk about a Russian COVID-19 vaccine is just that — talk. Since it was officially registered two months ago, the vaccine has only been made available to people connected with the government or large businesses. A program of mass vaccination is not expected until next spring at the earliest.