Russia-Ukraine War Continues To Pummel U.S. Data Center Industry

The invasion of Ukraine — along with Western sanctions and corporate divestment against Russia and companies affiliated with Vladimir Putin's government — continues to impact the data center landscape in the U.S.

In recent days, Russian cloud provider Yandex announced it is nearing insolvency after being delisted on Nasdaq. While internet service provider and colocation data center operator Cogent Communications will soon drop all Russian customers and power down their hosted servers.

Meanwhile, Oracle has stopped providing cloud services to Russia — and Microsoft’s Azure cloud products may not be far behind. 

With the industry already bracing for cyberattacks and worsening supply chain problems, data centers may continue to feel the war’s impact as the conflict severs economic relationships across the globally connected digital infrastructure space. 

Russia’s Google May Default After U.S. Trading Freeze 

Russian cloud giant Yandex is warning that the company may default on its debts after its stock was indefinitely de-listed on the Nasdaq stock exchange.

The Russia-based tech giant — sometimes referred to as “Russia’s Google” for its array of services ranging from cloud services and search engines to ride-hailing apps — said in a press release that the company remains suspended from the digital stock market through this week and it will be unable to make upcoming bond payments.

Although the company said it still has a cash balance of over $600M, mostly in dollars and euros held outside of Russia, the suspension would trigger a condition of certain bonds allowing their holder to immediately redeem them with interest. 

"The Yandex group as a whole does not currently have sufficient resources to redeem the notes in full," the company said, and doing so would "have a material adverse effect on our short-term financial position and liquidity and may affect our ability to meet our other obligations."

While Yandex is not directly subject to U.S., UK or European Union sanctions, both Nasdaq and the New York Stock Exchange have suspended trading of all Russian companies until they can explain how they will be impacted by those sanctions.

Yandex has already had to scramble to meet its debt obligations following the invasion of Ukraine, transferring millions of dollars from a Netherlands-based subsidiary to pay certain bondholders last Thursday. But even in the event of default, the company says, it should continue to operate normally and avoid the impact of sanctions, at least for the immediate future. 

"We believe that our current data center capacity and other technology critical to operations will allow us to continue to operate in the ordinary course for at least the next 12 to 18 months," according to a Yandex statement.

"We are currently analyzing the new export controls and working closely with our vendors. None of the Yandex group companies operates in the defense, aerospace or maritime sectors that have been specifically targeted."

Cogent Removing Servers From Russian Companies

DC-based Cogent Communications — one of the world’s largest internet service providers with a significant colocation data center business — has told Russian customers that their business relationships are being terminated effective immediately.

While the decision impacts all of Cogent’s service lines, a memo to Russian customers specifically mentioned companies with their own equipment in any of the company’s 54 colocation data centers located across North America and Europe.

“For any colocation customers, your equipment will be powered off and kept in the rack for you to collect," Cogent’s memo read. "If not collected within thirty days, the equipment will be removed from the rack and stored. For any utility computing customers, you will not have access to your servers after the termination of service. The servers will be disconnected and kept in storage by Cogent for an indeterminate period."

According to network analysis firm Kentik, Cogent’s top five Russian customers are Russian state telecom Rostelecom, fiber provider Transtelecom and mobile services Megafon and VEON.

Oracle Pulls Cloud Services From Russia — And Microsoft May Be Next

On March 2, software and cloud provider Oracle announced that it would suspend all operations in the Russian Federation. Oracle doesn’t have any data centers in Russia, but some of its cloud services, such as Oracle Exadata, were used by Russian companies until now. 

Microsoft also announced late last week that it would stop "all new sales of Microsoft products and services in Russia."

But what exactly this entails remains unclear. Like Oracle, Microsoft does not operate a data center in Russia. And while its Azure cloud services are not available there directly, the company partnered with Russian telecom MTS in 2018 to provide cloud services under a different label based on Azure.

MTS was recently delisted from U.S. stock exchanges.