By Alexander Marrow and Polina Devitt
LONDON (Reuters) - The Kremlin's fear of a serious tech brain drain is the main factor preventing Moscow from nationalising Nasdaq-listed Yandex (NASDAQ:YNDX), often dubbed "Russia's Google (NASDAQ:GOOGL)", four people with knowledge of the company's divestment plans told Reuters.
Yandex's fate has been the subject of much speculation since it announced plans to pursue a corporate restructuring last November, a move that should ultimately see its main revenue-generating businesses inside Russia spun off from its Dutch-registered parent company.
As Russia's leading tech company, boasting some of the country's top developers among more than 20,000 staff, Yandex was one of the few Russian firms with genuine global ambitions before Moscow unleashed its war in Ukraine in February 2022.
Many of its staff have moved abroad, some relocating to Serbia, where its new offices are filling up quickly. Maksut Shadaev, the head of Russia's ministry of digital affairs, told parliament in December that around 100,000 IT specialists had left Russia in 2022.
And at a company where staff know-how is crucial to maintaining a leading position in search technology, advertising and ride-hailing, a hostile takeover by the state that sparks a talent exodus could do serious damage, according to the sources.
"It's obvious that if (nationalisation) happens, the company will gradually come to nothing," said one of the people with knowledge of the talks. "And this is probably what is stopping tough action from being taken."
The Kremlin did not respond to a request for comment. Yandex declined to comment. In a results filing late last month the company said its plans for the potential corporate restructuring were "progressing".
Moscow has previous form. It seized assets in the Sakhalin oil and gas projects last year by presidential decree and has taken the Russian assets of four Western firms under "temporary control" in 2023, including handing the running of French food group Danone's Russian subsidiary to the nephew of Chechen leader Ramzan Kadyrov.
Yandex co-founder Arkady Volozh, in a statement on Thursday criticising what he described as Russia's "barbaric" invasion, said he had been focused on extricating "talented Russian engineers" from the country since the war started.
"These people are now out, and in a position to start something new, continuing to drive technological innovation," he said. "They will be a tremendous asset to the countries in which they land."
It is not yet clear whether Volozh's comments may have any bearing on how Russia decides to proceed with the company.
TALKS AT STANDSTILL
Sources told Reuters in May that shareholders in Yandex's Dutch holding company, Yandex NV, could be in line to make $7 billion from a full divestment of its Russian businesses and that Yandex had received bids from several Russian billionaires.
The likelihood of Yandex successfully divesting, however, is diminishing, three of the sources said.
Talks are currently at a standstill. The fourth source said Yandex's people were the key asset and that no one wanted to be seen to be "killing the company".
One of the sources said "hawks" in state companies believed nothing at all should be paid to foreigners. There was a risk that the "brains" at Yandex would leave en masse if the company were nationalised or sold to a state firm, the source added.
Andrei Kostin, CEO of state-owned Russian lender VTB, in June proposed that Moscow should take temporary control of Yandex's assets, decrying the fact that Western investors were set to gain.
VTB was the only party to publicly state that it had bid for Yandex, before later announcing a withdrawal from the process. Two sources said VTB had never been a serious option as a buyer, given sanctions on the state lender.
VTB did not immediately respond to a request for comment.
Extracting funds from Russia is getting harder. Obtaining approval for deals, with Moscow now demanding a 50% discount among other requirements, is a lengthy and difficult process, Western company executives have told Reuters.
For Yandex, last month's U.S. sanctions on Alexei Kudrin, the former finance minister acting as a mediator between the Kremlin and the company, are another headache, two of the sources said.