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Asia Insight

Huawei plays star role in new China-Russia AI partnership

Distrust of US outweighs suspicion of each other -- for now

DIMITRI SIMES, Contributing writer | Russia, Caucasus

MOSCOW -- As Huawei Technologies scrambled to cope with U.S. sanctions in 2019, the Chinese telecom equipment maker was feeling nothing but love from Russia.

Huawei acquired Russian facial recognition technology. It launched a 5G test zone in Moscow. Russian President Vladimir Putin even spoke up for the company, saying the U.S. was trying to "brazenly force it out of the global market" by blacklisting it, as quoted by the government-funded RT.

Indeed, mutual suspicion of the U.S. and shared concerns about being frozen out of advanced technology have brought China and Russia closer together. Now, the Kremlin has declared 2020 the year of Russian-Chinese scientific, technical and innovation cooperation.

One priority stands out: artificial intelligence.

Experts say this new AI partnership -- with Huawei playing a starring role -- could undermine American technological dominance. But just as Moscow and Beijing are wary of Washington, they have their doubts about each other. Some Russian tech insiders warn that working with China is fraught with risks.

Nevertheless, when Chinese President Xi Jinping visited Russia last June, the two governments announced a joint investment fund for high-tech projects. The fund launched in September with an initial budget of $1 billion and a focus on financing AI research.

Meanwhile, several Chinese tech companies have entered Russia over the past year, hunting for AI opportunities.

China's Dahua Technology and Russia's NtechLab joined forces in May to release a camera with facial recognition capabilities -- a product that could appeal to law enforcement in both countries. In December, Chinese software developer Vinci Group agreed to work on AI products with Russian IT startup Jovi Technologies.

But no Chinese company has done more than Huawei to establish itself as an AI player in Russia.

Some experts say the new Russia-China partnership in AI, including facial recognition, could undermine American technological dominance.    © Reuters

In June, Huawei spent $50 million for the rights to facial recognition technology developed by Russian startup Vocord. The venture's website touts the typical mix of surveillance applications -- "public places, transport hubs, stadiums, commercial centers and banks" -- but also features a quirky tool for uploading family photos to see which relative your child most resembles.

Huawei waded in deeper in August, signing a cooperation deal with an AI research center backed by Moscow. Then, at a conference in November, it announced plans to build an ambitious "AI ecosystem" in Russia by 2025.

"Huawei aims to work with industry organizations and engage over 100,000 AI developers, more than 100 [independent software vendors] and over 20 universities to build an AI ecosystem within five years, bringing AI applications to more industries," said Jiang Tao, vice president of Huawei Intelligent Computing BU.

Russia may have only a handful of its own AI startups, but the country has plenty of offer Chinese partners, according to Valentin Makarov. The president of Russoft, an influential software developers association, said Russia can boast of highly skilled specialists, strong research institutions and good achievements in specific AI-related fields such as facial recognition -- a point that appears to have drawn Huawei to Vocord.

As for Russian AI businesses, partnerships with China represent an opportunity to bring their work to an enormous market, noted Igor Bogachev, CEO of IT company Zyfra.

"There are estimates that the Chinese AI market in 2018 was $4.9 billion -- that's a huge number," said Bogachev, whose company works with AI. "So of course the Russian companies are quite interested in bringing their designs to the Chinese market."

As joint projects progress, they could help Russia and China turn the tables on the West.

Huawei wants to build an "AI ecosystem" in Russia by 2025.   © Reuters

Russia's access to Western technology has been limited by U.S. and European sanctions imposed over the Ukraine crisis in 2014. China has felt a similar squeeze amid the trade war with U.S. President Donald Trump.

But Samuel Bendett, a research analyst at the Washington-based Center for Naval Analyses, thinks the growing Sino-Russian cooperation could chip away at America's edge.

"Both China and Russia are making public their plans to compete for the [world's] best and brightest high-tech workers, seeking to attract this newly emerging AI talent pool to their respective countries," Bendett said.

The U.S., he continued, "has an advantage in the near- to mid-term as the country with the biggest financial and educational support for AI development, but Sino-Russian cooperation can erode this advantage down the line."

The Pentagon sees a national security threat, even though Moscow and Beijing have yet to openly collaborate on military AI. In an AI strategy released in February 2019, the Defense Department warned that growing Russian and Chinese spending on military applications for artificial intelligence threatens "to erode our technological and operational advantages and destabilize the free and open international order."

Others question whether the partnership will ever get that far. Skeptics note that fundamental issues of trust could pose serious obstacles to true cooperation.

Intellectual property rights are one concern.

In December, in an unusual public airing of grievances, Russia's state defense conglomerate Rostec accused China of copying everything from Sukhoi fighter jets to missile systems. Many Russian AI companies fear losing their technologies the same way, explained Alexey Maslov, a professor at the National Research University Higher School of Economics.

"Formally, Russia and China have signed all the agreements about respecting intellectual property, but we know of cases of China acquiring Russian technology through piracy," Maslov said. "As a result, Russian companies are afraid of cooperating with China."

Some Russian tech companies working in China, he added, register in Singapore or Hong Kong -- hoping for an extra layer of protection.

Bogachev said his company treads carefully. "On the one hand we have experience working in China and want to do business there," he said. "But at the same time we are very cautious about doing so because we are genuinely worried about our intellectual property."

Another concern is technological asymmetry.

Sergey Karelov, founder and chief technology officer at Russian IT consultancy Witology, worries Russia's relatively small AI market means China will not consider it an equal partner. He offered a grim prediction of Russia's technological future as Washington and Beijing's great power competition unfolds.

"The United States and China are moving rapidly ahead, and all the other countries will find themselves hopelessly behind in just a few years," Karelov said. "We will have a strange bipolar world in which it will be too late to talk about cooperation between [first-tier powers like] the United States or China and second tier countries like Russia or Germany."

Russia's AI cooperation with China, Karelov warned, could result in a massive outflow of Russian data that would only widen the gap between the two nations.

Nearly all the Russian experts Nikkei spoke with opposed Moscow sharing any military AI innovations with China. Russoft's Makarov argued Russia cannot afford to work with China in such a sensitive area because there is no guarantee their friendship will last.

"There are certain critical technologies that will determine the new economic order and you need to maintain sovereignty over them," he said. "History has unfortunately shown that periods of warming are replaced by other periods."

For now, Moscow and Beijing look set to continue marching arm-in-arm into the brave new world of AI. Putin's dramatic political shake-up in January, which resulted in the departure of Prime Minister Dmitry Medvedev -- who had championed AI cooperation back in 2017 -- is not expected to change that.

But something else that happened the same day Medvedev's government resigned could, perhaps, have an impact.

That day, the U.S. and China signed their "phase one" trade deal. Beijing agreed to boost imports of American products by $200 billion in exchange for Washington lowering its tariffs on sanctioned Chinese products to 7.5%, from 15%.

Russia's political elites are far from thrilled about the compromise, Maslov said. Part of the appeal of teaming up with China was the idea of creating a united front against the U.S. But the professor said Moscow is even less likely to trust Beijing with advanced technologies now that it doubts China's commitment to resisting Washington.

"It turned out that China is not ready to wage a real fight against the United States and, in this, the psychology between Russia and China diverges," Maslov said. "Russia is ready to fight whereas China is ready to back down."

The sense in Russia, he said, is that "China is not the reliable partner to whom you can give over advanced technologies because China is not willing to actively defend its interests against the outside world."

Pressure from the U.S. motivated China and Russia to put their heads together on AI. A difference of opinion on how to deal with the U.S. might just tear them apart.

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