Israeli tech firms halt operations in Russia over Ukraine war as sanctions pick up

A number of Israeli tech companies have suspended or pulled their commercial operations in Russia over its ongoing war on Ukraine, amid an avalanche of coordinated government sanctions by Western nations and a boycott by private and public companies that began days after Russian troops invaded Ukraine on February 24.

As the war enters its third week, these punitive measures against Moscow have been gaining pace.

By Sunday, over 350 companies, including tech firms, major manufacturers and consumer brands have either suspended or halted their operations in Russia altogether or have restricted their services in order to pressure the Kremlin over the war, according to a running tally kept by a team of researchers from Yale University. The list includes Visa, Apple, Facebook, Mastercard, Amazon, Google, Ford, Dell, DHL, and McDonald’s, as well as a host of luxury brands.

These moves have been coupled with far-reaching sanctions by Western governments on Russian agencies, companies, and individuals such as President Vladimir Putin as well as dozens of oligarchs, the scale of which economic analysts say is unprecedented.

The oligarchs — government officials and business owners who have amassed vast wealth in an economy where only Putin loyalists can get ahead — are seen as somewhat vulnerable because much of their wealth is tied to Western interests.

In Israel, the government has avoided sanctions on Russia or direct criticism of the Kremlin as it seeks to balance its ties with both Kyiv and Moscow. The country has also taken no action against Russian oligarchs with assets in Israel, most prominently Roman Abramovich, a Russian-Israeli magnate who has been sanctioned by the United Kingdom and Canada.

But over the past week, a handful of large Israeli firms have joined the ranks of multinationals freezing or restricting their activities in Russia, including Fiverr, a company that connects businesses with freelancers offering digital services and products; web creator Wix, which employs nearly 1,000 Ukrainian developers; gaming giant Playtika; Payoneer, a payment processing firm with a previous history of running afoul of sanctions in regions like Crimea, Iran, Sudan, and Syria; and fintech firm Tipalti.

Fiverr co-founder and CEO Micha Kaufman said in a post that the “devastation in Ukraine requires action” and that the company — publicly traded on the New York Stock Exchange with a market cap of about $2.3 billion — would be “suspending its business in Russia.” The company has allowed Russian freelancers to withdraw their earnings and has worked to support its Ukrainian freelancers and workers, Kaufman said.

Wix co-founder Avishai Abrahami said on LinkedIn last week that the company, traded on the Nasdaq with a market cap of $4.39 billion, has stopped operating in Russia and “does not and will not sell anything in Russia and no commerce can take place.”

However, in the interest of free speech, “the ability to create and publish free sites will remain available in Russia,” he added.

Wix had approximately 1,000 developers in Ukraine before Russia’s invasion late last month, and ran logistics to get teams to safety where possible.

Israeli-founded gaming company Playtika, which has employees in three major Ukrainian cities including the capital, said that it was pulling its online games from the app stores in Russia “until further notice” and contributing funds to the Red Cross Ukraine Appeal Fund.

Playtika is a pioneer of free-to-play games on social networks and mobile platforms and the creator of popular titles such as Slotomania, House of Fun and Bingo Blitz. The company was acquired in 2016 for over $4 billion by a Chinese consortium that includes the private equity firm co-founded by Alibaba’s Jack Ma.

Headquartered in Herzliya, Playtika went public on the Nasdaq last year and currently has a market cap of about $8 billion.

With sanctions in mind, payments firm Payoneer has said it “won’t accept any new customers, and after fulfilling its obligations toward its existing users in Russia, in line with its service agreements, services will also be halted for them.”

“We cannot, with a clear conscience, support an aggressive government that has disrupted decades of peace in Europe,” the company added in a statement.

Payoneer’s shares started trading on the Nasdaq last year at a valuation of over $3 billion, after it completed a merger with special purpose acquisition company FTAC Olympus Acquisition Corp., a blank-check company run by Bancorp founder Betsy Cohen. The company currently has a market cap of $1.53 billion and is considered one of the largest online money transfer platforms in the world, allowing businesses and gig economy freelancers in different countries to transact with each other and with clients. It counts Amazon, Airbnb, and Fiverr among its partners.

Last year, Payoneer agreed to pay a fine of some $1.4 million as part of a settlement for more than 2,000 apparent sanctions violations, by processing payments for parties located in Iran, Sudan and Syria among others, according to US Treasury Department.

Meanwhile, fintech firm Tipalti, a developer of payments and compliance solutions, said it was “obligated to work with sanctions screening systems to identify financial crimes and check classification lists before every transfer of payments on the company’s platform.”

“At this time, these systems do not enable the transfer of payments to Russia,” it said in a statement.

Tipalti says it processes over $30 billion in total annual payments volume in over 150 countries.

Navigating sanctions

Generally, while Israeli companies that sell goods or services to clients in Russia or otherwise engage in business relations with Russian entities are not directly bound by the sanctions imposed by the US, the EU, and the UK, they may be at risk of violating the punitive measures or becoming entangled in them, especially if they also have operations in these countries.

The Ministry of Economy and Industry held a webinar last week for companies that export products or services to Russia or maintain other business relations with Russian entities to help them stay on top of regulations and how they may be affected.

The US government, meanwhile, has warned Israel against taking in “dirty money” from Russia and called on Jerusalem to join Western sanctions against Moscow.

The US under secretary of state for political affairs, Victoria Nuland, told Israel’s Channel 12 new this weekend that Israel should get onboard with Western sanctions and bar Russian oligarchs.

“What we are asking among other things is for every democracy around the world to join us in the financial and export control sanctions that we have put on Putin. We have to squeeze the regime, we have to deny it the income that it needs,” Nuland said.

“We squeeze the oligarchs around him, we squeeze its economy. So in that context, we’re asking as many countries as we can to join us. We’re asking that of Israel as well,” she said.

Israel has provided humanitarian aid to Ukraine, including medical equipment and generators for a hospital, but has so far refused to send military equipment, including defense gear such as flak jackets and helmets.

As Israel has avoided imposing sanctions, flight traffic has suggested that some wealthy Russians are seeking refuge in Israel.

Channel 12 reported Friday that in the last 10 days, 14 private jets that took off from St. Petersburg landed at Israel’s Ben Gurion International Airport.

Last week, the outlet reported that an unusual number of rented private jets have been flying from Russia to Israel since the invasion of Ukraine, a possible indication that some rich Russians are looking at ways to slip around sanctions.

Times of Israel staff and Agencies contributed to this report.