Why did Russia's leading IT giant collapse? NIC's bankruptcy exposes cracks in system

The author of the Resurgam Telegram channel discussed the issue.

One of Russia’s largest state-owned IT companies, the National Informatization Center (NIC), has declared bankruptcy, signaling significant issues within the country’s digital and economic systems. The company, a subsidiary of the state corporation Rostec, played a central role in major digitalization projects over the past decade, receiving hundreds of billions of rubles in government funding. NIC managed IT systems for critical sectors, including healthcare, the pension fund, and the Safe City surveillance network. It also handled IT operations during the 2018 FIFA World Cup and developed software for major entities like Russian Post and Rosatom.

Financial troubles for NIC reportedly began in 2023 when the Ministry of Emergency Situations (MES) rejected one stage of the Safe City project, accusing the company of fraud involving 670 million rubles. The ministry refused to pay the contract, escalating NIC’s financial issues. Observers have noted that a company with such extensive government backing and monopoly status should not collapse over a single dispute, raising questions about deeper problems.

The author proposes three plausible explanations for NIC’s bankruptcy:

1. Corruption and money laundering schemes: It is possible that bankruptcy is a method to cover up embezzlement or misappropriation of funds, a scenario seen before with other state-linked entities. For instance, a similar case occurred when a research institute working on import substitution for Western software collapsed after spending billions without producing results.
2. Internal conflicts between state entities: NIC’s financial troubles may reflect a struggle between Rostec and MES over responsibility for misused funds. The MES’s fraud accusations and refusal to pay could be attempts to shift blame, as the 670 million rubles dispute likely represents only a fraction of the actual issues.
3. Systemic crisis in Russia’s tech sector: This bankruptcy might be the beginning of widespread failures in the technological sector, which is particularly vulnerable to inefficiencies and corruption in the economy.

Each of these explanations points to significant dysfunctions within Russia’s governance and economic systems. While the exact cause remains unclear, NIC’s collapse underscores growing instability in sectors previously viewed as critical to the country’s modernization efforts.