Russian cybersecurity firm Kaspersky Lab will gradually scale back its operations in the US following the recent sanctions imposed by the US Commerce Department, which ban the company from selling and updating its popular antivirus software in the country.

Goodbye US

Kaspersky Lab has had problems in the US market for quite a while, as relations between the US and Russia have soured over the annexation of Crimea in 2014 and, more recently, over Russia's invasion of Ukraine.

However, last month's decision by the US Commerce Department effectively caps Kaspersky Labs' prospects in the US, which the company once considered a priority market.

"Kaspersky will generally no longer be able to, among other activities, sell its software within the United States or provide updates to software already in use," the US Commerce Department said in a statement last month.

The announcement came after a months-long probe found Kaspersky's operations in the United States "presented a national security risk due to the Russian Government's offensive cyber capabilities and capacity to influence or direct Kaspersky's operations," the agency said.

Although Kaspersky Lab initially said it was going to fight the sales ban in court, the firm apparently thought twice about its chances to get the decision overturned and announced its gradual exit from the US on July 16.

"Kaspersky Lab, after carefully studying and assessing the implications of US legal requirements, has made the difficult decision to cease active operations in the US, with no prospects for business in the country," Kaspersky Lab said in a statement quoted by the Russian state-run news agency TASS.

 

It started so well…

Meanwhile, the US was one of the first foreign markets Kaspersky Lab expanded into, and the security firm has successfully operated there for over two decades.

Founded in 1997 in Moscow by Evgeny Kaspersky, Natalya Kaspersky and Alexey De-Monderik, Kaspersky Lab almost immediately began to establish presence outside Russia. In 1999, Kaspersky Lab opened its first office abroad in the United Kingdom, followed by an office in the United States as part of a strategy to tap into significant cybersecurity markets worldwide.

At the time, expansion into Western countries seemed like a natural direction for the fledgling tech firm, as Russia was keen to establish good relations with the Western world.

By the 2010s, Kaspersky Lab emerged as a prominent player in the US cybersecurity market, with a roughly 9% market share in the consumer security segment in early 2014, according to Forbes. At some point, Kaspersky was considered one of the top three brands in internet security, behind Norton Antivirus and McAfee.

Things began to sour when Russia annexed the Crimean peninsula in March 2014, triggering a host of Western sanctions. During this period, criticism of Kaspersky Lab emerged in the US over alleged connections to Russian security services.

Although Kaspersky Lab has consistently denied these allegations, it has been widely known that Evgeny Kaspersky, the company's co-founder and CEO, is a graduate of the KGB school and has a history of supporting Russian government initiatives aimed at increasing state control over the Internet. Despite these controversies, as recently as November 2019 Kaspersky Lab was recognised as the Brand of the Year at the World Branding Awards, winning in the Anti-virus Software category.

 

Road bumps

Problems for Kaspersky Lab in the US market have been escalating over the last few years, culminating in the recent sales ban. In 2017, following Russia's reported interference in the US election, Kaspersky Lab lost some share of its US business when the US Department of Homeland Security banned Kaspersky software from federal government systems due to concerns over potential ties to Russian intelligence agencies and the risk of espionage.

However, things intensified after Russia's full-scale invasion of Ukraine in 2022. The US took further steps in 2022, adding Kaspersky to its List of Communications Equipment and Services that Pose a Threat to National Security. In early 2023 the US Department of Commerce was reported to be considering stricter sanctions against Kaspersky Lab, which materialised in last month's sales ban. At the time the ban was announced, US Commerce Secretary Gina Raimondo stated that "Russia has shown time and again they have the capability and intent to exploit Russian companies, like Kaspersky Lab, to collect and weaponise sensitive US information."

According to Raimondo, the Commerce Department's actions demonstrated to America's adversaries that it would not hesitate to act when their technology poses a risk to the US and its citizens. In addition to banning the sale of Kaspersky's antivirus software, the Commerce Department also added three entities linked to the firm to a list of companies deemed to be a national security concern "for their cooperation with Russian military and intelligence authorities in support of the Russian government's cyber intelligence objectives." The Commerce Department also "strongly encouraged" users to switch to new vendors, although its decision does not ban them from using the software if they choose to do so.

Kaspersky is allowed to continue certain operations in the United States, including providing antivirus updates, until September 29, 2024, to minimise disruption to US consumers and businesses and to give them time to find suitable alternatives.

 

Angry reactions

Predictably, Moscow criticised the sanctions against Kaspersky Lab, suggesting that, in addition to targeting a Russian company, the sanctions were aimed at eliminating a competitor for local companies. "Kaspersky Lab is a company which is very, very competitive on the international level," Kremlin spokesman Dmitry Peskov said. "This is a favourite method of unfair competition by the United States. They resort to such tactics every time."

"US sanctions have been imposed against Kaspersky Lab," added Russian Foreign Ministry spokeswoman Maria Zakharova. "We consider them part of illegal anti-Russian sanctions measures and Washington's hybrid war."

"However, in addition to pursuing a Russophobic agenda, the administration of [US President Joe] Biden is guided by self-serving motives – the Americans are settling scores with foreign companies that are direct competitors to Silicon Valley IT giants," she continued. "In such cases, the United States resorts to any method, including unfair competition; everything is fair game for them."

 

Looking for business elsewhere

At this point, it is hard to determine the full impact the banishment from the US market will have on Kaspersky Lab's business. One thing that is clear, though, is that the security firm has shifted its priorities for international expansion and is no longer relying on the once lucrative markets in Western countries.

In September 2023, Kaspersky Lab opened a transparency centre in Saudi Arabia, aiming to build trust in Kaspersky products by explaining its policies to users and giving them a chance to check the source code. A network of transparency centres has already been established in various countries as part of a global transparency initiative launched back in 2018.

In April 2024, a transparency centre was launched in Istanbul. More transparency centres are anticipated to be opened in the Middle East, Africa and the Asia-Pacific region. Meanwhile, in a bid to increase its presence in China, Kaspersky Lab announced an OEM agreement with Chinese electronics manufacturer Centrecom late last year.