Kyivstar’s Acquisition of 80% of GigaCloud Cloud Provider May Threaten National Security – Economic Security Council of Ukraine
28 October 14:55
on October 24, the Economic Security Council of Ukraine asked the government’s sanctions policy group, the Antimonopoly Committee, the National Security and Defense Council, and the President’s Office to assess the national security risks of Kyivstar’s potential acquisition of 80% of GigaCloud due to possible ties to Russian citizens under sanctions.
GigaCloud is Ukraine’s largest cloud service provider, serving more than 1,500 clients, including the state-owned Diia, the NHS, the Ministry of Social Policy, UkSATSE, the State Protection Agency, and the Odesa Sea Port.
The potential acquisition of an 80% stake in GigaCloud could pose risks to Ukraine’s national security, as Kyivstar’s parent company, VEON, is controlled through a number of foreign legal entities by Russian citizens Mikhail Fridman, Alexei Kosogov and Peter Aven, who are under sanctions from the National Security and Defense Council, the EU, the UK, the US and other countries.
In 2022, the UK government has already ordered the investment company LetterOne, which is linked to the same shareholders as Kyivstar, to sell its stake in the British Internet provider Upp Corporation due to “national security risks.”
The use of cloud services by representatives of the Ukrainian public sector using technical means belonging to sanctioned entities may also contravene the Law of Ukraine “On Cloud Services”.
At the same time, in the long term, the agreement between Kyivstar and GigaCloud may contribute to market monopolization, which would also pose a threat to Ukraine’s security and defense capabilities.
After the martial law is lifted, CMU Resolution No. 263, which temporarily allows executive authorities, as well as state-owned and municipal enterprises, to use the services of foreign data centers, will expire. Under such conditions, GigaCloud and Kyivstar, which has its own cloud service Kyivstar Cloud, will have significant potential to gain leadership or even monopoly positions in the sensitive sector of government data storage. Some experts estimate the potential future share of the two companies at 70% of the market, according to the statement of the Economic Security Council of Ukraine.
Taking into account the above-mentioned warnings, the Economic Security Council of Ukraine has asked the competent state authorities to assess the risks to national security, and in case of real or potential threats, it expects appropriate measures.
On September 19, Kyivstar filed an application with the Antimonopoly Committee to buy a stake in Ukrainian cloud operator GigaCloud.
