Illegal iPhones, Apple of Russian Elites' Eyes

By Peter Finn
Washington Post Foreign Service
Saturday, April 26, 2008

MOSCOW -- Ramzan Kadyrov, the strongman president of the Russian republic of Chechnya, seemed fascinated. The object of his curiosity was the latest must-have toy for Russia's elite: the iPhone.

At a business conference in the southern city of Krasnodar this year, Kadyrov sat with Dmitry Medvedev, Russia's president-elect; Dmitry Kozak, the minister of regional development, and Alexander Tkachev, the local governor. According to a journalist at the conference, the four passed the Apple phone back and forth as Kozak demonstrated its features to Kadyrov.

These powerful officials are not alone in their interest. There are approximately 500,000 iPhone users in Russia -- a country where the phone is not officially for sale, according to Eldar Murtazin, head of analysis at Mobile Research Group in Moscow, citing data obtained from Russia's cellphone operators.

"Russian people love anything that is forbidden," said Murtazin, adding that iPhone sales in Russia are the third-highest in the world, after the United States and China (where the phone also cannot be sold legally).

The phones are bought in bulk in the United States, and an 8-gigabyte model sells in Russia for at least $700, nearly twice the price in the United States. Still, the price of an iPhone in Russia has fallen dramatically since its launch in the United States last year, when they went on sale here for $1,800.

What was once exotic is now widely available at electronics stores and through Internet sales across the former Soviet Union. Besides Medvedev, other prominent politicians spotted using iPhones include Ukrainian President Viktor Yushchenko.

Sergei Bobovnikov, a dealer in Soviet propaganda art, said there was a line of about 40 people, mostly tourists, in an Apple store he visited on a trip to Miami. Bobovnikov and a friend bought seven phones, which they brought back to Russia and sold to friends at cost.

"It's a prestige thing," Bobovnikov said. "Having an iPhone is like being part of a club."

AT&T is Apple's exclusive carrier for the iPhone in the United States, and the phone is locked to prevent its use on another wireless network. But for about $40, Russian hackers will unlock the phone, install a Russian language pack, and make it work with Russian cellphone operators.

"You can have all the features except visual voice mail," said Maxim, a 16-year-old high school student who unlocks phones and did not want his last name published. "It takes about 45 minutes."

The phone has reportedly become commonplace at the Kremlin and in the corridors of Russia's parliament. But the use of unauthorized software to make the iPhone work in Russia raises some ticklish questions for the leaders of a country that has long been assailed for a flourishing trade in unlicensed goods. The smuggled and hacked iPhones deprive Apple of fees and the Russian treasury of import duties and taxes.

Medvedev's office said no one was available to comment, and his spokesman has previously refused to comment to the Russian media on the issue.

A spokesman for Apple in Moscow would only say that the iPhone is not for sale in Russia; officials at the company's headquarters in California did not respond to messages requesting comment.

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