Publish and be damned.
Photograph by Alexander Aksakov
By Geoffrey Smith
May 15, 2015

Paypal has been sucked into the treacherous waters of Russian politics, after it blocked an account intended to fund mass publication of a report into Russia’s involvement in the fighting in eastern Ukraine.

The report “Putin.War” had been initiated by the liberal politician Boris Nemtsov, who was gunned down within yards of the Kremlin in January. Friends and colleagues of Nemtsov, who was prime minister under Boris Yeltsin in the 1990s, have said the murder may have been ordered in order to stop him publishing it.

The report was completed from Nemtsov’s notes by his colleagues after the assassination, and was published earlier this week. It alleges that over 220 Russian soldiers have been killed in the fighting, and that their presence in Ukraine was officially sanctioned and supported. Only 2,000 copies have been published so far. The newspaper RBC said 14 publishers have declined to publish it “due to the political situation in the country”, and the only printer that has agreed to take the work has insisted on staying anonymous.

That contradicts the Kremlin’s line that the only Russians fighting in eastern Ukraine are volunteers – a line that has already lost much credibility outside Russia but which is still largely unchallenged by media within the country, and enthusiastically defended by the state broadcasters that dominate the media scene.

The website of Radio Free Europe/Radio Liberty said employees in Paypal’s Moscow office had confirmed that the account had been deliberately blocked. A Paypal screenshot posted by Vsevolod Chagayev, a colleague of Nemtsov now trying to distribute the report, said that “Paypal doesn’t provide the possibility of using its system for the collection of donations supporting the activities of political parties and political goals in Russia.”

Paypal started offering its service in Russia in 2011, but only started processing transfers in rubles in 2013. As a relatively late entrant to a market that’s still growing fast despite Russia’s overall economic troubles, Paypal is under pressure to catch up with established players such as NASDAQ-listed Yandex NV (YNDX). According to consultants J’son & Partners, electronic payments totaled some 570 billion rubles ($11.4 billion at current exchange rates) last year, but was expected to grow at nearly 30% a year for the next four years.

A Paypal spokesman told Fortune that the refusal to accept donations to political parties and causes was due to the fact that local law obliges them to validate the identity of donors (effectively creating an electronic trail that law enforcement can use to crack down on dissenters).

“We regret any disappointment this may cause our customers,” the spokesman said.

(UPDATE: This article has been updated to include a response from Paypal)

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