Google did everything right in terms of local execution to get all the required licensure and top talent, and then Sergey threw it away.
Bad things happen when the state controls everything.
(As I heard it, the legend is mostly attributed to Sergey pushing for it, and every time I've heard Eric talk about it it felt there was some disdain there, so I would agree with you that Larry was probably convinced also, otherwise Sergey alone wouldn't have pulled it off.)