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A Hug Among Friends

Martin Laryš / Ed. 16. 2. 2016

Fear of Russian intervention in the Czech economy is rampant, and Klaus does little to allay such concerns.

President Václav Klaus’ recent visit to Moscow has renewed discussions about Czech-Russian relations and the president’s alleged pro-Russian sympathies. Energy relations between the two states and Russian investments into strategically important Czech companies remain potential flashpoints, which some say could eventually endanger the national security of the Czech Republic.

The style of former-President and current Russian Prime Minister Vladimir Putin recalls Soviet imperial politics in many respects, though energy resources have been substituted for nuclear warheads as the key means of influencing actions in the near abroad. And, while the comparison does not correlate fully, there is little doubt Russia has the potential to use energy as a political weapon. At the same time, Russia can ill afford to use energy as a weapon too overtly, because Moscow is also dependent on European energy customers. Most of Russia’s energy goes to European Union member states, and they are an essential source of revenue for the state budget and the pockets of leading state officials.

While energy remains a concern, the bigger threat for the Czech Republic remains less direct Russian takeovers of strategic companies. The close and often personal ties between large Russian state companies and intelligence services would lead to a likely increase in influence for Russian intelligence in the Czech Republic.

Natural Gas

In December 2008, the Russian state-owned gas monopoly Gazprom signed a deal with the private Czech gas and oil company Moravské naftové doly (MND) to construct a new underground storage facility in eastern Czech Republic with a storage capacity of 5 million cubic meters. That memorandum follows the signing of another document between MND and Czech-based Gazprom subsidiary Vemex in April 2008, which calls for the Russian company to purchase all the gas extracted by MND in its drilling operations in the Czech Republic. Vemex was established in 2001, and, in a relatively short time, the company has captured 12 percent of the Czech retail gas market, supplying the Prague gas utility Pražská plynárenská, as well as the Spolana chemical producer (owned by the Polish petrochemical giant PKN-Orlen) and the steel manufacturer Vítkovice.

Since U.S. President Barack Obama changed course on a proposed radar base in September, the main focus in Czech-Russian relations has shifted toward energy policy and the economy. The Kremlin and Gazprom are concerned about a default on payment for Russian gas imports, based on the “take or pay” principle. Only 2.7 billion cubic meters of gas were imported by the Czech Republic through the beginning of August instead of the 8.5 billion envisaged. This “take or pay” principle means that Czech purchaser RWE Transgas must pay even for gas it hasn’t yet withdrawn and has prompted worries on both sides.

One bright spot in this sector is that the Czech Republic, in contrast to the other post-communist EU countries like Slovakia, is less dependent on Russian gas, with 25 percent of supplies coming from Norway.

Nuclear Energy

Fear of Russian dominance in oil and gas was a major argument for further developing Czech nuclear energy, to create an alternative energy source and further decrease dependence on Russia. However, the Russians are trying to find their way into this strategic sector, as well. Like most things, it mostly comes down to money, which Russian energy companies are not lacking.

In August 2009, the Czech state energy company ČEZ announced a tender for the right to build two reactors in the Czech nuclear plant Temelín and three more reactors in other European countries. Russian state company Rosatom, chaired by former Russian Prime Minister Sergei Kiriyenko, has shown major interest in this proposal. The tender is worth an estimated 500 million Kč ($28.8 million). Many speculate that the main reason for Russian Deputy Prime Minister Alexandr Zhukov’s visit to Prague in September was to lobby on behalf of Rosatom. These reactors are the largest energy tender in Central Europe and are unlikely to move forward free of political intervention. The result of this tender will seriously influence the position of the Czech Republic and its relative energy dependence on Russia. Another hopeful candidate is U.S. company Westinghouse, but, according to the Czech weekly Respekt, the Russians remain the frontrunner.

The nuclear power plants Temelín and Dukovany also remain attractive to suppliers of nuclear fuel. Recently, ČEZ signed a contract with Rosatom subsidiary Tvel for fuel supplies to the Temelín plant, choosing them over Westinghouse. The contract runs through 2010. Tvel is already the exclusive supplier of fuel to the Dukovany plant.

Klaus and Russia

During his Moscow visit, Klaus condemned “the renewed faith in the state,” and “in social, paternalistic state power.” Ironically, while Klaus is widely seen as a Russian apologist, such statements seem to describe the very nature of the present Russian state. Is the Czech president really as pro-Russian as many suppose?

In Moscow, Klaus sided with Rosatom in its effort to win the tender for building nuclear reactors. In recent months, he was tight-lipped about the possibility for the radar facility in the Czech Republic, and, on this issue, he seemed to side with left-leaning political parties. Pro-Russian policy is a hallmark of the Czech Social Democrats (ČSSD). Its chairman, Jiří Paroubek, even traveled to Russia to meet Vladimir Putin (probably to assure the Russian prime-minister that he stands firmly against the radar facility in the Czech Republic) without informing the Czech Foreign Ministry.

Klaus was one of a few European politicians who praised Russia in its war campaign against Georgia, though he has since defended himself, saying he was just protesting against blaming Russia alone for the conflict. According to the Czech daily Hospodářské noviny, Klaus is very popular among Russian journalists and very famous and popular in Russia because his statements about “cheap Russophobia” are unique among European political elites. His statements that today represents the “best condition of political freedom and system in Russia in last 2,000 years,” and that “a bigger threat to the Czech Republic comes more from Brussels than Moscow,” are further evidence of his more pro-Russian course.

Frequent rumors also allege Klaus has close ties to the private Russian company Lukoil. Respekt published an article in March 2009 claiming that Lukoil CEO Vagit Alekperov met secretly with Klaus in late November 2008 to discuss the company’s plans for expansion in the Czech Republic. Lukoil is allegedly interested in increasing its influence in Mero, a state company that controls the country’s Druzhba and Ingolstadt-Kralupy-Litvínov oil pipelines. Lukoil also funded the Russian translation of Klaus’ book The Blue, Not Green Planet, in which he downplayed the effects of industry on global warming. Klaus does not dispute this, and, on his Web site, praises Lukoil for helping publish his book.

According to Respekt, Lukoil is also allegedly interested in acquiring a 16 percent stake in Česká rafinérská (Czech Refinery), currently owned by Shell, Italian energy company ENI and Unipetrol (owned by Polish giant PKN-Orlen). The readiness of PKN-Orlen to sell some subsidiaries, including the refineries, is heavily dependent on the continued fallout from the global economic crisis. Lukoil already has secured a lucrative contract to supply jet fuel to Prague International Airport. The contract according to Respekt was facilitated by former communist party official and lobbyist Miroslav Šlouf through his company Slavia Consulting. Journalist Jiří Komínek says Šlouf was filmed on numerous occasions entering and leaving the Russian Embassy complex in Prague 6 in January 2008, around the time of Klaus’s re-election campaign.

While much of the evidence remains circumstantial, there is reason to believe that Russia continues to have an interest in dominating the energy sector in the Czech Republic and that the Kremlin is interested in increasing its influence over other strategic components of the Czech economy. Even Czech intelligence services report Russia has an interest in Prague’s Ruzyně airport – which will undergo privatization in the coming years.

For the moment, Klaus is doing little to allay such fears and, on the contrary, is giving all indications of aiding and not ending these designs.

Czech Republic 606
Czech foreign policy 255
Europe 665
Russia 202
economy 157
energy 46
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