Economic relations between the Czech Republic and Russia are increasingly stronger, so much so that in 2010, trade between the two countries was 7.8 billion Euros, an increase of 29.5% compared to the previous year. Everything indicates that, this year already, trade relations between the two countries will return to pre-crisis levels.
Even Mirek Topolanek, the former Czech prime minister, whose relations with Moscow were not among the most peaceful – just consider the criticism on the Kremlin in 2008, during the Caucasus crisis and the support given to the U.S. missile shield project in central Europe, which eventually faded away – when he was in office, he had stated: “with Russia, we may also have a number of political and security divergences, but we have absolutely no intention of undermining our mutual economic relations, which are increasingly fruitful”.
The same concept has recently been expressed by the Minister of Industry & Trade, Martin Kocourek, during a mission to Moscow.
The reason for this attachment is all too clear: a number of Czech companies are looking to Russia as a market with great potentiality, especially in a time like this, in which the Eurozone is showing alarming signs of a slowdown.
On the other hand, despite Czech aspirations for energy independence, it is also quite clear how important Russian oil and gas supplies are for the Czech Republic. In 2010, these two commodities alone, accounted for 81% of Czech imports from Russia. Among other things, Russian is also the nuclear fuel used in the Temelin power plant in southern Bohemia.
By contrast, the Czechs are able to sell – on the immense Russian marke – particularly motor vehicles (17.4% of exports), computers and information technology products (12.2%) and industrial machinery (9.7%).
In 2010, Czech exports to Russia increased by 35.8%, for a total of 2.66 billion Euro, while imports from Russia accounted for a total of 5.13 billion Euro (+26.5 %).
PPF at home in Russia
An example of a Czech entrepreneurial group, with considerable interests in Russia, is Petr Kellner’s PPF, which operates in that country, primarily through Home Credit (the main company in Russia in the field of consumer credit, with a market share close to 30%). Another important operation is the one which took place this summer, when PPF was able to acquire full control of Eldorado, a large chain of electrical appliances and consumer electronics, with 770 stores in 450 Russian cities.
PPF is also active in the Russian real estate sector, where it does business through PPF Real Estate, a company that, after investing 165 million euro, shows clear intentions of continuing to expand also in the coming years.
However, as an indication of the interest that Czech companies have towards Russia, it is enough to examine the recent trade mission carried out by the Prague Ministry of Industry: in order to satisfy all requests for participation, the largest state aircraft was made available to the government to go to Russia.
During the last edition of the Engineering Fair at Brno, in September 2010, 350 Czech companies attended the “Business Rusk Federacciai den” event, 30% more than the previous year.
PSJ, a large Czech company in the construction industry, has recently stated that its contracts in Russia have already reached such high values as to compensate for the decline felt at home, due to the crisis. The PSJ in that country, currently earns more than one third of its turnover.
Russian investors in the Czech Republic
Building trade, real estate, heavy machinery and energy, but also the financial and credit market. These are the economic sectors of the Czech Republic that have attracted the most consistent Russian investment capital in the last few years.
The examples are numerous, such as the very significant one of Evropsko-Ruská banka – the first Russian-owned bank to have been licensed to operate in the Czech Republic – which began operating in 2009, with the declared intention of aiming at Russian business customers with business interests in this country, and vice versa.
Of Russian ownership is also JS Škoda, manufacturer of equipment for the construction of nuclear power plants, which belongs to the engineering and metallurgy giant OMZ.
Exemplary is also the case of Červa Export Import – a famous Czech company, leader in the production and marketing of accident prevention products, security clothing and work shoes – that is owned by Vostok-Servis (number one in Russia in the work clothes sector, which supplies companies such as Gazprom and Russian Railways).
Of note, is the example of the oil giant Lukoil, which has been operating in the Czech Republic since 2007, through a chain of 44 petrol stations. Last year, it reached a turnover of 5.4 billion crowns, which enabled it to gain a market share of around 4%.
Prague interested in business, but also in national security
It must be said that the flow of Russian investments to the Czech Republic has also undergone significant stops. It ‘happened particularly when, in specific sensitive areas, the Prague government came into play, to protect national interests. Quite significant was what happened in 2009, when Aeroflot was among the first to come forward in a privatization bid for the Czech company Csa, only to be excluded eventually – due to decisions taken by the Council of Ministers. A few days earlier, the Czech Security Commission of the Chamber of Deputies had examined a document by the secret service, expressing reservations on the possibility that the airline could end up in Russian hands.
On that occasion, Aeroflot simply wrote a few lines of comment: “We peacefully accept this decision. The Czech government has the right to choose whatever partner it wants. However, we are quite concerned about alllegations made by Czech politicians that we could represent a threat”.
The bid, on the other hand, ended in a stalemate because, once the number one favourite Aeroflot, had been excluded, no other company in the Czech Republic proved to be in a position to purchase the expensive airline.
Reports on Russian aspirations may be heard every time there is talk about a possible future privatization of the Prague Ruzyne Airport. Things have never developed, but the mere possibility that the main airport might end up in Russian hands, raises many questions in Prague.
The constant issue of national security – particularly, the extremely sensitive one of national energy independence – is also bound to crop up in the near future, during a tender for the expansion of the Temelin nuclear power plant. And a number of observers have already begun to turn up their noses towards the favourite, the Russian state company Atomstroyexport.