Andrej Babis is the one of the wealthiest men in eastern Europe — if you bite bread, read a newspaper, fill your car with fuel, or put fertilizer on your window box in Prague, chances are you owe Babis money. He is also Deputy Prime Minister of the Czech Republic, Finance Minister, and candidate to become the next Czech President.
When Babis announced on Friday in Washington that he is planning to sue the US foreign policy establishment for libel, he wasn’t bluffing. His aim is to stop the US State Department, American officers at NATO headquarters in Brussels, and the war party in Kiev from attacking him as a Kremlin stooge.
The rise of Babis is also the takeoff of another albatross which is about to hang itself around the neck of candidate to become President of the US, Hillary Clinton. For it’s her campaign booster and pollster, Douglas Schoen and his old firm Penn Schoen Berland (PSB), which claim credit for inventing Babis’s political party, Akce Nespokojených Občanů (Action of Dissatisfied Citizens) – the acronym ANO also means “yes” in Czech – and putting Babis in power. From non-existence in 2011, ANO took 19% of the votes in the Czech lower house election of 2013, a close second behind the ruling Social-Democratic Party; 17% in the Czech senate election of last October. According to the American pollster, PSB’s Czech-educated executive, Alexander Braun is the winner of several US awards for his Czech political campaigns. He also claims credit, along with Schoen, for advising “notable clients…includ[ing] Tony Blair and Hillary Clinton, as well as presidents in Mexico, Ukraine, and Philippines.”
With the ANO vote running at close to 20%, and Babis’s voter approval rating at better than 60%, he and his appointees in the Czech Government control the ministries of finance, defence, justice, transport, environment, and regional development. Try buying, lighting, and stubbing out a cigarette between Karlovy Vary in the west, on the German border, and Ostrava in the east, near Poland, and you need ANO’s permission.
If it is American strategy to prevent Germany or Russia, or the two of them together, from ruling who can drop their butts in Eastern Europe, then the rise of the potentate of Prague is either a good thing, or a bad thing. For the time being, it’s an uncertain, so a dangerous thing.
When “Dragoon Ride”, a convoy of 120 armoured cars from the US Army and the North Atlantic Treaty Organization (NATO), tried to rally Czech support for American rule of Ukraine and war against Russia last month, it was the ANO ministries which refused to allow them to drive through Prague, diverting them instead to a military base on the outskirts.
The US Army called “Dragoon Ride” a “highly visible demonstration of U.S, commitment to its NATO allies and demonstrating NATO’s ability to move military forces freely across allied borders in close cooperation.” On March 29 the Stars and Stripes reported that “the convoy unleashed fierce debate among the Czech people and politicians. On Saturday, thousands of people gathered in Prague, the capital, to demonstrate support for and opposition to the convoy and American foreign policy.” The Ukrainian regime media called that “the opening of another Russian front in the Czech republic”, and the Czech Republic “Russia’s outpost in central Europe.” In Kiev Babis’s ANO was called the “Führerpartei”.
The Ukrainian allegations were published on March 29. On April 13 a US-supported think-tank in London calling itself the Henry Jackson Society published a report on Babis entitled “Now the Czechs have an oligarch problem, too”. The author was Andrew Foxall, who heads the Jackson group’s Russia Studies Centre. Foxall has been an academic in Belfast. For several days he has had a problem. When readers tried to open his report on Babis, the link was blocked by what was described as a “fatal error”. The think-tank now says “that was a technical problem with our website.” It can now be read here.
The Jackson think-tank reports patrons representing the US Council on Foreign Relations; the US National Endowment on Democracy; General Jack Sheehan, a former US NATO commander and now lobbyist for the Bechtel construction company; former Pentagon official, Richard Perle; and Robert Kagan a foreign policy advisor to several secretaries of state. Kagan is the husband of Victoria Nuland, the State Department official currently in charge of eastern Europe and the Ukraine war.
On Friday (April 17) Babis was in Washington for the annual spring meeting of finance ministers at the International Monetary Fund (IMF), announcing there that the Jackson Society’s allegations are “a pack of lies and dirty tricks…What a coincidence that it was published [on April 10] two days before I arrived [in the United States].”
Babis directed his public attack against Foreign Policy, which published Foxall’s report in the US. The magazine was owned by the Carnegie Endowment for International Peace until 2008, when it was bought by the Washington Post. When the Post was sold in 2013 to Jeffrey Bezos, the Amazon.com owner, Foreign Policy was one of the small properties in the deal. It calls itself “A Trusted Advisor for Global Leaders When the Stakes are Highest.”
David Rothkopf , the editor of Foreign Policy, is an apparatchik from Bill Clinton’s administration. He also owns a company called Garten Rothkopf, which he describes as “an international advisory company specializing in global political risk, energy, resource, technology and emerging markets issues based in Washington, D.C.” According to the company, it specializes in “focus on political realities that uncovers the likely – though often unintended – consequences of government action”.
Rothkopf is a booster of the Hillary Clinton campaign. Two years ago he claimed in print “there are few certainties in American politics. But you can write it down: If Hillary Clinton wants to be the next nominee of the Democratic Party to be president, the job is hers.” Rothkopf also claims Clinton “has been the most successful U.S. secretary of state in two decades.”
Rothkopf’s company calls Steptoe & Johnson, a law firm in Washington, its “strategic partner”. Steptoe has been the registered lobbyist in Washington for, among others, Bulgaria, Hungary, Canada, Turkish-occupied Cyprus, and the Dominican Republic. According to US government filings, the money flows at more than $1,000 per hour from the foreign client to Steptoe, and from Steptoe to Rothkopf and his associates.
Last week Babis called Rothkopf and his publication “a medium that is known for writing to order… I have already called on them to apologise to me, and unless they apologise, I will hire lawyers in the United States and I guarantee to you that they will apologise to me. It is a pack of lies and untruths.” Rothkopf was asked what response he makes to Babis’s comments. He refuses to reply.
Foxhall says “we stand by our story.” So far, he added, “we have not received a letter from Mr. Babis’s legal representatives.” He declined to explain why his report omits to mention Babis’s US ties, except that they were “marginal to the central argument”.
A few days earlier, Babis had called the US Ambassador to Prague, Andrew Schapiro, to his dacha near Prague to discuss his planned trip to the US. Schapiro’s mother was of Jewish Czech origin; he was born in the US after World War II. A wealthy lawyer, Schapiro has been a fundraiser for the Democratic Party’s National Finance Committee; he is one of Hillary Clinton’s campaign supporters.
Between conversations with Babis, Schapiro launched an attack on Czech President Milos Zeman for agreeing to attend the parade in Moscow on May 9, celebrating the 70th anniversary of the defeat of Germany in the war. Speaking on Czech television at the start of April, Schapiro had said: “it would be unfortunate for President Zeman to be there as perhaps the only EU head of state, watching a military parade, at a time when Russian troops are destabilizing a neighbour in violation of international law.”
Zeman replied: “I can’t imagine the Czech ambassador in Washington would give advice to the American president where to travel. I won’t let any ambassador have a say about my foreign travels. Ambassador Schapiro has the door to the Castle [Prague’s presidential residence] closed.” Under subsequent pressure from Washington and its supporters in Prague, Zeman has insisted his trip to Moscow next month is a “sign of gratitude for not having to speak German in this country.” He has conceded that he will attend the celebration, but not the military parade.
After Babis’s last meeting with Schapiro, according to the Czech financial paper Hospodarske noviny, Babis appeared to take sides with Schapiro against Zeman. Hospodarske noviny is owned by rival Czech oligarch, Zdenek Bakala. Babis, according to the newspaper, called for an increase in the Czech budget for defence spending. Babis is the minister in charge of the budget; his ANO colleague, Martin Stropnicky, is defence minister. “The U.S. offensive [against Babis] has succeeded”, reported Hospodarske noviny. “Last autumn, Babis was reluctant to adopt a clear position on the Ukrainian crisis, but now he seems to be a sort of hawk.”
The Czech hawk is a bird of a different feather. Compared to the NATO requirement – called the Wales pledge, after the NATO summit meeting of September 2014 — that member states spend 2% of their GDP on defence, the current Czech budget allocates 1.04%. As finance minister, Babis has cut defence spending from his predecessor’s budget from 1.08% to 1.04% this year. He has accepted an increase in defence spending to 1.07% by the year 2017.
Czech media have reported this month that Babis “was claiming until recently that he is not interested in foreign policy, anti-Russian sanctions are useless and the Ukrainian crisis is just ‘a competition between American imperialism and Russian.’ However, then something happened and Babis changed his stance all of a sudden. He started criticising Vladimir Putin´s regime, praising the Western sanctions against it and challenging President Milos Zeman´s planned trip to Moscow.”
According to Czech reporters, Babis’s change of mind is the result of lobbying by Schapiro and advice from “Babis´s main strategist Alexander Braun.” For more from PSB on Braun as the grey cardinal in Prague, read this. In 2013 Hospodarske noviny called him the most influential man in Czech politics whom noone knew. In April 2014 Aktuálně.cz reported Braun was still on Babis’s payroll for the European Parliament and Czech Senate election campaigns. “Cooperation continues”, Braun was reported as saying.
This week in Washington Braun was asked to clarify his current role as advisor to Babis, and to explain why this has not been registered with the Foreign Agents Registration Act (FARA) unit of the US Department of Justice. He was also asked to respond to the allegations in the Jackson Society, Foreign Policy reports. Braun didn’t respond.
Babis’s business operations, as reported in the Czech press, are consolidated into a holding called Agrofert. This now includes about 200 companies operating in the Czech Republic, Slovakia (Babis is originally Slovakian), Hungary, Poland, the Netherlands and Germany. They represent a vertically integrated agro-industrial chain, including crop farms, fertilizers, vegetable oil and ethanol fuel, meat processors, bakeries, and chemicals. For more on Babis’s interest in state subsidies for increased volumes of ethanol in Czech auto fuel, click.
Babis has also expanded into the Czech media, as have several Czech oligarchs before him. As he has done so, journalists opposed to him have banded together to form Echo-24, an internet medium which specializes in bashing Babis. Echo-24 is financed by Jan Klenor, a recent chief executive at Patria Finance, a stockbroker which is part of the Czech CSOB banking group, owned by KBC of Belgium. Echo-24 accuses of Babis of concealing a past of Soviet and Czech security service links. The publication is silent on Babis’s present American ties.
Czech sources believe Babis has Russian business interests, claiming his companies obtain supplies of fertilizer and crude oil from Russian producers. Russian customs data for fertilizer exports indicate relatively small volumes go to the Czech Republic; the major Russian exporters refuse to say if they have significant dealings with Agrofert.
Most Russian crude oil exports to the Czech Republic originate with Rosneft, and go to PKN Orlen, the dominant fuel supplier in the country. Listed on the Warsaw Stock Exchange, PKN Orlen’s largest shareholders are the Polish government; ING Bank; Aviva insurance company; and the pension fund Zlota Jesien (“Golden Autumn”), also part-owned by the state through PZU, the largest Polish insurer.
PKN Orlen has been in litigation for many years with Babis, compensating for some of his claims but winning Czech court victories over him for most of the claims. In June 2013 Rosneft and PKN Orlen signed a three-year crude delivery contract for 8 million tonnes, worth at the time about $7 billion. The Czech signatory for PKN Orlen said at the time: “Rosneft is one of the main partners for PKN ORLEN S.A. for crude oil supplies. The cooperation of the companies is being built on the basis of sustainable and long-term repetitive and stable cooperation and fair market mechanisms.” In Moscow last week, Rosneft refused to say more about its Czech relationships.
LUKoil and Gazprom Neft have also delivered crude to the Czech Republic for refining domestically. But LUKoil, according to Moscow reports, pulled out of sales to Prague the year before Rosneft signed on.
Babis’s business interests in Czech energy supplies have so far been confined to fuel additives such as ethanol. Gazprom delivers natural gas to the Czech market without involving Babis: it flows through the German-owned RWE group; MND which belongs to Karel Komarek, another rival Czech oligarch; or Vemex, a local company controlled by Gazprom itself. Babis may have an interest in increasing local biogas production; this competes in the Czech market with Russian gas. As for nuclear energy, so far Babis has not been directly involved in the politically charged and protracted negotiations between Prague and Moscow over Rosatom, the Russian nuclear power agency’s bid to build new reactors.
Russian analysts of the Czech Republic recognize Babis’s political importance, but say they know little about his business. Trukhachev, a specialist on Czech affairs at the Russian State Humanitarian University in Moscow, notes there is strong resistance among Czech voters to the expansion of NATO or American military operations or weapons installations on Czech territory. Babis’s ANO voters are evenly divided for and against sanctions against Russia, Trukhachev says.
“Czechs have a good historical memory. They remember the German tanks in 1939; they remember the Soviet tanks in 1968, so they will be just as unhappy with American tanks. It’s difficult to predict [the views] of Andrej Babis, because on the one hand he seems to be a [economic policy] liberal. On the other hand, for [support of the geopolitical doctrines of] Atlanticism he hasn’t been noticed.”
Gennady Nechaev, a military affairs correspondent in Moscow for Vzglyad, who reported from Prague for several years, says Czechs take US military pressure “negatively, as the country likes to be clean, quiet. They do not like, and do not accept such kind of noise. It is clear that this action plan [Dragoon Ride] is likely to have the direct opposite of the effect the Americans want. During the term of the Warsaw Pact, the Soviet Union practiced such actions – they caused terrible discontent. This military task is very complicated — moving large masses of weapons and equipment through densely populated areas under its own power. The propaganda purpose is not justified, at least in the Czech Republic, at least for now. Look what happens.”
For the Czechs’ northern neighbour, Poland, the biggest interest south of the border is PKN Orlen. Babis’s attempts to take assets out of the Czech operations of the Polish company has not endeared him to Warsaw politicians nor to the Polish intelligence services. OSW, the state think-tank in Warsaw, reports regularly on Czech developments, but has so avoided analysing Babis.
This month OSW analyst Jakub Groszkowski reported that the Czech government is deeply divided over “the difficult art of balancing” its trade and investment interests with Russia and its obligations as a member of the European Union and NATO. OSW has also acknowledged “openly anti-American and pro-Russian views” in Czech public opinion, estimating that at least 25% of voters oppose NATO.
Babis’s personal popularity among Czechs, and his holding’s low indebtedness to foreign banks make him an attractive figure to European, as well as to American bankers familiar with Czech business. “He is very disciplined; he isn’t flashy,” says an international banker in Prague. “He is competitive, but unlike the Russian oligarchs he is not heavily leveraged, and he invests at home.” His business reputation is stronger than his peer — the wealthiest of the Czech oligarchs, Petr Kellner, claims a European banker with direct experience in Prague. “Czechs run a small kitchen by European standards, and they like it that way. They prefer others keep out, too.”
For an analysis of the offshore registration and tax minimization operations of Babis’s rivals Kellner, Komarek and Bakala, read this. This government radio report claims Babis is the local oligarch exception for “stay[ing] behind to pay Czech tax.”
In New York the Clinton Foundation identifies few donors from the Czech Republic. One is Ladislav Drab, the chief executive of American Power Supply and Czeska Energie (CE Group), traders in imported natural gas, LNG, and electricity for the Czech market. Drab’s donation to the Clintons is listed in the $100,000 to $250,000 range. Drab received this souvenir from Bill Clinton:
Another in the Clinton roster of donors is Braun’s firm Penn Schoen & Berland (PSB), which is recorded as making a donation of $50,000 to $100,000. If Braun was fronting for Babis or another of Braun’s clients, he isn’t saying. There is no record at the US Justice Department’s foreign agents’ registry that Braun or PSB represent either Babis or a Czech government entity or business. If Braun has been billing Babis for advice on which US Government officials to meet, he isn’t obliged to register as a foreign agent. If he picks up the telephone to arrange a meeting, the law requires him to register.
The Washington Post, Wall Street Journal and Newsweek have all been reporting in recent days on the foreign business and government lobbying of Hillary Clinton accompanied by large donations to the Clinton Foundation. For more on the $13 million in donations which Ukrainian oligarch Victor Pinchuk has made to the Clinton Foundation, on the advice of lobbyist Schoen from PSB, click. This week Newsweek is reporting that while Pinchuk was giving money to the Clintons, Hillary Clinton as Secretary of State overlooked his breaches of US and European Union sanctions against trading with Iran.
Schapiro and others from the Clinton entourage are now pressing Babis and the ANO to reverse Czech policy, and revive earlier US and NATO plans to establish missile batteries and other military deployments on Czech territory. An American source in Prague says: “Babis doesn’t work for the Americans, but he doesn’t like Zeman. Clearly he is out to become president himself. He is likely to succeed. ”
John Helmer is the longest continuously serving American correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties.