The Prague Post
http://www.aaaradiotaxi.cz/index.php?xSET=lang&xLANG=2
December 1st, 2008
Endowment Fund     Business Listings ONLINE      Reservations      Classifieds    Subscriptions
Prague accommodation

Home » Archives » Business

Amassing media

Sale of publishing house to Czech mogul reveals fears of Russian capital

By Benjamin Thomas Cunningham
Staff Writer, The Prague Post
September 3rd, 2008 issue

ČTK
Zdeněk Bakala, local coal and media tycoon, purchased Economia publishing house Sept. 1, dispelling worries of Russian influence.
With Russian foreign policy raising eyebrows in recent weeks, anxieties about Russian investment are beginning to keep pace, fueled by a fear that Russian private investment and official state policy are coordinated and closely linked.
The chain of events leading up to the recent sale of local publishing house Economia unveiled a growing trend of general uneasiness toward big Russian investment, and speaks to the potential for politics to intervene in the private sector.
“The people who are capitalists in Russia are always somehow connected to the government,” said Economia CEO Michal Klíma. “For me, people do not fear this enough.”
The sale of Economia — which oversees the publication of the daily Hospodářské noviny (HN), the magazine Ekonom and multiple trade publications — to Czech entrepreneur Zdeněk Bakala was announced in a front-page story in the Aug. 31 issue of HN. Bakala, one of the Czech Republic’s richest men, acquired an 88.36 percent stake in the publishing firm by purchasing a 77.5 percent share from the German firm Verlagsgruppe Handelsblatt.
Subject to much speculation since the company’s March announcement that Economia was on the block, the sale, in more recent weeks, has seen controversy related to another potential buyer, the firm Mladá fronta a.s. — publisher of weekly E15 and lifestyle magazine Juicy and unaffiliated with the daily Mladá fronta Dnes.
The German daily Frankfurter Allgemeine Zeitung reported last month that Mladá fronta management has close contacts with influential people in Russia and other former Soviet republics, a connection Mladá fronta representatives deny.  
Alarmed by these speculations, the Czech Syndicate of Journalists (SNČR) issued a condemning statement Aug. 20 accusing Mladá fronta’s ownership of lacking transparency.
“Management is nontransparent, giving rise to the speculation that there might be money-laundering involved,” reads the statement. “Mladá fronta a.s. has breached the law repeatedly by not filing annual financial reports with the commercial court.”
One day later, Economia’s Klíma published an opinion article on the anniversary of the Aug. 21, 1968, Soviet-led invasion, writing, “While Western publishers do not demonstrably offer danger, Russian capital is an objective threat!”
Government intervention
Imbedded in the more publicized controversy surrounding Economia’s sale was a report in the Aug. 11 edition of Czech Business Weekly, which alleged that Foreign Affairs Minister Karel Schwarzenberg contacted Handelsblatt executives to lobby against Mladá fronta’s bid and in favor of the eventual buyer Zdeněk Bakala.
At press time, Schwarzenberg was in Brussels for an EU summit on Russia and unavailable for comment on these allegations.
“The minister did not speak to a member of the family that owned Economia, so he could not tell them Bakala is better than anyone else,” said Foreign Affairs Ministry spokeswoman Zuzana Opletalová.  
Bakala and Schwarzenberg have significant past dealings. The pair teamed up on the privatization of spirits company Karlovarská Becherovka in 1997, sold in part to French-owned alcohol producer Salb, in which Bakala controlled 40 percent and Schwarzenberg 20 percent. Bakala also purchased Schwarzenberg’s majority stake in the weekly news magazine Respekt in 2006.
Opletalová said Schwarzenberg still holds a minority share in the Respekt, with Bakala a majority owner of the parent company Respekt Publishing.
As of press time, the purchase of Economia still awaits final approval from the government Anti-Monopoly Office (ÚOHS). No final selling price has been made public, though estimates place it somewhere in the range of 70 million to 90 million euros ($102.9 million to $132.3 million/1.7 billion Kč to 2.2 billion Kč).
Rumors of Schwarzenberg’s overtures to the former German owners raise the possibility that politics came into play on the Czech side of the deal, rather than from politically motivated Russian venture capitalists.
“I don’t have the information that Schwarzenberg contacted the German owners of Economia. In the case that he did so, I would consider it unacceptable,” said SNČR Chairman and HN reporter Miroslav Jelínek.
Responding to general questions before the final sale of Economia went public, CEO Klíma said, “All big investors do depend to some degree on the government. … But the level in Russia is even more [linked to politics]. That’s just how it works there.”
Growing influence
Enigmatic Russians were in the news again after an Aug. 25 Respekt report that anti-corruption police had begun investigating a possible connection between Russian investors and efforts to privatize Ruzyně Airport, ČD Cargo and Czech Airlines.
Energy investments generate the most fear among Europeans pondering possible Russian influence.
The Russian government has at least $157 billion in energy money in sovereign wealth funds — government accounts that are invested privately for profit, then recycled for public expenditures.
Energy giant Gazprom controls an estimated 25 percent of Europe’s natural gas supply. Supply cuts to Ukraine, Belarus and more recently the Czech Republic seemed to coincide with political disputes, though Russian officials deny that the cuts were politically motivated.
Petr Kratochvíl, deputy director of Prague’s Institute of International Relations, said the Czech Republic is relatively well-positioned energy-wise when compared with much of Europe, and adds that reviews of Czech secret service reports “seldom speak of Russian influence on the Czech economy.”
In addition to energy, Russian investors have been acquiring international assets in the traditional strong points of the old Soviet economy, including mining and heavy industry.
Recent acquisitions in the United States include steel companies in Oregon, Colorado, Michigan and a mining company in Montana.
In the Czech Republic, Russians hold ownership in steelworks Škoda JS, Škoda Steel and Vítkovice, said František Masopust, director of the Chamber of Trade and Industry for CIS Countries.
Statistics on investment between the Czech Republic and Russia are murky, as each government uses different statistical means.
The Czech National Bank estimates $4.8 billion in Russian money came into the Czech Republic in 2007, compared with $2.8 billion in Czech investment in Russia.
Kratochvíl said Czechs tend to be much less skeptical of Russia in general compared with citizens of Poland or the Baltic states, adding that “these issues tend to be politicized here only until economic interests are affected.”
While Kratochvíl, a political scientist, is softer in his apprehensions about Russian investment than Economia’s Klíma and SNČR’s Jelínek, he does point to a trend of increased connections between Kremlin officials and big business.
“It has changed — ever since the second [presidential] term of [Vladimir] Putin [beginning in 2004], and especially recently,” he said. “Being a neutral businessman is no longer enough in Russia. There is this idea of a strong centralized Russia.”
— Naďa Černá contributed to this report.

Benjamin Thomas Cunningham can be reached at bcunningham@praguepost.com


Other articles in Business (3/09/2008):

Browse the Current Issue

If you enjoyed this article, why don't you subscribe to the print version!
We accept secure online transactions provided by PayPal and Moneybookers

Be the first to add a comment!


Full Name: *
City: *
E-mail: **
This comment can be published in the print version of The Prague Post
Enter the text on the right:
 visual captcha
Comment: *
* Required field. In order to be approved for display, comments must have a first and last name and a city.
** E-mails are required and will only be used for internal purposes.

Most visited in Business Listings

Hotel booking
The Prague Post Online contains a selection of articles that have been printed in
The Prague Post, a weekly newspaper published in the Czech Republic.
To subscribe to the print paper, click here.
Unauthorized reproduction is strictly prohibited.