The political differences between Ukraine and the Czech Republic are disappearing.



All ears: this 'liberal democrat' likes to listen to other people.

Ten days ago, Ukraine’s acting prime minister began appointing billionaire businessmen to run regional governments in the eastern parts of the country. Apparently, these oligarchs, who employ tens of thousands of people, are much respected and can be relied upon to get things back under control.

Before last October’s parliamentary elections, I compared Andrej Babis to Bidzina Ivanishvili, the Georgian billionaire who now runs the country (Babis likes the comparison and uses it about himself). Ivanishvili stepped down as prime minister a few weeks ago after just over a year in office, but his people, who include the new president and prime minister, did not. Is this Babis's cunning plan too?

Today, I would compare Babis to Sergei Taruta, the owner of a Ukrainian steel enterprise who five days ago was put in formal charge of the Donetsk region, the home of deposed president Yanukovych. Or perhaps Babis is more like Viktor Pinchuk, Ukraine’s art-loving celebrity oligarch, who told the New York Times last week, without a hint of irony, that “in such times in Ukraine big business can play a temporary role in government, while in usual times Ukraine’s challenge is to separate business and politics.”

Like these Georgian and Ukrainian oligarchs, Andrej Babis portrays himself as a reluctant politician answering the call of public duty in desperate times. But it would be more accurate to describe his ascendancy to political power as the culmination of years of informal political influence. The oligarch has now become the governor, whereas before he merely controlled him.

Self-made billionaire humiliated by managers of state enterprises.

It is true that Babis had lost much of his political influence in recent years. Although today he is once again the country’s most powerful patron of politicians, his return to pre-eminence comes after a hiatus that lasted some eight years, during which time the position was held by Martin Roman.

The turning point came in 2004, the year that Roman was put in control of CEZ. In that year, Babis was part of the successful Polish bid to acquire a majority stake in Unipetrol under the Gross government (his first attempt in 2001 ended in fiasco because he was unable to raise the money after having been awarded a majority stake in the state petrochemicals firm by then prime minister Milos Zeman). But the whole thing went horribly wrong for Babis after the Polish company in question, PKN Orlen, reneged on its promise to sell on the chemicals assets in the Unipetrol group to Babis, in return for his support with the Gross government. Babis then became embroiled in an ugly legal action with the Polish company and in a messy bribery scandal in both the Czech Republic and Poland. Krzysztof Kluzek, a former member of the supervisory board of Orlen and a witness in the Polish parliamentary investigation, claimed that Orlen clearly understood at the time that Babis was the key to unlocking the Czech government: either it had to pledge in advance to selling Babis stakes in the Unipetrol group, or it stood no chance of winning the tender.

Babis has been fighting Orlen in the courts ever since, using the services of Czech competition lawyer Radek Pokorny (who is, of course, Roman's lawyer and a close associate of the new Czech prime minister). In the summer of 2009, the courts ruled that Orlen was obliged to pay Babis some Kc 2 billion in contractual damages. But Babis had been seeking ten times that amount in reputational damages. In October 2010, the Czech Arbitration Court dismissed Agrofert's claim in full and ruled that Agrofert pay the court fees incurred by Orlen. Agrofert appealed in an attempt to have this decision reversed. And a month ago, the courts concurred with Orlen's position, upholding the judgement issued by the Arbitration Court in October 2010 and dismissing the petition as groundless.

Both of Babis's attempts to gain control of Unipetrol failed, but not because his ties to Czech politicians were not strong enough. In both cases, local politicians did exactly what Andrej Babis asked: it was his bankers and his business partners that let him down. And yet, the Unipetrol debacle ten years ago marked the moment when Andrej Babis began to lose his dominant political influence to a man he regarded as nothing more than the mediocre manager of a state enterprise.

Since then, Babis has been nursing his Unipetrol wounds -and his grievances against Martin Roman. It was inevitable that Roman and his more experienced minder, Vladimir Johanes, would abandon their sinecures in the Czech energy sector the moment Babis returned to political power. Daniel Benes, who has been clinging to Roman’s coat tails for the last ten years, and who lost his political protection when Necas and Nagyova were wiped out by a wiretap last summer, will be the next to go. I give him until Easter at most.

Listen and learn

The Unipetrol trauma was a defining experience for Babis. Apart from being a cruel humiliation at the hands of the Poles, whom he resents because he cannot dominate them and whom he fears because of the competitive threat they pose to Agrofert's market power, Unipetrol taught Babis the imperative of effective counter-surveillance when doing business with bent politicians.

Little wonder then that Babis has been building up his own surveillance capability at Agrofert in recent years. In November 2011, the deputy director of the police unit responsible for investigating financial crimes (UOKFK), Jiri Vesely, took up his new post as security director for Agrofert. At the time, Babis described Vesely as "just the man for the job. He has national security clearance for handling secret documents," (Pan Veselý splňuje veškerá kritéria pro uvedenou pozici. Je prověřen NBÚ na stupeň tajné). I understand that Babis, as an employer of 30 000 people, needs a surveillance capability to combat internal fraud. But a senior police officer with national security clearance for handling classified documents!


Turning point: Andrej Babis and his lawyer in November 2006 going in for questioning by the financial crimes unit of the Czech police (UOKFK) about the sale of Unipetrol to the Poles. Five years later, in November 2011, Babis hired UOKFK's deputy director, Jiri Vesely, to run the security department at Agrofert.

Whoever shall Agrofert headhunt next from the interior ministry to bolster its security department? Robert Slachta?

As we contemplate the significance of Andrej Babis for Czech politics, we should pay special attention to any aspect of his behaviour that reduces the power of his legitimate competitors in politics and in business. Those parts of the media not already under his control must devote resources to penetrating the power structures that Babis is building both within Agrofert and in the various departments of government that he now dominates. These include his recruitment of individuals from the interior ministry like Vesely.

We should not allow ourselves to be distracted by the news that the networks of influence of men like Martin Roman are now being dismantled. What matters is that their power is being taken over by an unaccountable and acquisitive individual ruled by self-interest, rather than by institutions governed by law.

Unusual times require unusually rich men.

Let us recall Ukraine, where oligarchs have held formal political power for ages and the difference between business and politics was obliterated long ago. Like that Ukrainian oligarch quoted earlier, many of you will argue that in these difficult times in the Czech Republic, billionaires like Andrej Babis have a useful role to play in government, even if under normal circumstances the challenge is to keep business and politics apart.

But neither Ukraine nor this country will ever get back to normal times for as long their governments are under the control of oligarchs employing tens of thousands of people, including former high ranking police officers specialising in financial crime and expert in mounting surveillance operations against public figures.

Andrej Babis's move directly into politics brings this country closer to Kiev, not Brussels. Earlier this week, Guy Verhofstadt, the former Belgian prime minister and now chairman of the Alliance for Liberals & Democrats for Europe, the European parliamentary group that ANO 2011 will join, declared to anyone who would listen (almost no one) that Babis is no oligarch because his business empire was built without the help of politicians.

Only a Belgian politician could mistake Babis for a liberal democrat. And only a fool could expect an oligarch to give up his control of politics willingly. But today in the Czech Republic the obliteration of the difference between politics and business that Babis epitomises has become a cause for popular celebration, not alarm. The dismal truth is that Andrej Babis is the most powerful politician in the country because a significant minority of Czech voters actually want a celebrity oligarch to rule over them. Ukraine has arrived in Prague.