Russian President Dmitri Medvedev began a two-day visit to the Czech capital of Prague on Dec. 7, bringing with him offers of investment and warmer relations. The trip comes at a time when Russo-Central European tensions are escalating.
Previously part of the U.S. strategy in Central Europe to contain Russian influence via ballistic missile defense (BMD), the Czech Republic has had a complicated relationship with Russia in recent years. But since June, when the Czechs withdrew from plans to host BMD components in their country and had their role reduced by a shift in the overall structure of U.S. BMD in Europe, Prague's position on Russia has been unclear. Now, as the eurozone crisis continues and the Czechs' need for investment grows, Prague may have no choice but to accept Russian offers of assistance — and the political conditions that come along with them.
The Czech Republic, along with the rest of Central Europe, has watched Russia increase its pressure on the region. Russia remains vehemently opposed to current U.S. missile defense plans and has reacted to those plans by issuing a series of threats, including its own new missile defense policy, moving missiles to Kaliningrad, and other military build-ups against NATO members in Central Europe. Russia also is starting efforts to institutionalize its influence over many of its former Soviet states by creating a new alliance structure, the Eurasian Union, expanding Russian power along the edges of Central Europe once again.
But recently Russia has started to diversify its strategy with some Central European states to take advantage of a new opportunity: the European financial crisis.
Indeed, Russia is looking to capitalize on the crisis by picking up strategic assets in many affected countries, particularly those in Central Europe. Moscow also wants to forge partnerships with some of the countries' governments, top businesses and industries to increase Russian influence inside of Central Europe. With many Central European states seeing investment plummet, their currencies destabilize and credit all but disappear, Russia is one of the few countries that have the cash and political will to go into the economically shaky region.
It is no coincidence that Medvedev brought a large financial and economic delegation with him to Prague. According to Stratfor sources in the Czech Republic, Russia is already looking at picking up smaller assets in the country, such as refineries, power stations, and construction and transportation firms. These assets are not worth much on their own, but their value multiplies when put together.
In addition, Russia hopes to strike strategic deals with the Czech Republic in three areas. The first is a joint venture between Czech construction firm OHL ZS and Russian Railways for a $2 billion project to modernize and build new railways across the country. Russian Railways, partnered with Germany's Siemens AG, is already in talks across Central Europe to build high-speed rail lines from Russia into Central Europe, with a line to Prague also on Moscow's agenda. The Kremlin's goal is to increase trade and social ties between Russia and Central Europe, which could be politically useful in the future.
The second proposal is for Russia and the Czech Republic to launch a joint venture for the modernization of Russian transport helicopters, both civilian and military. Czech state firms already work with Russian transport helicopters, but the new deal would add two components to any purchase: an agreement for the Czechs to repair the helicopters and an upgraded license. This new deal is appealing to the Czechs because an upgraded sale of Russian helicopters would bring in some 40 percent more revenue for the Czech military, which is already looking to sell similar upgraded helicopter packages to Hungarian, Polish, Iraqi and Afghan forces.
The last and perhaps most important deal is a Russian bid to complete the nuclear power plant in Temelin. The Temelin project became a controversial issue in Europe after the Japanese nuclear accident. There already are two large bids for the estimated $25 billion project by the United States' Westinghouse and France's Areva. However, Stratfor sources have indicated that the project may be too financially hefty for these Western firms. Russia's Atomstroyexport is now negotiating its own bid, and sources have indicated the Russians are offering three additional nuclear tenders to the Czechs.
Each of these proposals is in a critically strategic sector for the Czechs: transportation, military and energy. These are also sectors that are in desperate need of cash. Many Czech officials are wary of Russian cash, knowing it traditionally comes with political strings attached. Currently, the Czech government is attempting to limit Russia's involvement in any strategic sector in the country to that of minor stakeholder or control. But as the need for investment and cash in the Czech Republic grows — and particularly if the eurozone or European Union begin to break in the next year — Prague is concerned that the Czechs may not be able to refuse Russian assistance.
