Arms dealer Strnad´s Interest in Acquiring the Strategic Firm, Škoda JS, Poses a Security Risk

30. 12. 2019

Autor: Anna Vacková

In the recent weeks, the media have reported that the Pilsen-based Škoda JS is to be acquired by a Korean company, Korea Heavy Industry & Development. The news was spread by the Koreans themselves. However, the current owner of Škoda JS, a Russian engineering company, OMZ, belonging under Gazprombank, denied the information.

Key Role in the Nuclear Industry

Škoda JS traditionally focuses on the nuclear industry. It is engaged in the supply of nuclear reactors, nuclear waste containers, engineering and other services for nuclear powerplants. Its strategic importance lies in its potential future role in securing supplies of the domestic industry for the completion of nuclear power blocks in the Dukovany and Temelín powerplants.

Were the Koreans to succeed, they would strengthen their position in the upcoming tenders for the selection of the main supplier of these contracts worth hundreds of billions of Czech crowns. However, it is clear that there is a lot at stake and the situation around the sale of Škoda JS will not be that simple. Other big investors are keen on it, too.

The company is currently struggling with a lack of domestic orders, plus it has been placed on the US sanction list due to having Russian owners. This is the main reason for its sale. In the past, the Russian giant, Rosatom, one of those interested in the comple

Litigation with the ČEZ Group

As the news server Euro.cz recently informed, in mid-October, the first round of bidding on the purchase of Škoda JS took place, and two companies advanced to the next round. Which ones are they remains unclear. However, there is an additional point of interest there; discovered by Euro.cz, which is that the new owner will also acquire the unresolved dispute with the ČEZ power company.

Porcování ČEZ. Rumunský majetek české firmy si chtějí rozdělit tamní státní společnosti

ČEZ is suing Škoda JS for 611 million Czech crowns, which is a result of an extensive falsification of a control procedure of welds in Temelín and Dukovany. When it became apparent, all documentation had to be re-produced, requiring expensive shutdowns. Škoda JS was responsible for this expensive sloppy work as a subcontractor.

ČEZ spokesman, Ladislav Kříž confirmed to Euro.cz that this obligation, which of course represents a reputation problem, shall be transferred to the new owner. Considering last year's profit of Škoda JS before tax, of CZK 235 million, this is not exactly a trifling amount.

What is Strnad´s Motivation?

However, the interest of armorer Jaroslav Strnad is also worth noting here; his business has been prosperously expanding over the past few years, frequently employing dubious or even criminal business practices. To a large extent, he´s been benefiting from intimate ties with the Prague Castle, since he became the biggest sponsor of President Miloš Zeman and consequently of the Party of Citizens' Rights.

In turn, Zeman promotes Strnad's business interests, having even awarded him State honours, which is very unusual in the case of an arms dealer. The involvement of Strnad's group in the forthcoming transaction raises question marks. It foreshadows a security risk due to his personal ties and unfair business practices.

Some of Strnad's companies, headed by a key sponsor of Zeman's Dako-CZ campaigns, are actually financially linked to the controversial billionaire of Russian descent, Alexej Beljajev. Beljajev's firms had been in the past repeatedly investigated by Slovak security forces. Beljajev's business associate, Lazar, is in Wikileaks reports referred to as „a member of the underworld.“

Criminal activities of Strnad´s companies

However, this is not the only problem issue concerning Strnad's companies. Some are still being investigated in connection with re-export of ´Dana´ self-propelled howitzers and RM-70 rocket launchers through an Israeli mediator to Azerbaijan without having a permission of the local authorities. This was the first non-transparent sale of heavy weapons, through intermediaries, by an EU Member State, to the embargoed zone of the Azerbaijan-Karabakh conflict.

Last February, the media reported that an American company, SARN, filed a lawsuit against the Czechoslovak Group for its procedure and breach of contract in Strnad's radar-producing company, Retia. In the lawsuits, the American party argued by criminal practices of Strand´s firms. The cases are to be heard in the USA.

Last but not least, the Balkan media brought information on allegations of money laundering by former high-ranking representatives of the Macedonian regime, headed by the secret service chief, Sasha Mijalkov, with ties to the former Prime Minister, Nikola Gruevsky. The Macedonian authorities are investigating Strnad's role in buying certain Serbian firms with illegally-gained funds. The factory IVK 14. Oktobar in Krusevac was also in their viewfinder, purchased under ´non-standard´ terms by the subsidiary of the Czechoslovak Group.

For the above reasons, as well as other ones, which are not discussed in this article, the sale of a strategic business such as Škoda JS, should be in the centre of attention of our home intelligence services. It is not only the fate of one engineering company, but yet another piece of mosaic in the current security-geopolitical orientation of the Czech Republic.