Now the Czechs Have an Oligarch Problem, Too

Czech oligarch Andrej Babis, his country’s second-richest man and one of the most politically powerful billionaires in the world, is expanding his business empire into Prague’s corridors of power. Babis currently serves as finance minister, but his ambitions are far grander. The rise of Babis — nicknamed “Babisconi,” after Italian billionaire turned prime minister Silvio Berlusconi — marks a turning point in his country’s post-communist history.

Since its “Velvet Divorce” with Slovakia in 1993, the Czech Republic has made a rapid transition to democracy and market economics, enjoying some of Europe’s highest growth rates and becoming an active member of the EU. Like its Central European neighbors, the new country flourished and became, initially, a remarkable success story. But in recent years, its liberal democracy has weakened.

Since the global financial crisis, many Czechs have become increasingly disillusioned with Brussels. The Czech media landscape, once admirably diverse, is now increasingly controlled by powerful tycoons. President Milos Zeman has encouraged this process and, under his leadership, anti-establishment forces have flourished. Though the situation in Prague is not quite as dire as in Budapest, where Viktor Orban appears to be losing faith in democracy as a system, the rollback of democratic institutions in the Czech Republic is ringing alarm bells in a corner of Europe vulnerable to the influence of Vladimir Putin’s Russia. The rise of Andrej Babis is a case in point.

Ed.: This article has been updated. See below for clarifications and corrections.

Four years ago Babis founded the Action of Dissatisfied Citizens (ANO) party. After a series of scandals in which politicians enriched themselves in office, Babis’s party aimed, ironically enough, to capitalize on Czechs’ rising distaste for wealthy businessmen. ANO rose to power with the help of anti-corruption and anti-establishment slogans, at times even calling the Czech Republic a “failed state.” It finished second in the country’s 2013 parliamentary elections and went on to join the coalition government. A year later, in the 2014 European Parliament elections, ANO went one better: It won more votes than any other Czech party.

As elsewhere in Europe, ANO’s brand of anti-politics resonates with the public. Portraying himself as a non-politician and outsider, Babis promises to dramatically change Czech governance. ANO’s voters are also attracted by his personal appeal: A blunt-speaking entrepreneur, his face beams out at Czechs from billboards and newspaper pages. But Babis and his fortune — $2.4 billion, according to Forbes — are mired in controversy.

Historians from Slovakia’s National Memory Institute, which preserves files dating from the country’s period under Nazi and communist rule, published documents suggesting that Babis collaborated with Czechoslovakia’s secret police, the StB (under the codename Bures). In 2014, Babis successfully sued the National Memory Institute in a Bratislava court, claiming that he had been wrongly registered as an agent in StB files. The institute appealed, maintaining that the court ruled unfairly and that former StB officers had lied under oath to protect him. On June 29, the Bratislava Regional Court affirmed the ruling, holding that Babis did not collaborate with secret police in the 1980s. Under the 1991 Czech lustration law, it is illegal for former StB collaborators and top communist functionaries to hold high political and economic posts. Yet when Prime Minister Bohuslav Sobotka (a member of the Czech Social Democratic Party, the country’s largest party) appointed Babis finance minister in 2014 without requesting a lustration certificate as he was supposed to, a Prague court merely announced its intention to fine him — and the fine was annulled on Sobotka’s appeal.

Babis denies reports that his family, too, cooperated with the StB, arguing that they — like many families — were victims of the communist regime. But the archives suggest otherwise. Documents say that Babis’s diplomat father, Stefan, and his brother, Alexander, voluntarily cooperated with the agency. When contacted for comment, Babis’s office said that he had cleared his name, while Babis himself has called all such allegations about his past “bullshit.”

Babis’s business success — which translated into a monthly salary of $1.4 million before he entered government — is often attributed to the contacts he made during the late communist period. During the Velvet Revolution of November 1989, Babis was based in Morocco as a representative for Petrimex, Czechoslovakia’s state-controlled trade company. He returned home to see his country split in two. In 1993, Babis, helped by his former director at Petrimex, founded the fertilizer giant Agrofert, currently the Czech Republic’s fourth-largest company and a near-monopoly in several sectors of the economy.

Babis’s businesses continue to benefit from his connections with the Czech political elite, in particular with President Milos Zeman. As prime minister in 2001, Zeman oversaw the sale of Unipetrol, a state-owned chemical company, to Babis. The deal was evidence of a strategic partnership between the two men that continues to this day. Although Babis pulled out of the sale a year later, he oversaw the sale of Unipetrol to a Polish company in 2005. Afterwards, high-ranking Polish officials reported that 42 million euros ($53 million) had been handed out in bribes on both sides of the border. In Warsaw, the scandal shook the Polish political scene. In Prague, however, the Czech Parliament failed to open an investigation, allegedly because of Babis’s close links with then Prime Minister Stanislav Gross. (In an email exchange with the authors, Babis’s office insisted that “no bribes” had been paid.) Alarmingly, Babis’s approach to governing the country was, until recently, based on the notion that he would “govern the state like a business.”

As in neighboring Slovakia and nearby Hungary, the rich and powerful are consolidating their control over the Czech media. In Prague, Babis is leading the way in what has been dubbed the “oligarchization” of the media. When the global financial crisis struck, long-term international investors began pulling out. Babis, who already owned a number of influential newspapers, expanded his media holdings: he acquired MAFRA Media Group, which controls the best-selling Czech broadsheet newspaper Mlada fronta DNES, and bought Radio Impuls, which has the largest listenership in the Czech Republic. These outlets regularly feature sympathetic coverage of Babis — and criticism of his opponents. In the course of his career, Babis has recruited senior police officers, state security agents, and former communist informers to help him consolidate power. This alliance of security forces, business, and the media is currently constrained by independent judges — though such checks seem increasingly fragile.

Babis’s multiple media outlets have launched investigations into alleged corruption involving Prime Minister Bohuslav Sobotka, whose position Babis craves. After years of genuine media independence, many Czechs are talking of a return to the 1970s, when journalists aligned themselves with the political order. Babis wants to control, not just change, Czech politics.

The rise of Andrej Babis represents a new era in Czech politics — one that is more preoccupied with business interests than safeguarding democracy. Prague was once a focal point for change in Central Europe, home to the former Eastern Bloc’s strongest dissident traditions. But in 2015, the Czech capital is in a very different place than what was envisaged by those who stood on Wenceslas Square in November 1989.

Editor’s Note: The version of this article published on April 10, 2015 made certain statements relating to Andrej Babis that have been removed from this revised version, including most notably: (1) the statement that some had suggested that Mr. Babis was to blame for the death of Frantisek Mrazek; (2) the statement that Mr. Babis may have worked for the Soviet KGB; (3) the statement that Mr. Babis’s father, Stefan Babis, allegedly ran a Vienna-based black-market arms trade business; (4) the statement that, since becoming finance minister, Mr. Babis recruited senior police officers, state security agents, and former communist informers to help him consolidate power; and (5) the statement that Mr. Babis defaulted on state-backed loans. This version also notes that an appellate court in Slovakia now has affirmed Mr. Babis was not an agent of the secret police. Foreign Policy regrets these errors.

Photo credit: MICHAL CIZEK/AFP/Getty Images

Corrections, April 23, 2015: Agrofert is the Czech Republic’s fourth-largest company, not the largest, as the article earlier stated. The Czech police conducted wiretaps on Andrej Babis in conjunction with a fraud investigation; his company did not obtain information on rivals through eavesdropping, as originally claimed. And Mlada fronta Dnes is the Czech Republic’s best-selling broadsheet newspaper, not the best-selling newspaper overall.