The Czech-Russian Arms Trade Connection

The Czech-Russian Arms Trade Connection
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Czech President Milos Zeman’s comical attempt to paint U.S. President Donald Trump as his and Russian President Vladimir Putin’s political ally has ended tragically.  He now carefully avoids being in the same room with Trump even when surrounded by other world leaders.  In May he avoided the NATO heads of state meeting, and in July he is skipping the Three Seas conference in Warsaw, both chaired by Trump.  

As a result of this debacle Zeman’s associates are under increased scrutiny in the United States.  Especially since in June Zeman publicly supported the lax issuance of arms export licenses and even went so far as to criticize his own foreign service for its diligence in preventing arms proliferation.  International observers were baffled by this gaffe.  Was he drunk again? It turns out he was sober.   

But in July, a report in the Bulgarian press provided an answer, stating that Azerbaijan’s Foreign Ministry provided diplomatic cover for flights carrying weapons to war zones.  Czech and Slovak companies Real Trade Praha and MSM Group were mentioned along with other firms in an elaborate series of re-export schemes through Azerbaijan of arms that ended up in conflict zones in the Middle East. Many of the arms ultimately ended up in the hands of ISIS.  

Both firms are owned by Czech arms trader Jaroslav Strnad, whom the Czech media have dubbed “Zeman’s friend and sponsor.” Michal Strnad, Jaroslav’s son, has legal responsibility for managing his father’s group companies. These names are largely unknown in the West.

In June, Czech press reported that former officials from the Czech Ministry of Defense will be charged with crimes for their business activities with Strnad.  Several of these former officials are now employed in Strnad’s firms.  Also in June, Czech media reported that Strnad’s company was found guilty of subsidy fraud.

Strnad’s holding company Czechoslovak Group (CSG) reported in its bond issuance prospectus that its subsidiary Retia is facing a security clearance review by the highly regarded Czech National Security Office after CSG became a shareholder in Retia. The prospectus states that Retia may be stripped of its security clearance. Diplomatic sources tell me that security clearance reviews generally occur when intelligence agencies report that a new owner is a national security threat, e.g. because of ties to hostile intelligence agencies.

Russian media reported in May that Strnad is expanding his Russian activities by localizing Avia and Tatra truck production in Russia to launch new products in Russian markets. Czech press recently reported that Strnad and his Russian partners are engaged in a hostile takeover of a Czech railcar manufacturing company.  Trade unions are protesting the takeover because they believe that the acquirer is planning to shut down production in the Czech Republic.  

Since 2016 Strnad has substantially increased his partnerships with Alexej Beljajev, a Slovak national who has been called Putin’s bridge to Central Europe.  Their firm is the top financial sponsor of Milos Zeman.  Beljajev has a close business relationship with state-owned Russian Railways and its former head, Vladimir Yakunin, a senior FSB officer who is under U.S. sanctions.    

Russian Railways and rail technology enable the projection of Russian military power.  The Railway Troops of the Russian Armed Forces are responsible for the movement of military materiel across the vast terrain.  Without these capabilities, Russian armed forces would find it very difficult to transport equipment inside a country that spans a continent and has a terrible road network.   

Russian railcar manufacturing companies are an integral part of the Russian military industrial complex’s land based systems production.  Uralvagonzavod (Ural Railroad Car Factory) manufactures T-90 main battle tanks and is involved in the development of the T-14 Armata tank.  Therefore, any technology improvements for Russian rail translate into improvements of Russian military capabilities.  

The Russian military-industrial complex is reeling from Western sanctions that prohibit the export of technology that would allow Russia to develop its military machine.  As a result, Russia is desperately looking for technology to fill the gap.  Russia desperately needs even low-tech chassis and drivetrain technology of the 1980's and 1990's to make its next generation land based systems combat effective.

Will a prosecutor consider charging Jaroslav and Michal Strnad of trading on the black market for arms and being agents of Russian intelligence to steal Western technology? It depends on many facts that need to be discovered.  For example: Did the Strnads know in advance that the weapons were actually destined for re-export? Did they facilitate the re-export by asking for political support? Is there a technology transfer quid pro quo for access to Russian markets? Are the Strnads associated with people on watchlists and blacklists? Have there been acquisitions that have scant economic justification? Is money flowing to and from Russia, Switzerland, Liechtenstein and the UAE?

A writer cannot give definitive answers to these questions, but as witnesses come forward with the truth to the relevant authorities or the local U.S. Embassy, law enforcement can obtain the answers. The authorities will use subpoena power, witness testimony, recordings, emails and other records. As law enforcement develops their investigations, the media will continue to report what they discover.

 

Chris Yurko is a writer living in the Washington, D.C. area.

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