Yes They Did

It’s all but official. US President Barack Obama and Russian President Dmitry Medvedev will meet in Prague on April 8 to sign a treaty reducing US and Russian nuclear stockpiles.

The historic signing could be cause for champagne toasts all around, to the tune of “Happy Days Are Here Again”, particularly for Russia as it reasserts its long-term economic and political influence in Central and Eastern Europe (CEE).

Nuclear disarmament aside, Western and local diplomatic sources say the main reason for the Obama-Medvedev Prague summit will be to discuss the ongoing 26 billion USD international tender announced by Czech state-owned utility CEZ in 2009 for the construction of two additional blocs at its Temelin nuclear power station, scheduled for completion in 2020.

Hospodarske noviny, a leading Czech business daily citing well-informed CEZ sources reported on February 18 that the utility would accept bids from the Russian-Czech Atomstroyexport-led consortium, Westinghouse of the US and France’s AREVA.

During the past two weeks, however, some Czech media have been reporting that Russia’s Atomstroyexport and its “Czech” partners have made the most progress in securing the Temelin tender, whose winner should be announced by the end of the year.

Atomstroyexport has promised that if selected by CEZ to complete Temelin, it will outsource 50-60 percent of the work via Czech companies including its consortium partner, local reactor builder Skoda JS.

The problem is that Skoda JS was sold to the Russians in 2004 through a series of byzantine-like transactions via a bizarre web of offshore companies while members of the Czech government watched and collected a toll fee.

Local media citing both Western and local diplomatic sources confirm that the White House is not throwing in the towel and will put all of its weight behind US contender Westinghouse, possibly pitching a 50/50 JV deal to Medvedev.

Czech media reported in October 2009 that the true purpose of US Vice-President Joe Biden’s Prague visit had more to do with Temelin than with the Anti-ballistic missile (ABM) defense shield.

Hospodarske noviny wrote last October that the primary purpose of Biden’s mission was to meet with CEZ CEO Martin Roman and promote Westinghouse as the prime contractor for Temelin.

Apart from the financial value of the Temelin project, the Obama Administration has recognized that the US, pre-occupied with other parts of the world has all but forgotten about CEE, and through its neglect provided Russia a carte blanche in filling the void.

Russia has never left CEE, and in fact has become increasingly intertwined economically, particularly on the energy front with companies such as Gazprom and Lukoil making tremendous headway with the region’s corrupt politicians regardless of party affiliation; mercenary lobbyists and senior civil servants; and dubious local private equity companies. Just ask Gerhard Schroeder, Vaclav Klaus and other statesmen in the region.

This coupled with the fact that Czech public tenders, when the government bothers to announce them, have a strange way of appearing rigged, with their outcome almost always pre-determined long before any competition is announced.

The situation has escalated to the point where in mid-March, the American Chamber of Commerce (AmCham) in Prague launched a public anti-corruption campaign challenging Czech political parties to pledge to combat the problem within three months following end-of-May general elections.

Westinghouse, for its part, has also been stepping up its marketing efforts, promoting the low cost and safety benefits of its AP 1000 Pressure Water Reactor. What other sweeteners are brought to the table remain to be seen.

Apart from the 26 billion USD price tag, the Temelin tender represents a great deal more. CEZ is the largest utility in CEE, active in over 10 countries including a massive expansion drive into Turkey’s lucrative energy sector and a likely bidder for Poland’s first nuclear power plant.

The Slovak government headed by Robert Fico, whose pro-Russian, anti-democratic leanings are no secret, awarded CEZ a 5.2 billion USD no-bid contract in May 2009 to construct a new reactor bloc at the Jaslovske Bohunice nuclear power plant together with Skoda JS.

CEZ is also planning to construct a number of natural gas-powered plants in the Czech Republic, Slovakia, Hungary, Romania and elsewhere in the region. Awarding the Temelin contract to Atomstroyexport could secure CEZ brownie points with the Kremlin and help secure favorable gas prices from Gazprom.

All bets are on regarding when the Obama team, which chanted “Yes We Can” en route to the White House in 2008, realizes, somewhere between the Prague summit and the end of 2010, that Russia managed to successfully re-consolidate its former satellites through politically-loaded economic deals; at which time they will have to admit: “Yes They Did”.