Coal mine rescue plan opens up political rift, puts spotlight on prime minister’s past

The centre-left Czech government is facing one of its biggest tests since it was formed at the start of the year with a clear split between the Social Democrats of Prime Minister Bohuslav Sobotka and his coalition partners over proposals to extend the life of a coal mine earmarked for closure. The split and well as media revelations are focusing renewed attention on the dubious circumstances of the privatization of the OKD mining company a decade ago. The transaction was pushed through by then finance minister, Bohuslav Sobotka.

Paskov coal mine, photo: CTK

Finance Minister and ANO party leader Andrej Babiš delivered a clear ‘no’ on Wednesday to plans for the government to offer mining company OKD 1.1 billion crowns in order for the Paskov coal mine to be kept operating for a further two years. OKD wants to close the mine employing around 2,000 by the end of this year.

Babiš pointed out that the original deal to sell the state’s share in the mining company banned the buyer from seeking any help from the government further down the line. If the government seals a deal with OKD to prolong mining at Paskov then there could a queue of other companies asking for cash with the threat of closure and the coal miner itself could even come back asking for more aid for other mines or the whole company.

Babiš’s hardline stance was backed on Wednesday by Christian Democrat leader Pavel Bělobrádek.

Bohuslav Sobotka, photo: CTK

Prime Minister Bohuslav Sobotka reacted by saying that he and industry minister Jan Mládek would try and talk their government colleagues into backing the state aid proposal. A renewed memorandum between OKD and the government to try and seal a deal over the Paskov mine expires at the end of April.

In spite of the tough words, Babiš did admit that he does not know all the facts about the negotiations with OKD so far. There might be some more room for more negotiation and hard coal prices might recover helping to make the Paskov mine viable again in private hands, he said.

The price of the hard coal OKD produces for sale to heating plants and for coke for steel production has gone down by around a quarter over the last year with no sign the slide will stop. The mining company anyway expects its Czech production to more than halve by 2021.

But the arguments over OKD are not just ideological about whether more time should be bought for a Czech unemployment blackspot. It also looks pretty personal with the battle lines also drawn up in the Czech media.

The sale of the Czech state’s near 46 percent stake in OKD has haunted Sobotka ever since with some analyses saying the 4.4 billion received for the stake was half and maybe as little as a fifth of its real value. Sporadic police investigations into the deal have followed.

Andrej Babiš, photo: Filip Jandourek

Czech daily paper Mladá fronta Dnes, now part of Andrej Babiš’ media empire, has led the pack in its investigations of the OKD deal. On Thursday it revealed that Sobotka could have stepped in and halted the flawed deal in 2006, or demanded billions more in payments, but he preferred to keep it on track.

Replies to questions from the European Commission at the time about the sale were handled not by Sobotka or his ministry but by a friend in a law firm representing the buyer, Karbon Invest. OKD was later sold on to Czech financier and businessman Zděnek Bakala, now one of Babiš’main rivals in the Czech media sector.