Toxic Mix of Private Business, Politics, Chinese Influence Operations in CEE

Bwag // CC 4.0

The European Commission has approved of a very important merger – between a powerful Chinese ally and Czech billionaire, Petr Kellner and the influential media group, Central European Media Enterprises. This could result in manipulation of public opinion in favor of China all over the CEE region. What leverage has Beijing on Kellner? What are the security consequences of this merger for the EU? And why should the West care?

On October 28, 2019, PPF Group announced that its fully owned subsidiaries signed an agreement to acquire CME, an influential media group operating in the CEE region. A Special General Meeting of Shareholders confirmed the acquisition on the 27 February in Bermuda. On 6 October, the European Commission approved of this merger leaving the last safety check on the anti-monopoly offices of each of the countries which this merger concerns.

Peter Kellner is the richest Czech, businessman and owner of the PPF group. Kellner, despite declared political neutrality, is a highly influential shadow persona with considerable connections across the political spectrum with a proven track record of attempts to influence politics favourably to his business intentions.

At the same time, Kellner’s business is dependent on the sympathies of Chinese Communist Party (CCP), and currently profits from Chinese markets make up about 34 per cent of the overall profit of the PPF group.

Hence, it can be expected that Kellner will use its new media imperium to improve the media image of China, by spreading pro Chinese propaganda to manipulate the public opinion (more favourably towards Beijing), as has already happened in the Czech Republic.

About Peter Kellner

The media nicknamed him “the invisible billionaire.” Only very little is known about the richest Czech Peter Kellner. He does not give public appearances, avoid any media interviews and releases only one of his photos a year – as a part of his PPF group annual report.

Yet, despite the self-proclaimed political neutrality, Kellner’s invisible hand pulling strings of the Czech politics in favour of his business has been gradually becoming more visible than ever.

With an estimated wealth of 15.9 billion dollars, Petr Kellner is the richest Czech and the 73rd richest man on the Earth. He is the founder and the majority owner (91.12 per cent) of the PPF group. This investment group invests in multiple market segments.

In the Czech Republic and other post-communist countries, Kellner controls telecommunication companies where he is interested in developing 5G networks with Huawei (as he has already done in Serbia).

His investment group operates in markets in China, Russia and Vietnam. Kellner is said to owe his success to close ties with the political elites of these non-democratic countries, which in turn has an impact on Czech foreign policy towards these states.

Kellner’s Ties to China

One of Kellner’s companies, Home Credit, which focuses on direct individual lending, wanted to expand into Chinese markets.

Nevertheless, it is very difficult to gain an access for a foreing company since for these types of service, a certificate issued by the Chinese state is necessary. And usually this is a kind of benefit which needs to be earned’ more than ‘purchased’.

In 2014, with strong support from Czech political elites – especially the social democrats who were at that point the strongest party in a coalition with the ANO – Kellner received his licence as the only non-Chinese company.

Currently, money made on the Chinese loan markets make up about 34% of overall profits of the PPF group, giving China strong leverage on Kellner in the form of threatening to cancel the non-banking loans licence. Kellner needs the favour of the Chinese authorities in order to enter the

Hong Kong Stock Exchange and Sell Some of Home Credit’s Shares

Home Credit China’s importance for the PPF Group, in and of itself, exposes PPF’s business activities to the Chinese government’s malicious influence, considering the high stakes for the PPF Group that stem from their business involvement in China (and, inevitably, with Party elites), and the rather deliberate regulation enforcement that could affect foreign companies if they refuse CCP’s bidding.

PPF also owns one of three Czech mobile operators (O2) and is tech hardware provider to the other two (CETIN), all running on Huawei equipment. PPF signed a partnership agreement with Huawei in the fall of 2018.

All in all Kellner`s connections to the Chinese communist party are not neglectable to say at least. Over one third of the profit of his conglomerate is dependent on Beijing`s good will. And at the same time, Kellner is known to be that kind of an actor who does not think twice when it comes to using malicious methods to influencing politics or public life in his favour or favour his allies.

Propaganda Paid by PPF

The most recent scandal connected with Kellner’s companies revealed that Home Credit paid 2,000 hours of work to a PR company with the intention of manipulating the opinion of the Czech public in favour of China.

The services provided by the PR agency were unethical, as the “internal monitoring” of activities of high political representatives openly criticising China (e. g. mayor of Prague Zdeněk Hřib or Senator Pavel Fischer), the pressuring of media to withdraw critical and publish neutral or positive articles about China, and different forms of support for those public figures who were advocating for China.

Moreover, the same funding scheme was used for billed ‘articles’ by Czech Ambassador to Beijing, Vladimír Tomšík and the Czech Consul General in Hong Kong, Jan Juchelka. As part of this operation, a new think-tank ‘Sinoskop’ (later renamed as Asioskop) was established, employing biased experts to speak publicly about China.

Apparently, a PR company named CME media group was not the only instrument for influencing the public opinion in Kellner’s arsenal. Soon after the affair with the PR agency was revealed, Kellner announced the intended purchase of the mediagroup CME from the american telecommunication giant AT&T.

The CME group is an international media group operating in Bulgaria, Czechia, Romania, Slovakia, and Slovenia, with an overall value of 2.1 billion US dollars, and reaching about 50 million people in Central and Eastern Europe . It owns some of the most-watched news programming in Central and Eastern Europe.

Its influence in the region is demonstrated by the example of Czechia, where with over 1.5 million regular viewers, the evening news program broadcasted by the CME TV station Nova, has the highest viewing of any TV news across the country.

Despite Kellner’s statement to respect the independence of the media and its news, based on previous experiences, reliability of such statements can be doubted.

Political Pushback

Being aware of the threat that the acquisition of the CME group poses to the freedom of speech and independency of media in the CEE region, a group of Czech MPs and Senators have decided to take an action and wrote an open letter to the US senator Marco Rubio who is an outspoken critic of China to appeal to the US institutions to revise legitimity of such merger.

Indeed Senator Rubio has written an opened letter to the US Treasury department, concretely to the US Committee on Foreign Investment in the United States (CIFIUS) asking to exercise its authority and launch a full review of the national security implication of AT&Ts upcoming sale of the CME to PPF group.

As Rubio wrote in his letter:

“I believe te Administration needs to conduct closer review of corporate deals like AT&Ts sale of CME and understand how the Chinese government and Communist party work through proxies like PPF. Failure to do so undercuts US diplomatic efforts aimed at countering the CCP`s political interference in foreign governments and societies.“

Unfortunately, until this day, the reaction (if any) of the CFIUS remains unknown. Nevertheless, since this acquisition is not an investment into the US economics, hence does not qualify as a foreign investment, the powers of the CFIUS to influence it or stop it would be very little to none.

Divide and Conquer

The remaining two players who could have prevented the merger were the European Commission acting under the EU Merger Regulation and the anti-monopoly offices of each of the five countries where the CME group operates.

Nevertheless, with the Commission’s positive ruling, the chances of this merger being prevented are rather slim.

This turn of events is bad news for both the already struggling freedom of speech and independence of media in the CEE region as well as for the European unity. It is generally a bad practice for businessmen with political agendas to own influential media.

However, when such a businessman has a history of being involved with political machinations and influence operations who, what is more, has close connections to autocratic regimes, that is when a real security threat arises.

The CME group can be turned into another tool forKellner’s documented attempts to influence public opinion more favorably towards autocratic regimes such as China or Russia. This might contribute to an even bigger fragmentation of European external policy towards those two countries.

Hence, it is in the interest of the whole EU not to underestimate the power of pro-Chinese proxies such as PPF. The opposite might result in the EU irreversibly losing its ability to show a united front to external threats.