Bulgaria Ranks Second in EU for Russian-Linked Companies

Research by the international rating agency Moody's reveals that the Czech Republic, which accounts for just 2.4% of the EU's population, hosts over a quarter of the approximately 46,000 companies linked to Russia operating across the 27 EU member states. Bulgaria ranks second, with 9,500 Russian-connected companies, while Germany follows in third place with 4,200 such firms.

The Czech Republic has long been a favored destination for Russian businesses. Factors such as historical political and economic ties dating back to communism, linguistic similarities, and regulatory gaps have made it an attractive gateway to EU markets. This trend has intensified, particularly since the deterioration of relations between Moscow and Prague that began in 2021 and worsened following Russia's invasion of Ukraine.

Analysts suggest that the war in Ukraine has further encouraged Russian business activity in the Czech Republic. According to Pavel Havlicek from the Association for International Relations in Prague, engaging in business ventures or purchasing property has become "the easiest way for Russians to secure a residence permit" in the country.

Czech Prime Minister Petr Fiala emphasized the need for a deeper examination of the countries where Russian influence poses potential risks to the unity of the EU and NATO, as well as national security. The Czech counterintelligence agency, BIS, has long warned about internal threats, noting that the presence of numerous Russian-owned companies does not bolster national security.

Concerns have been raised that within the mix of legitimate businesses and individuals, there could be spies or saboteurs. The likelihood of Russian intelligence exploiting these avenues has increased since Prague expelled about a hundred Russian embassy personnel suspected of being secret agents in 2021.

There is also apprehension that these companies might be utilized to bypass sanctions imposed on Russia. Amid complex global trade and financial networks, the EU is working to monitor the flow of funds and goods to Russia, with several violations having already been uncovered in the Czech Republic.

The potential for crime to spill over from the east remains a pressing issue for authorities. Transparency International's Czech branch highlights that the country provides favorable conditions for money laundering, particularly for individuals from the former Soviet Union. The Czech National Center for Combating Organized Crime reported in July that the movement of post-Soviet criminal organizations has increased, exacerbating security concerns in 2023.

Lukasz Kraus from the Czech NGO "Reconstruction of the State"pointed out that money laundering undermines the economy, particularly affecting the housing market, where property prices have soared beyond the reach of many citizens. According to a report from Prague-based think tank Datlab, Russian firms, including those associated with sanctioned individuals, secured 2.5 billion euros in public contracts across the EU last year, despite existing sanctions.

In response, the Czech government, a strong supporter of Ukraine, has sought to tighten sanctions, but critics argue that gaps remain, particularly regarding opaque ownership structures that conceal Russian interests. Datlab estimates that only 35% of companies thought to be Russian-owned are accurately registered in the Czech business registry.