An interruption in oil supplies due to a war, a shortage of medical supplies due to a pandemic, or a company being taken over by a foreign investor from an enemy country. The importance of economic security is growing, which is reflected in the new Security Strategy. “Security is inextricably linked to the economic aspect, more than we could have imagined ten years ago,” says document co-author David Müller from the Ministry of Industry and Trade in an interview with iROZHLAS.cz.
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Despite the recent drop, the price of European gas is still at a relatively high level | Source: Profimedia
Compared to the past, the new State Security Strategy gives much more space to “economic security”. How would you simply explain what it is?
Economic security is a concept that takes into account the fact that we need to establish conditions and mechanisms for the Czech economy to remain functional, innovative and competitive.
This includes energy security, i.e. the supply of energy raw materials such as oil or gas, as well as electricity. In addition, raw material security, sustainability of critical and key infrastructure: to function even in the event of a crisis and be resistant to external interference.
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Also the security of the entire supply chain. Both Russia’s invasion of Ukraine and the coronavirus pandemic have shown their fragility. This certainly includes, for example, self-sufficiency in the field of chips.
Similarly, the various import dependencies that the Czech Republic faces have made it abundantly clear that the security of the Czech Republic is inextricably linked to the economic aspect, much more than anyone could have imagined a decade ago.
Research also falls under the broader scope of economic security. First of all, those technologies that are economically feasible. We know many examples from the world where both scientific and industrial espionage takes place.
Does the Ministry of Industry and Trade, which participated in the new Security Strategy, have any tools or opportunities to “strengthen” greater economic security?
In the case of supply chains, the ability of the state to intervene in relations between companies is very limited, and this is also not the goal. Rather, the state should create conditions for the private sector to have more diverse and secure supply options so that the potential impact on the private sector in the event of a crisis is not as high.
Thus, cooperation between the state and the private sector is an integral part of economic security.
David Mueller
Senior Director of the European Union and Foreign Trade Department of the Ministry of Industry and Trade. Prior to that, he worked in the same department as a senior counsel and lawyer. He also spent five years as Head of Business and Economics at the Czech Consulate in Toronto, Canada.
We are trying to help create a framework that will allow companies to diversify their supply chain. An example is the free trade agreements that we are trying to conclude with long-term strategic and other reliable partners of the European Union, and therefore with the Czech Republic.
Perhaps it is a technological and trade dialogue with the US, it may be a recent agreement between the European Union and Chile, which has huge reserves of lithium. We must realistically say that the self-sufficiency of the Czech Republic or the European Union is, in principle, unrealistic.
Why not?
This is unrealistic, firstly, from the point of view of the conditions that we have here, and secondly, from the point of view of the costs that this will entail. The Czech Republic is not particularly rich in raw materials, so in order to export we also need to import a relatively large amount.
There are several countries in the world that are trying to be self-sufficient, it is very expensive and not economically efficient.
What countries are they?
North Korea, Iran, we’ll find something else. Of course, sanctions play a role in these cases. But what drives innovation, better products and technological development is international competition.
Red light and beacon
After all, you have several options to force something. For example, from 2021, the Ministry of Industry and Trade will check foreign investments directed to the Czech Republic. In the most extreme case, investments may be prohibited by the government.
Yes, foreign investment verification is a tool available to the Ministry and therefore the Czech Republic. I would call it a “fuse”, which allows us not to close ourselves off from the world, but at the same time, if we perceive the subject as a risk, it allows us to respond adequately.
Are you preparing any other fuses of this type?
We are waiting for quite a big debate within the ministry, whether economic security deserves a separate document.
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I don’t think we have something like foreign investment screening right on the table right now, but outbound investment screening is being considered, as well as how to respond to international trade enforcement measures. This is something we are constantly working on.
Writing something down on paper is one thing, but understanding society, individuals, and companies is quite another. When the exclusion of a Chinese and Russian company from the tender for the completion of the nuclear power plant in Dukovany was discussed two years ago, it was accompanied by huge debates and there was no consensus among politicians. Similarly, when the National Cybersecurity and Information Security Administration issued a warning against the Chinese company Huawei in 2018. Has it changed?
In general, I think it’s an offset. I don’t want to say that we have a consensus, of course not, but there is a certain level of perception that certain organizations or countries can pose a security risk. The way we didn’t think about it at all 15 years ago, or how a very limited group of people thought about it then.
Over the past twenty or thirty years, we have become accustomed to the fact that acquisitions and investments are motivated by economic reasons.
Security strategy
One of the strategic documents that assesses the security environment and indicates where the Czech Republic sees challenges and threats and how it will respond to them. It is prepared by the Ministry of Foreign Affairs and approved by the government. The Security Strategy is followed by the Department of Defense Defense Strategy. The document is updated every few years, the latest Security Strategy is dated 2015. The current Security Strategy was approved by the government on June 28, 2023. The document is in the public domain.
I think it’s becoming more and more obvious that someone can develop economic activity not only for the purpose of economic activity, but also for the purposes of political pressure, technology, or access to confidential information or trade secrets.
This is what should turn on the red light and warning beacon, and we have to decide if we want to risk something like that or not.
Russia and China are also mentioned in the new Security Strategy as posing a threat to the Czech Republic or calling into question the international order. Can you think of any other not-so-friendly countries that we forgot about because we focused on these two?
This is a pretty good question. It’s always about who can pose a risk to us with what is happening in the Czech Republic. You can talk about some countries that pose a threat to security, but in terms of economic security, they have a minimal impact on us.
Russia has had a significant impact on us because of our dependence on its energy resources. We managed to solve this problem pretty much within a year. This is a small miracle. There are few comparable examples, such as dependence on Russia, probably on such a scale.
We do not import Russian gas
To what extent is the Czech Republic currently dependent on Russian gas and oil imports?
As for gas, the import of gas from Russia there has been almost completely stopped. On the day of the invasion, we imported 99 percent of gas from Russia; today we no longer import Russian gas to the Czech Republic.
As for the oil, then a complete breakdown is more difficult. Approximately half of the oil is imported to us through the Druzhba pipeline, which leads from Russia, and half through the ICL-TAL pipeline.
To get rid of dependence on oil from Russia, we need to increase the capacity of the TAL pipeline, which the government is currently working on. When it is completed, we will do without oil from Russia.
There is a possibility of alternative deliveries. There is enough gas and oil on the world market. It is more a question of the length of distribution routes and that they are available at the right time in the right place.
The entire new State Security Strategy emphasizes that society must also contribute, that it is not only about the tasks of the Ministry of the Interior, Foreign Affairs or Defense. What can I do for the economic security of the Czech Republic?
So it can heat up less. Of course, I am simplifying this. Although I mention this somewhat in jest, it is true.
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Savings of the population and companies have greatly facilitated the situation with gas. Consumption has been reduced by almost two billion cubic meters, that is, by about 20 percent, and this helps a lot.
It is important for us that this is perceived as a topic. Cheap gas and oil are not self-evident or guaranteed. That this was the case until recently was to some extent a coincidence, as well as the policy of exporters.
It is also important to raise awareness about security per se. Each of us consumes something, each of us works somewhere. There are people who work in research, start-ups, work with sensitive technologies. They should think about the fact that when they are having fun with some foreign partners, their motivation may be different from working together on a good business project.
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