Abramovich solves a complex problem for Chelsea

NOTHING lasts for ever, no matter how secure and embedded something might appear to be. Roman Abramovich, who was relatively unknown in 2003, gave Chelsea 19 years, hardly a fly-by-night experience, but it is unlikely the club will find another owner quite so generous.

As far as Chelsea and their fans are concerned, he was a good owner, a benefactor who funded the most glorious period in the club’s history. Yet there was an air of mystery about him, a silent, rarely seen figure who funded countless successful campaigns and seemingly asked for little in return, apart from trophies. Hence, if things didn’t work out, there was no scope for error as countless managers will testify if they hadn’t signed non-disclosure agreements.

Britain has always been suspicious of Russia and Russians, going back beyond the second world war. While the UK continues to adapt its attitude towards gender, sexuality and colour, if there is one nationality yet to be warmly embraced, it is Russia. And rich Russians are viewed with even more mistrust. No matter how benevolent Abramovich seemed, he was still Russian, seemingly an acolyte of Vladimir Putin and an oligarch. Some felt he would be here today and gone tomorrow, but he made Chelsea into an elite club and one that will now appeal to potential investors. In 2002-03, the last year under Ken Bates, their revenues were £ 75 million, by 2020-21, total income had risen to £ 436 million. 

Furthermore, they became very aggressive in the transfer market, bulk-buying in the early years to accelerate their transformation. Abramovich, if he had a liking for a player, such as in the cases of Andrei Shevchenko or Fernando Torres, would make sure he was signed by the club. Since 2003-04, Chelsea have spent £ 2.1 billion in player acquisitions, the highest of any club worldwide, and a fraction more than Manchester City’s gross outlay.

There was always feeling it would take something drastic to remove Abramovich from Stamford Bridge but that time has clearly come. Those fans of opposing clubs who claimed “you haven’t got any history” were wrong; Chelsea had a history, but it was largely unsuccessful, four trophies between 1905 and 1997 and another four before he bought the club for around £ 140 million. They created history in his time and kick-started the modern game. 

The age of the uber-club is not to everyone’s taste and its sustainability is questionable, but it was the arrival of the quiet Russian that delivered inflated investment, overspending and obscene wages. Chelsea exploited first-mover advantage, and pushed Arsenal and, ultimately, Manchester United, into the shadows, but they have since been overtaken by Manchester City and Newcastle United are now in the queue to join the elite. Even oligarchs are not richer than middle-eastern oil states.

Although it has been said the sale will not be fast-tracked, a quick disposal is probably preferable, not just for the owner, but also for the club. If Chelsea were to be impacted by UK government sanctions, what would it mean? A frozen asset, unable to operate? A zombie club with no cash flow? Nobody really knows. And with Roman gone, where will that leave them in terms of liquidity? He doesn’t want his loan back, and that underlines his affection for the club, but presumably, they will need ongoing cash?

A new owner will be found and it will not be long before everyone realises Abramovich was something of a one-off. If, for example, Chelsea becomes a US investment, the approach will be very different. They will be less of a Manchester City and more of an Arsenal or Manchester United. They will still be successful, but on a different scale. The sceptics who have taunted the club by predicting a non-league future are exercising wishful thinking –  they are an attractive proposition. 

Has he done the right thing? In the circumstances, there is no way he could continue, even if true official ownership has been clouded by the creation of a holding company. But Russia is at war with Ukraine and the world has condemned the action. In effect Russia has become a pariah. This is awkward for the club, the players and the fans, but as a beneficiary of a Russian regime that is making the whole world nervous, he has done the right thing.

Most Blues’ fans will mourn the passing of a trophy-laden period in the club’s history, so it is hard to agree with comments made by, among others, journalist Tony Evans, who wrote in the Independent, “There is a growing feeling that the club has been used. Many have felt that for a long time, but some are just admitting it now.”

Investors will undoubtedly try and take advantage of the situation. Abramovich wants US$ 3 billion according to media reports, but it is not out of the question that opportunists will offer far less than the “mammoth price” quoted. The net proceeds of the divestment have been promised to charities linked to the Ukrainian war, so this may stop prospective buyers from making derisory offers.

Abramovich has interested the UK government for some time, one of the reasons why he has been invisible to most Chelsea fans for some years. Although in the world of oligarchs, he is seated on the back benches and unlikely to have much influence with the likes of Putin, he was listed as a person of interest due to his links to the Russian state.  In some ways, the writing has been on the wall since Abramovich abandoned the new stadium, a Herzog & De Meuron project that would have built a magnificent, statement home considerably bigger than the 40,000 of Stamford Bridge.

There is another speculative and slightly sinister side to this story. Abramovich was supposedly involved in peace talks and given he has earmarked money to victims of the terrible conflict unleashed by Russia, does that sound like someone who dances to Putin’s tune? If that is the case, has the Chelsea benefactor walked into very dangerous territory?

League Focus: Ukraine has other priorities

THE ONGOING concerns about Russian troops gathering on the border with Ukraine is a reminder there are more important things in life than football. However, football also plays a part in ensuring life goes on as normal and in difficult times, the game can act as a boost to morale. Whether the situation escalates or not, and we have to remember that Ukraine has been in state of flux for more than seven years, the uneasy tension that exists in a sensitive part of Europe should be of interest to everyone.

Ukraine’s Premier League has been in a winter break and doesn’t return until the last week in February 2022. The geo-politics may have changed by then and if there has been a turn for the worse, war may have actually broken out.

Kyiv, the capital, is as central to football as it is to most other political, social and cultural activities in the country. The two top teams, Shakhtar Donetsk and Dynamo Kyiv, are currently playing at the same stadium owing to Shakhtar having to leave their home ground, the Donbass Arena in Donetsk in 2014, due to damage caused by the fighting between pro-Russian separatist forces against the Ukrainian military. Shakhtar have since played in Lviv, Kharkiv and now share the NSC Olympiyskiy, the 70,000-capacity home of Dynamo.

It’s almost guaranteed the title will go to one of these two clubs, for since 2008-09, Shakhtar have won nine and Dynamo four. The last team other than this duo to be champions was Tavriya Simferopol, who are currently playing in the Ukrainian Second League. 

The fear of war, which appears to be greater outside Ukraine and actually in the country itself if you believe the reports, has led to all kinds of rumours, such as the prospect of Dynamo Kyiv not returning from their winter training in Turkey. According to Times Hub of India, Dynamo’s Slovenian winger, Benjamin Verbic said some Dynamo players are very nervous about the current situation and are considering leaving Ukraine if war starts.

Dynamo’s coach, the Romanian, Mircea Lucescu, told the Turkish media he is not scared about the Ukraine-Russia situation and reminded them that during the 2014 crisis, when he was coach at Shakhtar, he remained in Donetsk at all times. 

There have been accusations of “fake news” at some of the stories emerging from the region, but one story that was definitely true was UEFA’s decision to block Ukraine and Russia meeting in the World Cup play-off. Ukraine are playing Scotland, while Russia will meet Poland. 

The gap between Dynamo Kyiv and Shakhtar and the rest of the Ukraine Premier League. While both were in the group stage of the Champions League this season, they were bottom-placed and failed to win a single game, but being there means they will reap some economic benefit. Three other Ukrainian teams, Zorya, Vorskla Poltava and Kolos Kovalivka all had disappointing campaigns in the Europa and Conference Leagues.

The Ukrainian Premier also has a big financial imbalance. In 2021-22, Shakhtar’s transfer expenditure amounts the equivalent of £ 53 million, while Dynamo’s totals £ 7 million. Beyond that, the sums are small. There is a distinct difference between the two clubs, as Shakhtar are aggressive buyers while Dynamo have become sellers of talent. They sold Vitaliy Mykolenko to Everton for £ 17 million in the recent transfer window, a 22 year-old highly-rated left back.

Shakhtar’s squad, which comprises 58% expatriates, includes 12 Brazilians and 13 Ukrainians, along with an Israeli and a forward from Burkina Faso. Dynamo’s squad is almost all Ukrainian and two thirds of all appearances are made by players who have been trained from their early years in football. 

The two clubs have very vocal and high profile owners. Dynamo’s is Igor Surkis, a businessman who is among the top 40 richest people in Ukraine. His brother, Hryhoriy, was the head of the Ukrainian Football Federation for more than 12 years. The Surkis’s are part of the so-called Kyivian Wonderful Seven, a group of influential people whose business activities have sometimes been controversial, such as Ometa 21st Century, which was accused of being a “ponzi” scheme.

Shakhtar’s owner is Rinat Akhmetov, Ukraine’s richest person with a net worth close to US$ 12 billion. He is the founder of System Capital Management (SCM), an organisation which includes Metinvest, a mining and steel company and Ukraine’s biggest private enterprise. Some sources have suggested he has been involved in organised crime, but he has never been charged with a crime. Recently, Akhmetov and other Ukrainian oligarchs were heavily criticised for fleeing the country in their private jets as the possibility of war increases.  Akhmetov has since returned.

Football and politics rarely mix well but the tension between Ukraine and Russia over the past couple of years has extended to the game. The national team included a map of Crimea on their shirts for Euro 2020 last year, much to the annoyance of UEFA, and the fans frequently sing songs about Vladimir Putin. One assumes that when the Ukrainian Premier returns, there will be plenty of noise in protest about Russia’s manoeuvres.

UEFA will have a problem if Russia does invade Ukraine as the Champions League final is due to be held in St. Petersburg, but at the moment, the venue for a football match is the least of anyone’s worries. The world holds its breath for Ukraine.

UEFA report suggests pandemic problems will linger

UEFA have issued their Club Licensing Benchmark Report for 2022 and the impact of the covid-19 pandemic is there for all to see. UEFA forecasts the full year 2021 will reveal losses among the continent’s top flight clubs of more than € 4 billion. Furthermore, the report shows that despite the dramatic loss in [matchday] income, player wages have still increased, albeit at a lower rate.

While revenues will recover, one worrying aspect of the pandemic is the rise in debt, with around € 750 million of new debt taken on by clubs. Larger clubs, in particular, were able to access bank funding to restructure their financing, as a result, the ratio of external debt to owner debt has creased from 3.7 to one in 2019 to 6.6 to one at the end of 2021. Only the largest clubs are able to access money at attractive rates, so interest charges will certainly impact future profitability.

UEFA believes the route out of the pandemic demands better cost control related to wages and transfer fees. In addition, long-term investment in infrastructure and youth development is a pre-requisite. The return of matchday revenues in 2021-22 should provide some relief – 88% of matchday earnings disappeared during the height of the crisis. 

With leagues feeling the pressure, the bigger competitions have attempted to become more innovative in raising money. La Liga, for example, has an agreement with private equity firm CVC that will earn them € 2 billion in exchange for 8.2% of commercial rights. The leagues have identified that their broadcasting rights are gold dust for investors and Serie A, the Bundesliga and Ligue 1 have all explored possible deals. It may take time to get universal buy-in, indeed in Italy the clubs were reluctant to go down this route. In Germany, fans will undoubtedly block any move to sell the family silver.

The Premier League’s financial power is highlighted once more by the UEFA report. In the transfer market, the summer of 2021 saw over € 2 billion of activity involving the league, which represented 27% of the market. The Premier clubs spent € 1.4 billion themselves. The Premier was the only major league to be anywhere near pre-pandemic peaks.

The Premier’s TV revenues are far more democratically distributed than any other league. The ratio between top and bottom is just 1.2x, which compares very favourably with the other leagues, most notably Portugal, where the ratio is 9.2x due to the top three clubs (Benfica, Porto and Sporting) negotiated their broadcasting deals individually.

The difference between English clubs and their peers is very clear when it comes to TV money. The average received per club in the Premier is € 117 million, far greater than Spain (€ 70m), Germany (€ 66m), Italy (€44m) and France (€ 22m), and multiples of countries like Portugal (€ 9.2m) and the Netherlands (€ 4.2m).

All over Europe, however, club losses area hitting new highs, although UEFA believes if the pandemic had hit a decade ago, less stringent governance would have seen more clubs encountering serious, far-reaching problems. Only two clubs among Europe’s elite, RB Leipzig and Valencia, saw their revenues increase, while clubs of the status of Barcelona (-14%), Manchester United (-18%), Inter Milan (-19%), Paris Saint-Germain (-15%) and Juventus (-14%) all saw significant drops in revenue. The pandemic has left around 25% of top division clubs with negative equity.

As mentioned, UEFA sees infrastructure investment as crucial as football attempts to mount a recovery, so stadium construction will be on the agenda. A total of 18 new stadiums have been built during the pandemic and in 2021, there were six new arenas and four rebuilds. Predictably, the number of stadium renovations has decreased in the past two years as clubs have cut back on investment in fixed assets.

The pandemic did not stop ownership activity and in 2021, there were 30 top-division takeovers, an increase on 2020. However, acquisitions slowed in the second half of 2021. US investors were especially active, securing minority stakes in European clubs including Crystal Palace, Liverpool, Wolverhampton Wanderers, Augsburg, Atlético Madrid and Club Brugge. Across Europe, 52% of clubs are privately-owned, 48% have public ownership models.

UEFA is aware of requirement for some adjustments across the industry. Andrea Traverso, their director for financial sustainability and research, commented: “The report clearly demonstrates the need for change in club football finances…strong balance sheets are important for attracting new owner investment and supporting third-party financing arrangements.”

A special report on women’s football will follow.