Gazprom Football Empire – the creation of a global image campaign

Gazprom Football Empire – the creation of a global image campaign

By Manuel Veth -  In 2008 Zenit Saint Petersburg became only the second Russian club to win a major European trophy when they beat Glasgow Rangers in

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By Manuel Veth – 

In 2008 Zenit Saint Petersburg became only the second Russian club to win a major European trophy when they beat Glasgow Rangers in Manchester to win the UEFA Cup – a triumph that propelled Zenit on to the international stage. However, such success would not have been possible without the financial backing of Gazprom, who had chosen football as the centrepiece of its global image campaign.

The final in Manchester was the peak of a process, which began in 1999 when Gazprom became the official sponsor of Zenit. Gazprom’s sponsorship deal was signed shortly after Zenit had lifted the Russian Cup, beating Lokomotiv Moscow 3-1 thanks largely to two goals from Alexander Panov, known as the “Kolpino rocket”. At the time of the takeover, Gazprom’s chairman Petr Radionov stated in the Russian daily newspaper Izvestiia “that in difficult economic times it is important that people have an outlet”. In a somewhat philosophical tone, Radionov was referring to the fact that Russia was recovering from the 1998 economic crisis with Saint Petersburg hit especially hard by the default of Russia’s banking sector.

Zenit – a cultural investment?

With Gazprom’s sponsorship, Zenit became part of a city-wide cultural investment programme with the company promising that its football club would have the funding available to produce a team that can challenge not only in Russia but also in the Champions League for years to come. Radionov, unlike so many apparent financial white knights in football, kept his promise.

For Gazprom, Zenit was a football experiment in a city – unlike Moscow – represented by only one club. Such investments, however, were characteristically not made without wider-reaching aspirations and motives in mind. The club would serve as an advertising platform that would become the new centre of a global football image campaign with the goal of introducing Gazprom and Russia in a new, progressive light to the west.

Zenit's 2008 UEFA Cup triumph in Manchester remains their only European silverware

Zenit’s 2008 UEFA Cup triumph in Manchester remains their only European silverware

In many ways, Gazprom’s investment in Zenit marked a turning point in Russia’s post-Soviet economy as the country moved away from an economy based on the banking sector to one which focused on the export of natural resources under the rule of Vladimir Putin after 2000. Shortly after the rise of Putin, Gazprom was able to reacquire oil and gas assets all over Russia. This period was not without controversy, which included the trial of Mikhail Khordokovskii and the purges of other oligarchs in the Russian resource sector.  These events were the backdrop against which Gazprom made its return as the major energy company in Russia; a fact which coincided with Russia’s revival as a global energy exporter.

Russia’s economic shift is very much reflected in Gazprom, with the company’s investment in sport viewed by some as a project to mask the questionable circumstances that enabled Gazprom to become Russia’s largest company. In 2005 Gazprom took over as the only shareholder of Zenit when Chairman David Traktovenko – now owner of Sydney FC – stepped down and agreed to sell his shares to the energy company.

From that moment, Gazprom was not only part of the game as a sponsor but also as an owner, thereby confirming Zenit as Russia’s richest club. Indeed since the takeover Zenit have won the Russian league three times, as well as one Russian Cup as well as the above mentioned UEFA Cup. In 2012, the German marketing company Sport+Markt published a report and listed Zenit as the best supported club in Russia and the 11th in Europe with 12.6 million followers.

German research firm Sport+Markt give an idea of Zenit's market potential

German research firm Sport+Markt give an idea of Zenit’s market potential

Zenit is not enough: The creation of a global football network

But Zenit were not enough for Gazprom who wanted to expand its sport empire beyond Russia’s borders. In 2007, Gazprom was announced as the main sponsor of German club FC Schalke 04. As part of the sponsorship package, Schalke also signed a cooperation agreement with Zenit. The former has one of the best youth development programs in Germany, and have since sent specialists to Russia to help improve their youth infrastructure and those belonging to other clubs owned and operated by Gazprom.

Gazprom’s investment in Schalke has also allowed for some direct influence from Russia’s political elite in the day-to-day business of the German club. When Bayern Munich acquired Manuel Neuer from Schalke in the summer of 2011, Vladimir Putin personally tried to interfere with the transfer. The German newspaper Die Welt reported that Putin told Gazprom to make funds available to keep the German national goalkeeper in Gelsenkirchen. Putin also contacted the management of the club to voice his discontent with Neuer’s decision to eventually leave.

Footy Call? - Putin's angst at Neuer transfer was reported in German press

Footy Call? – Putin’s angst at Neuer transfer was reported in German press

The trails being made by Gazprom into German football has more recently become a topic of fervent discussion in the south of the country. The all-conquering Bayern Munich have been the subject of speculation about a potential sale of some their shares to the Russian gas giant. The so called 50+1 rule forces German clubs to hold 51 per cent of their own shares; the clubs are, however, free to sell up to 49 per cent to investors.

In 2002, Adidas acquired 9.1 per cent of Bayern’s shares for €77m, and in 2009 Audi paid €90m for the same holding. These massive deals freed Bayern of their debts, making them one of the richest clubs in the world. In December 2012, Germany’s popular national daily newspaper Sueddeutsche Zeitung reported that Gazprom were contemplating offering the Bavarians a multi-million Euro deal that would far exceed the previous arrangements with Audi and Adidas. The Gazprom-Bayern rumour has since refused to dissipate with the mutual benefits of such a move, plain for all to see.

A strategic partnership with Bayern, who are Germany’s best supported club, would create a more positive profile for Gazprom, who are often looked upon with suspicion in Germany, the economic engine of Europe and Gazprom’s most important customer in the European Union.

At this point, however, any future arrangement with the current Champions League holders remains distant, although their footballing empire has been growing elsewhere. For instance, in 2010, Gazprom saved the storied Serbian club Red Star Belgrade from bankruptcy by agreeing, by Serbian standards, a massive sponsorship deal worth €3m a season.

However, Gazprom’s activities in Serbia were lightweight compared to deals which followed.

Gazprom – the European Ministry of Sport Propaganda

In 2012, Gazprom buddied up with Chelsea to create a global energy partnership. The deal with Chelsea is perhaps less surprising considering Roman Abramovich’s close connections to the Kremlin.

As the Guardian suggested, the deal with Gazprom may help Chelsea to circumnavigate any potential issues with the new Financial Fair Play rules as the deal has seemingly reduced Chelsea’s dependence on cash inflows from Abramovich personally. As opposed to sponsorship money, Abramovich’s investments into Chelsea are recorded in financial reports as loan debts, a situation that has made Chelsea one of the most indebted clubs in Europe.

Financial Fair Play was introduced by UEFA in 2009, which is in essence a licencing system for clubs that compete in international competitions. The concept of Financial Fair Play is loosely based on the licencing system used by the Deutsche Fussball Liga (DFL), the governing body of the Bundesliga and 2. Bundesliga in Germany. As UEFA states on their official homepage, FFP follows the following principles:

• to introduce more discipline and rationality in club football finances;
• to decrease pressure on salaries and transfer fees and limit inflationary effect;
•to encourage clubs to compete with(in) their revenues;
• to encourage long-term investments in the youth sector and infrastructure;
• to protect the long-term viability of European club football;
• to ensure clubs settle their liabilities on a timely basis.

The deal with Gazprom therefore allowed Chelsea to increase their sponsorship revenue, and become less dependent on cash injections by Roman Abramovich, which are technically viewed as liabilities under the terms laid out by UEFA.

Gazprom's deal with Chelsea added yet more Russian influence at the English club

Gazprom football empire –  deal with Chelsea added yet more Russian influence at the English club

It was therefore not surprising when Chelsea chairman Ron Gourlay expressed his enthusiasm for the deal: “This is another very exciting global partnership for the club, and demonstrates the ever-growing appeal of Chelsea FC.” Furthermore, Gourlay added: “Our huge fan base around the world will help Gazprom reach their key markets in Europe and Asia, while we will benefit from their support in developing further our wide-ranging (Corporate Social Responsibility) CSR programs.”

According to sports website TSMPLUG, Chelsea have the second highest wage bill in the Premier League after Manchester City. The Guardian also reported on 9 November 2012 that the sponsorship deal with Gazprom meant that the club would for the first time since Abramovich had taken over in 2003 be run at a profit.

The Gazprom deal was perhaps a way for Abramovich to further circumnavigate Financial Fair Play by playing on his economic connections back in the Motherland. But as Abramovich’s involvement at Vitesse Arnhem shows (read Futbolgrad’s article Vitesse Arnhem and Chelsea – a Georgian-Russian Detente here), the Russian oligarch has had no qualms with slaloming round UEFA’s rules.

Release of the Kraken: How to influence policies Gazprom style

Gazprom does not invest in football merely to promote its image at home or abroad. Rather, Russia can use these investments to directly influence the decision-making processes of major clubs. Like a kraken, the company is therefore able to spread its tentacles into the decision making processes of, for instance, one of England’s largest sporting clubs, which ripples into the overall affairs of the Premier League and the Football Association.

In a way this process is reflected in other economic spheres as Gazprom has been able to infiltrate major energy companies in Western Europe through minority stakes. Through these minority investments Gazprom, in theory, has the power to influence policy decisions in countries like Germany, France, and the United Kingdom.

For now, from the perspective of the countries in which Gazprom are making their investment, such projects are not considered dangerous. For them, this is a project concerning image and cosmetics. Ultimately, it can be argued that Russia, through Gazprom, is planting the seeds of control under the veil of pursuing its own major sport projects in Russia at home and abroad.

Manuel Veth is a PhD candidate at the University of London King’s College, London. Originally from Munich, his thesis is entitled: “Selling the People’s Game: Football’s transition from Communism to Capitalism in the Soviet Union and its Successor States”. Follow Manuel on Twitter @homosovieticus

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    Dave 3 years

    Any details on how much Chelsea are getting paid for the Gazprom deal?

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