The Metallurg Novokuznetsk Case – A Challenge to Russian Football Ownership Structures

The Metallurg Novokuznetsk Case – A Challenge to Russian Football Ownership Structures

Manuel Veth - The mayor of Novokuznetsk Sergei Kuznetsov has questioned whether the city should continue to financially support the local hockey team

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Manuel Veth –

The mayor of Novokuznetsk Sergei Kuznetsov has questioned whether the city should continue to financially support the local hockey team Metallurg Novokuznetsk. Technically the Kontinental Hockey Liga franchise is owned by NKMK (the Novokuznetsk Iron and Steel Plant), which in turn is a subsidy of the mining conglomerate Evraz—owned by Chelsea owner Roman Abramovich.

Evraz has a profit of around $8 billion, but has been a reluctant owner in recent years, which has meant that the club has faced financial problems. The city of Novokuznetsk therefore had to step in on a regular basis to financially support the club.

Metallurg Novokuznetsk may face a referendum over its future.

Metallurg Novokuznetsk may face a referendum over its future.

Kuznetsov has now begun to question the soundness of city governments financially supporting professional clubs. “I am regularly asked by people, whether the money spent on professional teams should not be spent on the development of youth sports. I think that is a very good question, and perhaps we need to hold a referendum and collectively decide what to do next.”

Metallurg Novokuznetsk case could have major implications on Russian club football

He further told championat.com “I want to come up with a proposal to hold a city referendum on how to spent the city’s money. We need to understand how the general public thinks about this matter, and whether the city needs a hockey team like we have it today.”

Kuznetsov’s proposal to hold a referendum on city funding of the local professional team could have a devastating effect on professional sports in Russia in general. State funding of competitive sports dates back to the time of the Soviet Union, and is especially widespread in football.

The current ownership structure of the 16 Russian Football Premier League clubs is as follows:

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Therefore, eight out of 16 clubs, or 50%, playing in the Russian Football Premier League receive direct financial support by regional governments. The influence of the state is even more significant, however, when one includes Zenit, Orenburg, Lokomotiv, and Arsenal, which are owned by corporations where the Russian government is the majority shareholder.

Only four clubs, CSKA Moscow, Spartak Moscow, FC Krasnodar, and Anzhi Makhachkala, are under private ownership. Suleyman Kerimov in Januar 2011 bought Anzhi Makhachkala from the Dagestan regional government. The regional government, however, continues to support the club financially.

The dependence on state ownership is also significant in the Football National League (second division). Here the ownership structures are as follows:

screen-shot-2016-11-04-at-21-14-23

Here 15 out of 20 clubs receive direct financial support from either city governments and/or regional governments. Furthermore, Fakel Voronezh are owned by KB Khimaavtomatika, which is a state owned aeronautical company. Finally, Zenit-2 are the farm team of Zenit Saint Petersburg, which is owned by the state owned company, Gazprom.

This leaves just FC Tosno, which is owned by the commercial real estate company FORTGROUP, Dynamo Moscow, owned by VTB Bank, and Spartak-2, a farm team owned by Spartak Moscow, as the only two completely privately owned clubs in the league.

This means that in the first two divisions of Russian football, only five clubs, or 13.88%, (Spartak-2 are not included as they are a farm team) out of 36 teams, are completely independent from the government. Therefore, a potential precedent set by Novokuznetsk mayor Kuznetsov could have a severe impact on the structure of Russian football.

 The Metallurg Novokuznetsk case could have a cleansing effect on Russian football

On the other hand, decisions by city governments to curb spending on professional sports in Russia may also have a cleansing effect. Alan Moore, who has worked closely in with clubs in Russia, believes that this may force clubs to actually look at their finances, which in turn could mean that they would pay players on time, and no longer resort to match fixing in order to fill budget holes.

Transparency has indeed been the major problem in Russian football, and in other professional sports in the country, and privately owned clubs, for the most part, have had a better record in Russian football when it comes to building truly professional structures not just for the first team, but also for youth development.

The best example for this is FC Krasnodar, owned by Sergei Galitsky. Krasnodar was founded in 2008, and has since developed into one of the top clubs in Russia, while at the same time staying within limitations set by UEFA’s FFP. The club has also opened a state-of-the-art youth academy, and a brand new football stadium that has received international recognition for its architecture.

Sergey Galitsky has been instrumental in the rise of FC Krasnodar

Sergey Galitsky has been instrumental in the rise of FC Krasnodar

Meanwhile, Krasnodar’s city rival, Kuban, which is owned by the regional Krasnodar Krai government, has, despite government interference, experienced significant financial problems, and was also relegated to the FNL last season. Krasnodar may, therefore, represent the future of professional sports in Russia, but whether it does depends on whether Mayor Kuznetsov’s model in which citizen determination decides how to handle professional sports teams becomes a common model in Russia.

Manuel Veth is a freelance journalist and a writer for Bundesliga.com. He is also a holder of a Doctorate of Philosophy in History from King’s College London, and his thesis is titled: “Selling the People’s Game: Football’s transition from Communism to Capitalism in the Soviet Union and its Successor States”, which will be available in print soon. Originally from Munich, Manuel has lived in Amsterdam, Kyiv, Moscow, Tbilisi, London, and currently is located in Victoria BC, Canada.  Follow Manuel on Twitter @homosovieticus.

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