Rants and musings from the magazine team
In February 2007, FourFourTwo marked its 150th issue with a number of features on 'The Men Who Changed Football'. But it's not all about the Wengers, Cantonas and Bosmans – as David Conn explains, one mega-rich Russian changed football forever the moment he stepped off his private jet and into Stamford Bridge...
The BBC was always painfully eager, in July 2003, to say it “broke” the story that a Russian, Roman Abramovich, had suddenly bought Chelsea. The Beeb’s then business reporter, Jeff Randall, was more than usually excited about the deal, telling the nation that Abramovich, whom he described blankly as “one of the richest men in Russia”, had indeed taken over the faltering, debt-soaked West London club. We were given no context then about who Abramovich really was, or how he came to have so many barrels of roubles, or why he had chosen to pour so much of this money into buying a football club which was reaching the end of Ken Bates’ line.
Bates, who briefly retired to Monaco with his £17m pay-off from Abramovich before suffering from football club
ownership withdrawal syndrome and
buying Leeds United, has always scoffed at claims that Chelsea had been just days from financial collapse. Abramovich’s
people never quite went that far, but Bruce Buck, the lawyer who became Chelsea’s chairman, did say that the club had been in “very serious financial difficulties”.
Abramovich’s intervention was to blast huge change into the English game, and it instantly wiped away Chelsea’s debts. The formerly crippling £75m Eurobond loan, which Bates had taken on in December 1997, was made to seem like
a tenner Chelsea had forgotten they owed the newsagent.
Nor was the new regime prepared to wait and see how the players they inherited would fare: Abramovich splurged £117m immediately on a
shopping list of new playing staff. When you recall who Chelsea bought in that initial frenzy – Hernan Crespo, from Inter Milan for £16.8m; Damien Duff, £17m from Blackburn; Claude Makelele, £16.6m from Real Madrid; Geremi, £7m from Middlesbrough; Adrian Mutu, £15.8m from Parma; Glen Johnson, £6m from West Ham; Wayne Bridge, £7m from Southampton; Joe Cole, another from
relegated West Ham, for £6.6m – it is worth reflecting on how scattergun their success rate has been.
There was always a question about how far the Abramovich project had signed up to the manager, Claudio Ranieri, but he nearly made himself difficult to sack,
guiding Chelsea, with some dignity and humour, to second in the Premier League –
11 points behind unbeaten Arsenal – and to the semi-final of the Champions League, where they lost to Monaco, 5-3 on
aggregate. Monaco lost 3-0 in the final to Porto, so Chelsea hired the European champions’ manager, Jose Mourinho. The offer he couldn’t refuse included a reported £6m a year salary and all the money he could ever spend on players.
Chelsea went buying again: Arjen Robben, a £12m PSV winger who turned down Manchester United; Mourinho’s
ex-Porto defenders Ricardo Carvalho, £19.85m, and Paulo Ferreira, £13.2m, joined Didier Drogba, signed for
£24m from Marseille, and Petr Cech, a
goalkeeper who cost £7m to ginger up some competition with Carlo Cudicini.
Mourinho brought organisation,
solidity and ruthlessness of purpose, along with his signature arrogance and overcoat, to this extravagant collection, and two
seasons after the questions over whether Bates’ Chelsea were even going to survive, Abramovich’s club were Premier League champions. Manchester United, until then the world’s richest, their fortune built on commercially exploiting the conveyor belt of success engineered by Sir Alex Ferguson, suddenly looked like game northern
tryers compared to the plaything of the dreamy-eyed playboy gazing down from the Stamford Bridge directors’ box.
As to why Abramovich did it, we can still only speculate, unless we choose to believe the simple explanation offered in the only interview he has given since he shook English football to its foundations. He had, he murmured, “fallen in love with the beautiful game”.
This is the same rationale since offered by all the businessmen flooding in from overseas to buy Premier League clubs. They all say they love the game, not that they can smell money. The Glazer family who paid £810m for Manchester United from their Florida base and saddled
the club with £660m debt told us they
were “avid” United fans. Randy Lerner, the MBNA credit card company heir who bought Aston Villa in the summer of 2006, said plenty about the interest he developed in football when a student at Cambridge in the early 1980s, but nothing much about his financial plans or motivation for buying the club. Eggert Magnusson, the chairman of Iceland’s FA, waxed on about the history and heritage of West Ham after the £85m takeover of the club in November, although the principal financial force behind the deal, Bjorgolfur Gudmundsson, did acknowledge – via his spokesman – that it represented for him a “business opportunity”.
Accounts of Abramovich’s life depict
a lonely, sickly orphan who did not play football with the rough-and-tumble lads of his neighbourhood. But as a billionaire, he said he was taken to Old Trafford one night and decided to buy some of the game’s magic. He looked – this is important to remember – at Real Madrid and Barcelona, but found that Spanish clubs are not for sale because, great football institutions as they are, their fans own them.
"I want that one!"
English clubs, however, are all companies. And they were all then, except for United, in
various states of financial desperation, with debts accumulated either in trying to keep up with United or avoid relegation to the financial tundra of the Football League. Abramovich’s purchase of Chelsea sparked another round of wage inflation, with top players reportedly paid £120,000 rather than the £100,000 which had previously been top whack. The already debt-laden clubs realised they were falling even further behind, and began a worldwide search for more Abramoviches to sail to the rescue.
Although he never gave a more detailed, grown-up explanation of why he came from nowhere to buy Chelsea, Abramovich did in that sole interview provide a tantalising glimpse of the business culture from which he had emerged. Asked what advice he would give to young people aspiring to make money in Russia, Abramovich cited what was a wry saying among his peers: “Do not imagine that you will never go to jail.”
Behind the man’s unreadable blue eyes, and his purchase of a football club, lies the story of Russia’s carve-up after communism. The country was not lovingly remodelled with the help of well-meaning western
advisors into a fully functioning democracy and economy. Russia’s institutions, the army, police and civil service cracked apart, millions of ordinary people’s savings and pensions were rendered worthless
overnight, and the country’s vast, state-owned industries, property and natural resources were suddenly up for grabs.
Abramovich is said to have launched his business career selling toy plastic ducks from a grim Moscow flat. He then built a career in that post-communist environment with an oil trading company, Runicom. But he landed his really outrageous fortune not through gradual hard work and dynamism but via what many Russians regard as the greatest scandal of those wild years, the ‘loans for shares’ scheme.
Abramovich, then in partnership with an extremely influential new businessman, Boris Berezovsky, had worked his way into the inner circle of Russian president Boris Yeltsin, who was politically embattled and running out of cash. ‘Loans for shares’ was dreamt up by Yeltsin’s advisors after intense lobbying from these businessmen, who sniffed that they were within reach of Russia’s great prizes.
Abramovich with Berezovsky
The almost unbelievable arrangement was that the businessmen would lend Yeltsin’s government money and support, and in return he would grant them,
by decree, the right to manage huge
companies owned by the state. These
massive assets, including oil fields and
refineries and huge nickel and aluminium processing factories, were then sold off in “auctions” which were effectively closed to competitors. The same few businessmen paid a fraction of the companies’ true value and became billionaires overnight.
Abramovich bought Sibneft, a company sitting on 30 per cent of Russia’s oil, for just $200m – money he could easily borrow because the company was worth billions. While the majority of Russia’s population floundered in a collapsing society, a handful of individuals had landed much of Russia’s wealth. They were labelled the oligarchs.
Chrystia Freeland, the Financial Times’ Moscow bureau chief during those chaotic times, named her book Sale of the Century after the loans-for-shares process. It was, she wrote, “Such a naked scam, such a
cynical manipulation of a weakened state, that – especially now as Russia continues
to fall apart – it is tempting to dismiss the
rapacious oligarchs who instigated it as just plan evil.
"Yet... the future oligarchs did what any red-blooded businessman would do, seeking the most profitable opportunity. The real problem was that the state allowed them to get away with it.”
The explanation provided by John Mann, Abramovich’s and Sibneft’s spokesman, does not differ all that much from Freeland’s. “Was the process perfect?” Mann asked rhetorically. “No. The investors lent money to the Government in return for managing the companies, then later when the companies were privatised they had an advantage in buying the
shares. But it was not illegal; they played
according to the rules of the time.”
Mann argued that all of Russia was
undervalued, and Abramovich was taking a risk on whether his company would succeed in the modern era – although with a resource as precious as oil, it is difficult to see how the “auctions” could make Abramovich
anything other than an instant billionaire.
Abramovich attained celebrity here by buying into football, and nobody seems to care much how his money was made. But in Russia, the oligarchs were and still are loathed, seen by most people as latter-day robber barons. When Vladimir Putin,
a president with old-style Soviet roots, took over from Yeltsin, he was expected to undo the oligarchs’ wealth, although he is reported to have told them he would leave them intact if they stayed out of politics.
Those who opposed Putin were hounded, including Berezovsky, who moved to London and fought off extradition proceedings on the grounds that criminal charges laid against him in Russia were politically
motivated. Then two years ago, the
wealthiest oligarch Mikhail Khodorkovsky was arrested and charged with massive fraud, theft and tax evasion, for which he was
eventually convicted, sent to prison and stripped of all his wealth.
In Britain, the debate about Abramovich – such as it was – barely touched upon the moral question of how he scooped his wealth,
or whether our football clubs should be vehicles for billionaires from
anywhere. Instead, most of
a half-hearted discussion
centred on whether his
intervention had been good for the English game.
Simon Greenberg, who left his role as sports editor for the Evening Standard to become Chelsea’s head of communications, says it has all been positive: “Before, people complained that English football was
dominated by Man United and Arsenal. Roman Abramovich’s investment in Chelsea has broken that duopoly and
created more competition. Much of the money has trickled down the game.”
"Hello? Is that the England team? Yes, I can hold."
Greenberg cites the purchases of Cole and Johnson from West Ham, Scott Parker for £10m from Charlton in January 2004 and Shaun Wright-Phillips from Manchester City for £21m in July 2005 as examples where the selling clubs have been able to use the money to balance their books and sign players from clubs lower down.
“The investment of so much money in Chelsea has also been a catalyst for more investment in other clubs,” he says, “which has been good for the game.”
Malcolm Clarke, chairman of the Football Supporters’ Federation and a Stoke City fan himself, could hardly disagree more completely: “Mostly the new owners – wherever from overseas or here –
are attracted because football is
a plaything for them or to make money, not because they have any links to a club. The money is not trickling down meaningfully;
the gap is growing wider between the rich clubs and the rest, and
weakening the competitiveness
Before Abramovich arrived, Arsenal and Liverpool had been terrified of Manchester United’s financial power, leading Arsenal to borrow £260m to build their 60,000-capacity Emirates Stadium and Liverpool to decide to move too, but fail to find the money. The discussions which Liverpool began in December with Dubai International Capital were the latest in a two-year hunt for a saviour which began embarrassingly with talks, ultimately aborted, with Thai Prime Minister Thaksin Shinawatra.
Everton announced a partnership with the Swiss-based Fortress Sports Fund, which promised investment from another Russian businessman, Boris Zingarevich, who
contemptuously denied he had any
intention of becoming involved. Man City, with debts of around £100m after Kevin Keegan’s spending spree, made clear their willingness to “talk” to any passing Russian billionaires, but sadly, nobody called.
In fact, the next acquisition of a top English football club finally happened down the Mancunian way: the slow, tortured,
bitterly contested takeover of Manchester United by the Glazer family in June 2005. It was an education in the poker game of company takeovers – the Irish racehorse owners John Magnier and JP McManus walked away with £227m, winnings of
an estimated £100m, from their sale of
29 per cent of United – and in the eye-
watering way deals can be financed.
United were not only eight times Premier League champions, three times Double
winners and European Champions in 1999, but the club prided itself on having won so much and relentlessly expanded Old Trafford’s money-making activities without going into debt. United’s accounts for the last 11 months before the takeover showed a turnover of £159m, still way above Chelsea or any other club, a profit before tax of £10.76m, and no bank loans or borrowings at all.
The Glazers paid £810m in total, with £265m borrowed from bank JP Morgan
and £275m from three US hedge funds at punishing interest rates of between 14 and 20 per cent. The Glazers then took United off the stock market, and ladled the debt onto the club itself. After refinancing last summer, United’s total bank debts, which were zero, are now £660m, with £62m due in interest every year.
For a core of Manchester United fans who had opposed the original stock market float, protested against the ticket price increases and aggressive commercialism which branded Ferguson’s golden years, then fought in 1999 to defeat the proposed takeover of United by Rupert Murdoch’s BSkyB, the Glazers were a fate too far. Those fans formed a new club, FC United, member-owned, beginning at the base
of the football pyramid and reflecting the community and fan-oriented character they had craved at Old Trafford.
“It is about making football accessible again,” says the club's chief executive Andy Walsh, “for young people and many fans who felt alienated by the big business
takeover of the game.”
FC United manager Karl Marginson
Fans at other clubs have noticeably not protested at their takeovers, hoping instead that the takeovers would ditch mostly unpopular former owners – Terry Brown at West Ham and Doug Ellis at Villa sold their shares for millions – and herald good times ahead.
Keith Harris is a merchant banker whose company Seymour Pierce was involved in the Abramovich takeover and the subsequent buyouts at Aston Villa and West Ham. According to him, football clubs are regarded by the exceptionally wealthy as “trophy assets”. “Some people buy yachts,” he said, “and some buy football clubs.”
Malcolm Clarke reacts with a snort:
“A football club isn’t like a yacht – they’re not trophy assets. Clubs are important parts of their communities, loved and loyally
supported by their fans. The clubs need
protecting, not to be bought by people about whom we know so little, for reasons which seem to be all to do with making money from TV rights and ticket prices.”
The Glazer takeover has one thing in common with Abramovich: the family gave just one public interview, and in it they said they were motivated by being “avid” United fans. If you pushed the family’s financial PR people for a fuller explanation, they did sketch out the thinking which surely applies to the wave of takeovers now washing into the English game. “If you look at Premier League football’s popularity, at how the world is developing and how much leisure spend is increasing,” the spokesman said, “the family believes that long term they will make a success of Manchester United and get something out of it.”
Premier League football’s success and aggressive marketing of TV rights to over 200 countries means it is seen and the clubs “supported”, however virtually, by millions of people around the world. Bjorgolfur Gudmundsson’s spokesman said English football is now “like Hollywood films”.
That – the TV revenue, and potential
merchandise to be sold to fans worldwide – is the gold the investors see in their
calculators. Where it leaves fans, and the clubs’ souls, remains to be worked out.
Even Chelsea insist they will break even despite five years of feverishly spending Abramovich’s money – although few believe the billionaire bought the club to turn
a profit for him personally. Particularly after Khodorkovsky’s public humbling, many observers were convinced Abramovich did it to make himself very visible and difficult for Putin to scythe down. Through
football’s incomparable profile and prestige, went the theory, Abramovich made himself too visible and celebrated in the West to be brought low at home.
Then in September 2005, Gazprom, Russia’s state-owned oil company, bought Abramovich out, paying $13bn for Sibneft. Far from undoing the scandalous sale which handed Abramovich the oil, Putin’s Government paid him that unimaginable return to buy all the “trophy assets” he can ever dream up, be they yachts, football clubs, or Andriy Shevchenko.
John Mann, Abramovich’s spokesman, has always maintained that the theories were wrong; that there was no cunning political ploy behind the purchase of Chelsea.
“Mr Abramovich was never accused of any criminal offence, and he had no need of an escape hatch from Russia. He is not involved in politics and continues to do what the [Russian] government asks of its businessmen,” insists Mann.
“He bought Chelsea because he wanted to buy a football club.”
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