Gazprom’s colossal football empire

Gazprom’s colossal football empire

It was once said that of all the unimportant subjects, football is by far the most important. Today, that quote seems so antiquated. Football has transcended the boundaries of a mere sport, into the galactic sphere of the ‘real world’. Football seems to have become more than a game between 22 players on a pitch; it has become a business for people and companies to exploit. For owners to build up and knock back down at their will. For supposed protectors and governors to use as a political pawn.

In the 2013-14 season of the UEFA Champions League, England’s Chelsea and Germany’s Schalke 04 were arranged to meet twice in the group stages of the competition. This is not the first time that these sides have met, and it certainly won’t be the last, but somehow these meetings felt extra important. A dark shadow has been cast over Europe’s premier sporting competition by a Russian gas conglomerate. How has football become this untamed international beast?


What is Gazprom?


Gazprom is the world’s biggest natural gas company, accounting for around 17 percent of the global production. This production subsequently contributes a whopping eight percent to Russia’s overall GDP. It’s safe to say that Gazprom plays a prominent role in Russian business and political society.

The origins of Gazprom stretch as far back as the mid-1960s, when the then USSR created a specialised ministry for gas production and consumption, called the Ministry of Gas Industries. This development was closely connected with Russia’s expanding natural gas business plan, as exploration reached deeper into the communist state.

Gazprom only officially saw the light of day in 1989, when the ministry changed its name. It was still wholly owned and operated by the state, and was not unleashed onto the stock market until the mid 1990s. The company has, however, never truly been outside the influence of the state, and since 2005 it has taken a 51 percent controlling stake in Gazprom, with the rest of the shares being open for foreign investment. This cooperation reaches even further, with Gazprom holding a ‘legal monopoly’ for natural gas export out of Russia.

What it means for Gazprom is that they are inextricably attached to the Russian state, with former statesmen often being appointed to positions of power within the company, and vice versa. Some of the chairmen on the Gazprom board, for example, include Viktor Zubov (former Russian Prime Minister) and Alexei Miller (former Deputy Minister of Energy). Dmitry Medvedev also served as the Chairman of Gazprom’s board of directors until 2008. Jürgen Roth, in a recent book about Gazprom, called the company the “political, economic and intelligence arm of the Kremlin”.

As such, like The Economist points out, Gazprom essentially serves two masters: its shareholders and the Russian state. In theory, the company should seek to maximise shareholder profits, as you would expect from most businesses operate. The Russian connection, however, predisposes Gazprom to invariably favour one master over the other. This has especially been the case since Vladimir Putin’s power consolidation around 10 years ago, having used the company as a clear foreign policy tool. The most recent and high profile cases of such action have of course been with regards to Ukraine and the Crimea.


What’s so important about them?


Another important way in which Gazprom distinguishes itself from other energy companies is its historical, as well as current, policy of portfolio expansion. One such strategy has been to purchase media outlets, for example radio and TV stations, as well as popular web video streaming service Rutube. This has further been aided by Russia’s move to limit foreign ownership of media outlets, paving the way for Gazprom Media (Gazprom’s media ownership division) to expand even further.

Another, much publicised, approach which Gazprom has taken has been through sport sponsorships. These sponsorships extend into gymnastics, boxing and hockey, but by far their biggest investment exploit has been with football. Gazprom are official sponsors of four European football clubs: Zenit Saint Petersburg, Schalke 04, Chelsea and Red Star Belgrade, as well as the UEFA Champions League and the FIFA World Cup.

Gazprom’s seemingly most insignificant deal was with Chelsea to become their official global energy provider in 2012. The title and value non-disclosures of the agreement have, however, led some to question the minuteness of the deal. It is arguably a tool to get around UEFA’s Financial Fair Play regulations by, as other clubs have done, hoarding advertising partners to each and every aspect of the club. Similar deals made by Chelsea include Audi and Delta Air Lines.

What distinguishes this deal from others is the link between Gazprom and Chelsea owner Roman Abramovich. Back in 2005, Abramovich sold his shares in his oil-producing company, Sibneft, to Gazprom for an estimated $13 billion (€10.4 billion), in what was the biggest corporate takeover in Russia. Although this is their only official connection, many have speculated that the two parties have other ties, sparking this new cooperation.

In a slightly larger capacity, Gazprom are Schalke 04’s official shirt sponsors – originally signed 2007, and later extended until 2017. The latest deal is rumoured to net the German club around €20 million annually, with the shirt sponsorship deal being second only to Bayern Munich in the Bundesliga. This would certainly appeal to Schalke’s accountants, as the club are currently in debt at a figure of around €170-200 million.

This particular deal is also one in a long line of business which Gazprom has conducted with Germany. Being Gazprom’s biggest foreign market, supplying around 35 percent of Germany’s gas imports, they have invested significant attention and resources on cementing their place in the German market. A major move in this direction occurred in 2005 when Gazprom appointed ex-German chancellor Gerhard Schröder as the chairman of Nordstream, a pipeline in the Balkans connecting Russia and Germany. Schröder’s appointment was seen as instrumental in landing the Schalke sponsorship.

Influence is not always welcome, however, and there has been a definite blowback to these developments, with political leaders concerned that it deepening their dependence on Russia. Despite this pressure, the German state has chosen not to block or reconsider the deal. This has also been much the same with regards to Schalke, with any critique of the partnership mostly being limited to outraged outsiders.

One particular bone of contention has been club president Clemens Tönnies’ company link with Russia and Gazprom, and specifically his “ethical scandal” of a relationship, as Jürgen Roth worded it, with Putin. According to reports, Putin even went so far as to try and persuade Manuel Neuer, now of Bayern Munich, to stay at the club during the transfer dealings. As far as a protest to the deal is concerned, many have pointed out that the Schalke fans have yet to show any major negative reaction to the cooperation, aside from the occasional moral grumblings. Whether the fans would appreciate their team meeting with Putin, as Tönnies has promised, right in the midst of the current crisis, is another issue entirely.

Moving further east, Gazprom also have a significant presence in Serbia with Red Star Belgrade. Back in 2010, when the club was on the brink of bankruptcy with debts of around $25 million (€20 million), Gazprom signed a five-year deal to become their main shirt sponsor. The deal was worth an estimated $19 million (€15.2 million), or around $3.8 million (€3 million) annually, bringing much needed financial respite to the historic club.

Gazprom has a controlling stake in Serbia’s oil monopoly, NIS, and the Serbs, much like many Baltic countries, rely mostly on Russian gas exports. This has profound effects on the economy of the region, which inevitably trickles into the social sector and into the psyche of the population. Additionally, Putin’s pan-Slavic rhetoric has wooed a large section of the Serbian public – an important development as the country decides on whether to pursue EU membership. Gazprom’s intended pipeline through the Balkans remains a sticking point between the EU and Serbia, and the Russians are determined to persuade their neighbours to jump on the bandwagon.

The Red Star sponsorship has unsurprisingly helped in that regard. It is a historically laden club, having become only the second Eastern European club win the European Cup, back in 1991. It is also one of the most popular clubs in the country, with some figures claiming that almost half of Serbia identifies with the Crveno-beli. The fact that the financial situation was dire to say the least, also glorifies Gazprom to Red Star’s supporters, having temporarily rescued them from doom.

This is not the end of the story, however, with strong reports emerging of Gazprom’s intention to purchase a 100 percent stake in the club. Having won the Serbian SuperLiga in 2014, Red Star were denied entry to the 2014-15 edition of the UEFA Champions League qualification after having breached several provisions of the FFP regulations due to poor finances. Gazprom are therefore looking to “save” the club yet again, although they would get considerably more bang for their buck this time around, with ownership of the stadium and other facilities being rumoured to be included in any deal.

Finally, Gazprom’s largest footballing escapade so far is its ownership of Zenit Saint Petersburg. The takeover 2005 was the culmination of a process that started in 1999, when Gazprom became the club’s official sponsor. The endeavour can be considered as a success for Zenit, having won three domestic titles since the takeover, as well as becoming only the second Russian club to win a major European trophy, when they conquered Glasgow Rangers in the UEFA Cup final in 2008. A stadium has also been promised, although the date of completion for that project has been continually delayed, and will most likely be completed sometime before the 2018 World Cup.

Zenit are, like Red Star, one of the best supported teams in their country, and indeed in Europe according to some studies. Despite this, and the success which has followed the takeover, there have been blowbacks to the link between Putin, a Saint Petersburg native, and Zenit. He was even forced to publicly defend the club’s lavish spending on stars such as Hulk and Axel Witsel for a combined €95 million.

What Gazprom seeks to get out of the deal, however, is perfectly represented in those transfers. The ludicrous amounts spent on players and their new stadium – construction costs are expected to exceed €1.1 billion – are all part of a development project put into both the club and the city as a whole. Gazprom has been responsible for several cultural projects as they attempt to create an advertising platform on which to stage their global football image campaign.

One potential pothole in this plan could be the club’s racist fan culture, which has cast a shadow over the project. The phrase “there is no black in Zenit’s colours” has been irreversibly cast as the anthem of the club, especially when the ultras keep repeating the mantra over and over again. This is undeniably a Russian societal problem, with many sectors of the country coming under attack from interest groups for their xenophobic and homophobic rhetoric, but what has been striking is Zenit’s facilitation of these actions. Gazprom could potentially set an example in Russian and world football by stamping out intolerance, but instead the Zenit administration has actively avoided the subject, instructing their staff to stay away from such touchy topics.


What’s their master plan?


The key word in Gazprom’s plan clearly is ‘global’. Zenit was only the starting point of Gazprom’s football empire, and the subsequent sponsorships of the aforementioned clubs was not the end. There have been several rumours of Gazprom attempting to buy shares in various clubs in Italy. Additionally, German reports have suggested that they have contemplated buying a significant share in Bayern München. While Schalke is a major club in the Bundesliga, Bayern Munich are a global brand; one which would bring Gazprom’s club sponsorship brand to a whole new level.

A second avenue has been their involvement in both UEFA and FIFA. Crucially, Gazprom are part of the handful of elite companies which make up the list of official sponsors of the UEFA Champions League. As most will be aware of, the Champions League is the highest ranked club football competition in the world, and with UEFA’s strict control of its sponsors this is an impressive feat for the Russians. The competition reaches an estimated 4.2 billion viewers annually according to some figures, with the final in 2014 having reached 380 million according to UEFA, making it an incredibly profitably marketplace to reach.

The Champions League is arguably only surpassed by one competition – the FIFA World Cup, and again Gazprom are present. The viewing figures of the World Cup are tremendous, with estimates being that every game of the 2014 edition was viewed by an average of around 200 million people, and the final having exceeded a billion official viewers. For the next World Cup in 2018, Gazprom will be one of the competition’s main sponsors, which will incidentally be held in Russia.

It has, however, been pointed out that one of the key men for bringing the World Cup to Russia in 2018, Vitaly Mutko, is both the Russian Minister of Sport and a member of FIFA’s executive voting committee. This is also just one of many advances which Russia has made into the sporting world of late. The Black Sea city of Sochi, for example, has had a stellar year in 2014, hosting both the Winter Olympics and Russia’s inaugural Formula 1 Grand Prix.

While there’s no definitive evidence to suggest that Gazprom are responsible for these coincidences, the success of Russia is suspiciously indistinguishable from Gazprom’s advance into European football. The reported $90 million (€71.7 million) sponsorship deal with FIFA also accomplishes Gazprom’s aim of football influence through reputation legitimisation. The company is now allowed to use the FIFA and World Cup logos in their advertisements. Combined with their presence in the Champions League, Germany, England, Russia and Serbia, the FIFA deal makes it very apparent that Gazprom are now a major force in European football.

The question that all begs is simple: where does Gazprom’s bravado stand on the grander stage of football? Conglomeration of football has only just begun, but it has already reached dizzying heights. The two most famous examples of this development in recent years have indeed been Manchester City’s City Football Group, and Qatar’s Investment Authority. But then there are others, such as Red Bull and the Pozzo family. What kind of effect could those upshots have on the footballing landscape?


Political Supernovas


The City Football Group (CFG) acquired Manchester City back in 2008, and it soon became apparent that this was not your run-of-the-mill bored billionaire looking for a new toy. Not content with the bright lights of Manchester, CFG has set its aim on a global organisation, having acquired two more clubs in the form of New York City FC and Melbourne City FC. In May of this year, they also announced the acquisition of a minority stake in Yokohama F. Marinos of Japan.

Qatar has also been making significant headway into the beautiful game. It’s most significant investment has been the acquisition of Paris Saint-Germain, as well as its ownership of Qatari television network Al Jazeera, which has spawned the French sports channel beIN Sports. These projects, along with various sponsorships by Qatari foundations and companies, have been instrumental in cementing the monarchical state’s place in world football.

The case of Gazprom only becomes more interesting when compared to these developments. Their ownership of Zenit certainly draws comparisons from PSG and Manchester City; with the Petersburgian club enjoying unprecedented heights, as described before, which is in no small part attributed to Gazprom’s riches. In this way, Gazprom has begun its journey into football in much the same way as the other organisations, by winning over the fans of a big metropolitan football club, bringing them some vital silverware. Thus, they all started with a ‘cultural investment’.

Gazprom’s global strategy since then equally compares to the other two organisations. Gazprom is intent on creating a global brand; cleaning up their already tarnished image, or even creating an entirely separate entity. By claiming a stake in a cultural capital as strong as a football club, Gazprom manages to insert itself into the society of that particular place and associates itself within the ideals of the club. While millions may watch the World Cup and Champions League, few of those fans will be displaying Gazprom’s logo on their prized assets like Schalke and Zenit fans. That is an immensely powerful tool which Gazprom has taken full advantage of to promote itself.

It is also clear that Gazprom has a plan for its expansion, and has identified German as a key target market for propaganda. This is key to understanding their goals, as Germany serves as a vital business and political partner to Gazprom’s, and Russia’s, plans. If the company and country wish to continue, or even expand their partnership with the German market, as they have suggested, there needs to be a base for them to build on. Hiring ex-Chancellors is a step in that direction, but bankrolling the social spheres of the people is quite another.

Like CFG and the Qatar Investment Fund, Gazprom is essentially used as a marketing tool for a country. While there are exceptions to each of the cases, these organisations are often employed as sleights of hand by magicians; rarely willing to give away their secrets. The recent allegations towards FIFA regarding the World Cups in Qatar and Russia are forever looming over these groups, especially in links between them and their respective state’s success in continually winning sporting bids. Their club sides may not have reached their pinnacles, but on a political level, they are already superpowers. Their next steps could be monumental in the way football operates, at least from a European perspective.


Player swaps


Another avenue of ownership which is worth looking into is that of player movements. While the City Group amasses superstars over all continents, the Pozzo family has control over three relatively small-scale clubs around Europe who get to swap players. This is a novel ideal, but one which could start to snowball in the next decades if clubs continue forming into these owner-controlled clumps.

Udinese was originally acquired by Giampaolo Pozzo in 1986, and has served as the base of operations for his later expansion. Pozzo helped guide the Udine club through tumultuous times all the way into the Champions League; all without the stupendous riches of Qatar and Russia. He later purchased Granada CF in 2009 and Watford FC in 2012, to expand his network to Spain and England. In this network, players are moved around at the say of the Pozzo family owners, with all three clubs having benefited from this arrangement.

On the other end of the spectrum if you will, is Red Bull. This Austrian energy drink company, unlike the Pozzo’s, have a multi-billion euro set-up behind their sporting project, which stretches from the European clubs of Salzburg and Leipzig, to the Americas with New York and RB Brazil, and finally into Africa with RB Ghana. This unique model works by using their Ghanaian and Brazilian clubs as feeder clubs for their more established operations in North America and Europe. Player movement is not a central motive for the cooperation, with marketing and branding the real aims of the company, but this sort of wide net-casting would allow Red Bull to improve their scouting platform for their larger clubs.

Gazprom would also have this potential if it pursues the rumoured takeover of Red Star, for example, and further. Even though the company could not technically have an effect on player movements in clubs it only sponsors, Putin’s attempted derailing of Neuer’s transfer clearly shows the potential power of the company in these clubs. This is especially the case when Gazprom’s connection with the Russian state is taken into consideration. With Russian gas dependence in most of the Balkans, Gazprom could continue its expansion into the region and build a sizeable network of clubs in a society of tens of millions of people.

It will also be interesting to follow Gazprom’s exploits further east than the Baltics. They have recently signed a blockbuster deal with China for natural gas exports, as Russia’s cooperation In Asia develops. As Chinese football grows, both on a financial and competitive level, this could prove an interesting investment for Gazprom. Whether it could work on the same marketing level as its targeted markets in Europe is debatable, but any such movements would certainly shed more light on this giant’s intentions.


Why always Gazprom?


The clubs and organisations that Gazprom sponsors have been heavily criticised for their involvement with the Russian company. Greenpeace have made two public protests of UEFA’s partnership with Gazprom, as well as a failed demonstration at the 2014 Champions League final in Lisbon. This was due to Gazprom’s Arctic oil drilling programme, with Greenpeace refusing to allow Gazprom’s image to “hide behind the game we love”, as their statement read.

Similar critique has been levelled at Gazprom from other angles, especially from Germany, after the Russian intervention in the Crimea and Ukraine. Putin, in particular, has a negative connotation glued to his name in most of Western Europe. That a sponsor to a major German club is so closely linked him, as well as such a significant and current international political crisis, has caused a certain level of discomfort within a section of German society. The advertising on the middle of the shirt doesn’t help in comforting those same people.

While this article and author will in no way excuse or apologise for the actions and tactics of the Russian state in Ukraine, as well as other alleged incidents, the issue bears examining on a larger scale. It would, of course, be reasonable to question whether Schalke, Chelsea and others should reject the advances of a company with the reputation and ownership such as Gazprom. There is even a clause in the Bundesliga regulations which does not permit clubs to advertise unethical or political content on their shirts. Eintracht Braunschweig, however, were exempted by those very regulations when they were sponsored by Jägermeister. St. Pauli had Jack Daniels. Werder Bremen is still sponsored by Wiesenhof, despite alleged violations against animal rights.

And this is not a uniquely German situation. Apart from those clubs with alcohol sponsorships – products which have been proven to cause countless deaths every year – there are several other organisations with ties to powerful organisations, and very few of them have spotless records. Qatar is heavily linked with FIFA and French football, and has begun to make significant inroads with other leagues and clubs. They, however, have alleged links with terrorist organisations, and of course still subject many of its migrant workers, including footballers, to abject conditions. The United Arab Emirates, to which the City Group is linked with, have ruthlessly cracked down on dissidents as well as blatantly disregarding the human rights of many its migrant citizens.

Meanwhile, Gazprom, while connected to undesirable characters and events, have been shown to be more transparent than American media darlings Google, Amazon and Apple. This is not to imply that these organisations are malevolent, but rather to point out the pedestal, positive or negative, on which some organisations and sponsors are placed on.

The media coverage of a company like Gazprom in football is thoroughly warranted, as they have considerable influence on the beautiful game. To blame Gazprom’s partners smacks of a deus ex-machina to an almost unfathomable issue. Gazprom will, for the foreseeable future, be linked to the state of affairs at the Kremlin, and will inevitably be judged accordingly. The future of both remains unclear and the footballing world holds its breath as it awaits Gazprom’s next move.

By Tryggvi Kristjánsson. Follow @DrHahntastic