The Incredible Shrinking Russia
As if on cue, as if waiting for me to bring up Russia’s World Cup difficulties, a new development reared its head over the holidays. On Christmas Eve, the Associated Press reported that the entire 16-club contingent in the Russian Premier League will be asking their players to accept a substantial pay cut.
As part of the international condemnation of Russia’s advances on Ukraine, economic sanctions have come from the United States, Canada, EU, Japan, Australia and New Zealand, which were in turn met with retaliatory sanctions from Russia which, in effect, have only served to exacerbate the intended sanctions. There’s a Wikipedia page listing them off, because there is a Wikipedia page for just about everything. There are travel bans, trade bans, transactions bans, asset freezes, suspensions of talks regarding other issues of proposed cooperation, and one of Russia’s retaliatory sanctions bans the import of food from the sanctioning countries. This, collectively, has caused the Russian economy to tank to the point that singular American companies are worth more than the entire Russian stock market.
Sometimes people get to thinking that the stratified salaries of sports stars are in utter disconnect with the society around them. But the salaries can only be what someone is able to pay. And even the biggest soccer clubs aren’t really THAT valuable in the grand scheme of things. In May, Forbes listed the most valuable clubs on the planet, and top-ranked Real Madrid came out as being worth $3.44 billion, with FC Barcelona, Manchester United, Bayern Munich and Arsenal also topping the billion-dollar mark. The bottom-ranked company on the 2014 Fortune 1000- not 500, but 1000– is Magellan Midstream Partners, based out of Tulsa. They deal in oil pipelines. Odds are you have never heard of them before; I certainly haven’t. Their market cap on March 31 was $15.8 billion, also known as over 4 1/2 Real Madrids.
It’s nice to own a sports team, but ultimately, you probably have more important things to do in order to have the money it takes to own a sports team. And Russian soccer club owners have some important things on their minds, such as the steep decline in value of their domestic currency. Eventually, the pain gets passed to the players.
Which you’d think wouldn’t be much of an issue because the players are getting paid in rubles too and get hit as the same rate as everybody else. But it isn’t quite that simple. A good portion of the players from abroad are paid in euros or dollars, and supposedly immune to fluctuations in the ruble. But with the ruble where it is, the owners- who aren’t immune- have been forced to ask all players to accept renegotiated salaries based on a new exchange rate, which is going to result in across-the-board pay cuts of over 20%. And aside from that, soccer is a global marketplace. A player who doesn’t feel like he makes enough money in one country can very easily take his services to another country; another continent, where he feels he’ll get paid what he’s worth. The overseas players have already done this at least once: the time they left their respective homelands to play in Russia. There’s little to stop them from leaving again once their contracts expire.
Defending champion CSKA Moscow alone shows players from Brazil, Bulgaria, Cote d’Ivoire, Finland, Israel, Latvia, Serbia and Sweden, plus a Cameroonian in the U-21 squad. One doesn’t suppose any of them are too happy with recent developments.
The very real risk here is that the Russian league goes back to the way it was before the days of Vladimir Putin, when the clubs were net exporters rather than importers, and top domestic players couldn’t be held onto. As recently as 1996, Millwall- a midtable club in England’s then-First Division (the pre-Premier League top flight, for those recent converts to the game)- was able to snatch away Sergei Yuran and Vassili Kulkov from Spartak Moscow, which had finished third in the Russian league that year, the only lapse in what would ultimately become nine league titles in ten years. Ural Sverdlovsk Oblast, who currently employ players from Argentina, Austria, Chile, Iceland, Ukraine and Zambia, anticipates that they’ll be resorting to young domestics in the future- who play cheap- and odds are other clubs will be joining them.
Dialing down, however, may still be a better fate than what awaits the hockey league, the KHL. The KHL is regarded as the world’s second league after the NHL, and it isn’t cheap luring Canadian players away from the road to the Stanley Cup. Not all of the teams in the league are based in Russia, but the vast majority are, and some 40% of the players are from outside Russia. There is also no promotion/relegation mechanic; like in North America, there are conferences, divisions, playoffs, and ideally everybody shows up again next season. Ideally. In practice, there’s a fair amount of turnover. Last season’s runner-up, Czech club Lev Praha, proved too financially unstable to field a team this season. Spartak Moscow, which has a hockey branch, also had to withdraw for the same reason. KHL leadership, to this end, is looking at contracting the now-28-team league into something more manageable.
The Russian Premier League is 16 teams. Shrinking that league likely is not going to help matters. Shrinking the teams within it, though, appears inevitable.