How Russian-Jewish oligarch Abramovich financed Chelsea FC
The £1.4bn interest-free loans received by the football club went through offshore banks full of cash from the deal with Yukos
April 20, 2023
The Guardian published an investigation into how Roman Abramovich financed the British football team Chelsea, which he previously owned. The billionaire had to sell the club after the start of a special military operation, when sanctions began to be applied against him, and the sources of financing for one of the richest clubs came under close scrutiny. The article was titled "Offshore cash and huge loans: leaked information shows how Roman Abramovich financed the success of Chelsea." Spltnk studied the material and tells the main thing.
Roman Abramovich bought Chelsea in 2003 for £140m ($173.6m). Under his leadership, the previously not the most successful football club took the lead. For 19 years, Chelsea, in which he invested billions, became the champion of England five times, won the Champions League and the Europa League twice, won the UEFA Super Cup and won the Club World Cup. In 2022, shortly after the start of the special operation and the sanctions against Russian oligarchs announced in connection with this , Abramovich decided to sell the club. The billionaire's forced decision "endangered the very existence of Chelsea," the report says.
When Roman Abramovich bought the club, rules governing investing in football were virtually non-existent, and "few wondered about the mysterious man who was ready to save Chelsea from unsustainable debt," the article elaborates. “Even then it was well known that his fortune came from Sibneft, the oil and gas giant created from the privatization of state assets during Russia’s tumultuous exit from communism. loans that Abramovich poured into the club," writes investigative reporter Harry Davis .
The Guardian recently obtained what it calls the "oligarch files ," confidential documents leaked from Cyprus-based offshore service provider MeritServus. The company allegedly was "a haven for wealthy Russians who want to hide their wealth." The documents show a tangled network of offshore companies that were used to transfer money from Roman Abramovich's accounts to Chelsea. All these details clearly demonstrate how "the money was received as a result of two transactions that transform Russian business, concluded under the watchful eye of the Kremlin," the author believes.
The journalist is referring to two high-profile deals - the division of Yukos, which had united for a while, and Sibneft, which belonged to Abramovich, and the sale of Sibneft to the state company Gazprom.
Reporter Harry Davis recalls that at the beginning of the 2000s, Russians were treated very warmly in the UK. In the article, he quotes Tom Keating, director of the Center for Financial Crime and Security Studies, as saying: "The red carpet was rolled out and people could bring their money into the UK." After Abramovich bought Chelsea, the team immediately had an initial £224m interest-free loan and no obligation to document the origin of the funds. Everyone was interested that for the foreseeable future "sufficient funds would be made available to fund the business" and everyone "was in no mood to ask where the money was coming from."
In Abramovich's first two years at the club, £382m went through a company in the British Virgin Islands to Chelsea. They made deals with the best and very expensive players. The club's £230m transfer spending over the first two seasons has exceeded the combined spending of European giants Manchester United, Real Madrid and Juventus. The investment quickly paid off: Chelsea won two successive FA Cups in 2005 and 2006, fifty years after their only league title. This was followed by three more titles, as well as two Champions League trophies - a long period of success that few English clubs could boast of.
However, MeritServus' "secret" files not only reveal how "the oligarch's cash flowed into Chelsea during that golden era, but shed new light on the source," the article notes. The reporter recalls the "turning point" for Roman Abramovich and Russia in 2003, the arrest of the oligarch Mikhail Khodorkovsky , deals with his oil company Yukos and Abramovich's Sibneft, and leads to the fact that in fact Chelsea was financed with money received from the sale of the Russian oil. And President Vladimir Putin allowed Roman Abramovich to receive this money , since the billionaire has always been "loyal to the Kremlin."
"Khodorkovsky's arrest was a warning sign to other oligarchs that Putin was serious. They might enjoy a certain level of wealth, they might be able to run a business responsibly, but their loyalty was not to shareholders or employees, but to the Kremlin. Such a shrewd man, like Abramovich, he understood the new rules of the game. He knew to stay on the 'right' side of these people," said John Loh, Associate Fellow at the Russia and Eurasia Program at Chatham House, who worked for the Anglo-Russian oil venture TNK -VR".
According to John Loch, Roman Abramovich could not have bought Chelsea without the Kremlin's approval. However, Abramovich himself has always denied seeking Putin's approval for the purchase, and his lawyers have said any such claims were false.
Harry Davies also attributes Chelsea's success to a 2005 deal in which Russia's state-owned oil and gas company Gazprom bought shares in Roman Abramovich's Sibneft for $13 billion. Then the oligarch "used the proceeds to take Chelsea to new heights through an international network of offshore companies," the journalist notes.
After the sale of Sibneft, Roman Abramovich had "virtually limitless resources" at his disposal. Loans from the firm that financed Chelsea began to increase rapidly, reaching £578m by 2007 and over £1bn by 2014. As the money came in, English football authorities, British regulators and politicians showed little interest in where it came from. A 2011 report by the parliamentary committee on culture, media and sport mainly addressed the question of whether such lavish spending could distort the transfer market.
Chelsea broke the English transfer record in July 2006 by signing Andriy Shevchenko for £31m, then again in 2011 by poaching Fernando Torres from Liverpool. In the 2017/18 season, the club spent more than 250 million euros on players. "Abramović turned football from a millionaire's plaything into a billionaire's plaything. The increase in wages, transfers and management compensation set new benchmarks that other clubs had to meet," said Kieran Maguire, football finance expert and author of The Price of Football.
All this time, the club spent more money than it earned, and the amount of interest-free loans received from various companies continued to grow.
Meanwhile, the sporting body UEFA, which governs football in Europe, grew increasingly concerned about the exorbitant costs of benefactor-supported clubs, which then-Arsenal manager Arsene Wenger described as "financial doping".
The result of the UEFA review was the introduction in 2011 of the so-called financial fair play (FFP) - a system of rules that was supposed to limit spending and prevent clubs from spending more than they actually earn. "Without Abramovich and Manchester City owner Sheikh Mansour, we wouldn't have financial fair play. They changed the industry," expert Kieran Maguire said.
When UK sanctions forced Roman Abramovich to sell Chelsea in 2022, he wrote off all of his loans to the club. His lawyers stated: "The sale of Chelsea Football Club was carried out under license from the UK government and our client has stated that all proceeds from the sale will be donated to a charitable foundation."
“Abramovich built a giant in his own image, a globe-spanning colossus who used ruthless opportunism to outmaneuver competitors, financed by fortunes amassed in the chaos of post-Soviet Russia. However, until Putin’s conflict with Ukraine made Abramovich a person non grata, football authorities and governments around the world asked no questions,” the author concludes and notes that Roman Abramovich, as the owner of Chelsea, eventually managed to “change football forever.”
The money in Kelvedon Worldwide came from the oligarch's Cypriot company Kravin Investments, owned by Abramovich's Sara Trust. It is likely that this company was involved in the purchase of the club itself. Yukos money, according to documents available to The Guardian, went to her. According to The Guardian, a total of $1.288 million was sent from Kravin to Kelvedon. The English company under the deal, Chelsea Limited, was established on June 2, 2003, and it is in its documents that Abramovich is listed as a shareholder with a Chukotka address where he was governor.
In 2005, Abramovich sold the remaining 73% stake in Sibneft for $13 billion to Gazprom. And this income became the main source of funding for the Chelsea club in the future. In 2007, total borrowings reached £578m and £1bn in 2014. At the time of the sale of the club in 2022, Abramovich’s total interest-free loans to the UK entertainment industry amounted to £1.4bn. After the sale of Chelsea, these debts Abramovich wrote off.
