By Abhik Chatterjee, Edited by Vaibhav Agarwal
The Russian Invasion into Ukrainian soil took the world by storm on February 24th. The most prominent act of aggression on the European soul since WW2 left global governments scrambling for a response. "Economic sanctions" became the new buzzword and go-to foreign policy. A varied range of sanctions was imposed on parties associated with the Russian Federation – government officials, people in business, and even corporations–to pressurize the Kremlin.
Come February 26th. Roman Abramovich, the owner of Chelsea Football Club in the United Kingdom, announced that he would transfer "stewardship" of the club to the trustees of its charitable foundation. On March 2nd, he placed the club on sale and started looking for prospective buyers. Abramovich stated that all the proceeds from the sale would be donated to "victims of the war in Ukraine".
On the 10th of March, the British government imposed sanctions on the Russian oligarch. He became one of the 120+ Russia-related businesses and individuals placed under financial restrictions and sanctions. These have been set on the grounds of association with Vladimir Putin and receiving "preferential treatment" in tax breaks and concessions from the Government of Russia.
His assets in the UK are frozen, implying that the sale of the club is on hold. Player transfers and contract renewals cannot be undertaken. The revenue stream via merchandising and matchday ticket sales is cut off, and match attendance is restricted to season ticket holders only. Abramovich is placed on a travel ban too, i.e. he cannot enter the United Kingdom, let alone do business there. These are bold policy steps undertaken by the British government – moves that perhaps would not have been made if it weren't for the geopolitical tensions in Ukraine.
Abramovich has been on UK's watchlist for a long time now. His rise as a business tycoon began after the disintegration of the USSR due to Russian privatization under then-President Boris Yeltsin. His wealth is founded on the 1995 Siberian oil and gas company Sibneft (now Gazprom Neft). He acquired a controlling interest in the company with Boris Berezovsky, an oligarch, and staunch critic of Vladimir Putin.
After selling his stake at Sibneft to Gazprom in 2005, Abramovich diversified into aluminium,
steel manufacturing, and mining. Evraz PLC is one of his most profitable investments - and has been explicitly mentioned in the sanctions report issued by the British Office of Financial Sanctions Implementation: ". . . Evraz PLC is or has been involved in providing financial services, or making available funds, economic resources, goods or technology that could contribute to destabilizing Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine...".The statement also claimed that the company allegedly supplies steel for producing war tanks for the Russian military.
Though based in the United Kingdom and listed on the London Stock Exchange, nearly 60% of its shares are held by Russian oligarchs and kleptocrats. With a 29% stake and earning a hefty dividend per annum, the asset freeze puts Abramovich in a tough spot.
As reported by Petar Mirkovic, Evraz follows a policy of paying a minimum of $300 million per annum if the net leverage ratio stays below 3.0x. With its current stock price at a 52-week low, it has decided to defer all dividend payments, for the time being, has gone ex-dividend at 0.45e per share. This would have ensured a dividend yield of 20% next year – a better alternative to a yield of 70% at current prices and shattering profit margins. With the sanctions in place now, he cannot sell any of his existing shares and make relevant transactions. In fact, in anticipation of such actions by the UK government, he had transferred his Evraz shares from an offshore company to himself ten days before the Russian invasion. This would have theoretically allowed him to quickly sell his shares, fitting into the narrative the UK government stands by. However, the government was a step ahead in blocking any such manoeuvre.
Abramovich's stint in politics further established him as a person of interest (and now, concern). He was the governor of the impoverished Chukotka district from 2000 to 2008 and took steps to raise the median income, improve living standards and draw investment into the region. As a result, it has become a common assumption that the oligarch is still linked with the Kremlin and President Putin.
This isn't the first time Abramovich has found himself under scrutiny. His fallout with Boris Berezovsky brought him some unwanted attention. Under Berezovsky V. Abramovich at the London Commercial Court, Berezovsky sued the Chelsea owner for $4 billion for allegedly pressuring him to sell his stake in Sibneft through threats, blackmail, and links in the Kremlin. Abramovich fought the case for almost four years, denying such allegations. Berezovsky was declared an "inherently unreliable witness" by the end, and the high court dismissed the case. However, the proceedings confirmed that Abramovich had paid Arkady"Badri" Patarkatsishvili a sum of $500 million for helping him rise in the oil industry through his influence over then-President Boris Yeltsin. He also assisted in the acquisition of assets in the Russian aluminium industry.
Mrs. Justice Gloster, the judge presiding over the case, stated in her verdict:
"I am prepared to assume that, on occasion, President Putin may have taken his views into account when making decisions, but the suggestion that Mr. Abramovich was in a position to pull the presidential strings was simply not borne out by the evidence."
Thus, despite being convicted innocent, the case put a target on his back. Again.
On imposing sanctions, the British government established its firm belief in the narrative that Abramovich has strong links to the current Russian administration. The man's property dealings over the last two weeks paint a more vivid picture of said narrative. Hansjorg Wyss was one of the favourites to buy Chelsea through a Swiss-American consortium. In
conversation with Swiss newspaper Blick, he commented on his interactions with Abramovich, which translate as follows: "Abramovich is one of Putin's closest advisers and friends. Like all other oligarchs, he is also in a panic. Abramovich is trying to sell all his villas in England. He also wants to get rid of Chelsea quickly."
Abramovich owns a 15-bedroom mansion worth £125m in Kensington Palace Gardens, a flat at Cheyne Terrace valued at £8.75m, and a penthouse worth £22m on the side of the Thames. The financial restrictions have also halted the frantic search for prosperous buyers.
Abramovich's contingency plan was not fast enough. He failed. And lies stuck in a quagmire of financial doom.
As reported by The Athletic, Members of Parliament started re-evaluating Abramovich's position once the conflict in Ukraine broke. On Wednesday 2nd March, Sir Keir Stammer demanded to know why Abramovich was not sanctioned particularly – a question that did not receive a clear response.
On the 10th, Prime Minister Boris Johnson could not be more straightforward with the government's stance. Abramovich's actions to liquidate his assets in property and stock holdings play into this narrative that he might be targeted - whether or not he is an active proponent of the war in Ukraine. The sanctions show that the tag of being a "Russian" is enough to put a target on your back.
Roman Abramovich's rise and fall represent the murky relationship between politics, business, and sport. The fate of Chelsea FC lies in the balance. Their shirt sponsor, mobile phone firm Three, has temporarily suspended its deal with the club, and other sponsors might follow suit.
Abramovich has built Chelsea into a footballing powerhouse worth $3.2 billion worth. He might tear it apart.