 "Will oil prices stymie Lionel Messi's move to Chelsea?")
Lionel Messi may have chosen the wrong moment to be sulking. The iconic football player from Argentina apparently wants to leave Barcelona FC, the Spanish club that has been his home since his teenage years. The Internet is abuzz with his desire to play with Chelsea FC in the English Premier League. But the Messi-Mourinho matrimonial might not take place. One deterrent, of course, is the Financial Fair Play regulations that now require European football clubs to take both a responsible approach to revenue losses and to maintain a prescribed wages-to-revenue ratio in their account books.
But one other reason why Messi, whose transfer and salary costs have been estimated at over $300 million, might not wend his way to Stamford Bridge in Central London is the huge dive that oil has taken in the past few months. From a high of $115 in June 2014, oil is trading at around $45.
Chelsea is owned by Roman Abramovich, whose place in the global billionaires’ club depends somewhat on the earnings he makes in the crude oil trade. A few years ago, he had suffered a dramatic erosion of around $3 billion in his personal wealth with the global downturn in the economy, but his interests in oil and steel helped him stem his slide to relative poverty. Today, the Russian is beset with both low oil prices as well as his country’s atrophying economic muscle following sanctions in the wake of its adventures in Ukraine.
Since he took over the club in 2003, Abramovich has put in $1.4 billion in the club, making Chelsea among the first to prove that “crude cash” can buy success. The club returned a loss of $78 million in 2013-14, but that did not stop the Russian from pumping in over $70 million to facilitate transfers, including those of Diego Costa and Cesc Fabregas, both from Spain.
Will Abramovich spare the club millions that can buy Messi at a time when his earnings are probably taking a beating?
That is a question the people at Manchester City too will be asking of their owner, Sheikh Mansour. The royal from Abu Dhabi has outdone Abramovich in his munificence with an injection of $1.6 billion into the poor cousin of the more fancied Manchester United since 2008. The petrodollars have taken the club to the top of the English Premier League, where they won the title in 2014 and are in contention to win this year, too. Those who study football finances say that City and Chelsea have owners who have the gumption and the pound notes – not to forget the ego -- to lure Messi to their grounds, but both have oil earnings in their wallets.
This isn’t very unfamiliar to those in the Qatar Sports Investment, the group that owns Paris Saint-Germain FC. Funded by the Qatari government, the oil cash has not only taken PSG to the top – it won the Ligue 1 last year –but it has also pushed the hitherto lower-order football club into the global Top 10. In the middle of 2014, Brand Finance, an asset valuation company, designated PSG as the 10th most valuable football brand in the world, trailing Bayern Munich, Real Madrid and Manchester United, with the other places being occupied by the usual suspects. Qatar has ambitions of being seen as a footballing nation and has been awarded the 2022 FIFA World Cup. PSG is, in a sense, a brand-building exercise.
But like all such exercises, will economic constraints lead to tightened budgets? Qatar, a member of OPEC, earned $42 billion in oil exports last year. The figure might be much lower this year. Will it freely allocate some of that hard-earned money for PSG?
Other teams that may also be pondering this question this year are the Malaga football club that plays in the La Liga, and the American National Football League’s Dallas Cowboys. The owners of the team, Skeikh Abdullah Thani of Qatar and Jerry Jones, both make their money in oil and gas. And can one ignore the Indian Premier League’s Mumbai Indians? After all, Mukesh Ambani, who has large interests in oil and gas, regularly makes it to the list of billionaire owners of sports clubs.