Abramovich sanctions: what implications for Chelsea and the Premier League?

The UK government-imposed sanctions on the Russian oligarch who owns Chelsea FC include freezing the club as an asset, blocking its proposed sale and cutting off income from ticket sales, broadcasting rights and merchandising. There could be fallout for many other top teams.

As Western countries have reacted to the Russian invasion of Ukraine, the clamour to impose sanctions on individual wealthy Russians has led to a curious outcome: the freezing of a Premier League football team. While it is easy to think of an oligarch’s superyacht being impounded in a harbour somewhere out of their reach to use (or dispense with), what does an asset freeze mean for a football team?

It isn’t the case that the UK government now owns Chelsea – there hasn’t been a transfer of ownership. The freezing of assets is quite common, and the purpose is usually to ensure in court cases that a defendant can’t frustrate any potential judgement. The assets would then be unfrozen after the trial. In the case of sanctions, the purpose is to ensure that those being sanctioned cannot gain from the ownership of their assets. In principle, if the sanctions are effective in their purpose – here, to encourage Russia to withdraw its forces from Ukraine – then they can be withdrawn and the assets unfrozen.

Roman Abramovich – Chelsea’s owner since 2003 and the most recently sanctioned Russian oligarch – had intended to sell the club, valued at up to £3 billion. If a yacht is frozen, it cannot be used or sold, and the owner cannot benefit from its ownership – even if the ownership hasn’t been transferred. With a football club, the same must be the case.

As such, a ‘special licence’ has been granted to Chelsea. This allows the club to pay players and staff, settle outstanding transfer fees, spend up to £500,000 on staging matches and receive payments (which are then frozen). The club cannot spend more than £20,000 on away travel for matches, and club merchandise cannot be sold, nor can new tickets for matches be sold.

Presumably, there will be no away fans at the stadium when Chelsea play home matches. Chelsea fans might be able to attend away matches, if they purchase tickets directly from the opposing team (although this is uncertain at the time of writing).

The uncertainty of the impact of the asset freeze arises from daily running costs. Chelsea has a wage bill in the tens of millions of pounds per month. Without any income via television payments, additional ticket sales and merchandise, how long will the club be able to afford these payments? Will it even be able to complete the season?

Fundamentally then, the situation at Chelsea is that of an owner (and hence a club) unable to fulfil their obligation to provide a team to participate in fixtures to the end of the season. When this happens, usually a team goes into administration and suffers a points deduction. Such a penalty normally guarantees relegation or an alternatively adverse outcome – for Chelsea, this might mean falling out of the Champions League top four positions.

The impact may cross into next season too. Even if the club is permitted, via changes in the licence, to complete the season, the transfer embargo it is now under places it at a competitive disadvantage. Many key first-team players are nearly out of contract and, at this point, the club would ordinarily be starting to consider recruitment plans for the 2022/23 season. All of this is now significantly disrupted, with potential implications for Chelsea’s future performance across a number of competitions.

This all reduces the value of the asset in a way that the value of a superyacht sitting in a harbour is not diminished. The fall in value of Chelsea’s worth is perhaps reflected in the immediate withdrawal of its main sponsor, the mobile phone company Three.

From a broader sporting perspective, this is intriguing. While there are understandable claims from Chelsea fans that they should not be punished for what the Russian government is doing, at the same time, the wealth that has generated Chelsea’s current position, and its success over the last two decades, was drawn from the Russian political system that is currently committing atrocities in Ukraine as part of the invasion.

What about the impact on the Premier League?

Top tier football in England has changed substantially over the past few decades. The impact on competitive balance in the Premier League of the Abramovich years is largely indistinguishable from the impact of the increased broadcasting payments of the Premier League era, and the increased player power after the Bosman Ruling of 1995.

But an increased proportion of wage payments being concentrated in the biggest teams was always likely to lead to an increased proportion of points for the top teams, and hence less competitive balance. Indeed, there has been a real impact over a long period of time, to which the Chelsea wealth must have contributed – see Figure 1 where the red dots are the Abramovich years, all among the least competitive in post-war top flight history.

Figure 1: Proportion of the total wages and points of the top four positions in the Premier League and First Division (1947-2015)

Source: Authors' calculations

Once one team has an increased budget for players, the impact tends to be much broader, given the international labour market in football. Wealthy teams can import better foreign players to the league, and this forces the other clubs to invest more heavily to compete. Abramovich’s arrival coincided with a huge increase in the number of foreign players in the Premier League.

A wider point relates to the idea of ‘sport-washing’ – the attempt to improve the reputation of an individual, organisation or regime via the injection of funds into sport. Abramovich’s reputation as a Russian oligarch was undoubtedly improved by him ploughing money into Chelsea – witness the fans chanting his name during a minute’s applause for Ukraine in matches at Luton and Norwich recently.

Large investments in Premier League teams are a function of many factors. But a key component is the significant prize money that originates from large broadcasting deals and which offer the promise of a significant return to owners.

With the freezing of such assets, will would-be buyers of football clubs be discouraged? Other high-profile investments, such as the recent purchase of Newcastle United, which are also from regimes with questionable records on human rights, may well come under increased scrutiny now that a precedent for political pushback has been set.

For the time being, the full effects of the sanctions on Chelsea and the rest of the Premier League remain to be seen. But in any case, this direct intervention by the UK government into a sector characterised by vast foreign wealth is a significant step – one that will not have gone unnoticed by owners from the top of the table to the relegation zone.

Where can I find out more?

This article in Forbes explores the wider implications of the sanctions of the Premier League.
This UK government blog presents the latest sanctions aimed at Roman Abramovich and other Russian oligarchs.