Monday, June 23, 2008

Pro Sports Are Starting to Score in Russia

Pro Sports Are Starting to Score in Russia


Russia hasn't seen anything like it for years. In Moscow and other cities, the streets reverberated with the sound of cars honking their horns, while thousands of ecstatic revelers poured outside. They celebrated throughout the night, waving Russian flags, punching the air, and chanting "Russia! Russia! Russia!" Such was the euphoric reaction on June 18, when Russia's national soccer team defeated Sweden 2-0 in Innsbruck, qualifying for the European quarterfinals for the first time in 20 years.

The historic win is just the latest sporting triumph to have delighted Russia. There was similar rejoicing on May 14, when Russian club Zenit St. Petersburg defeated the Glasgow Rangers to win the UEFA Cup Final. Just four days later, Russia also won the World Hockey Championship, beating Canada to gain the title for the first time in 15 years. Russians reflect that the string of sporting triumphs is symbolic of a new zeitgeist, coming at a time when the country's economy is booming and its national prestige and self-confidence are at post-Soviet highs. "Russian sport is on the rise," says Alexander Razuvaev, head of research at Russian bank Sobinbank. "Of course, if there are achievements, you can turn them into a business," he adds.

In fact, the link between sporting success and wider economic trends is more than just a happy coincidence. Russia's recent prowess on the sports field reflects huge investments in sports made over recent years by large Russian corporations and wealthy tycoons. Many are now flush with cash because of high global commodity prices, allowing them to plow hundreds of millions of dollars into buying clubs, renovating stadiums, and rewarding players and trainers. "A lot of companies have invested in sports, and what you're seeing now is a result of those investments," says Alexei Krasnov, president of the sport marketing agency Sportima.

Rolling in Cash

Russia's national soccer team is a case in point. Over the past two years the team has received tens of millions of dollars in funding from the National Football Academy, an organization financed by tycoon Roman Abramovich (best known in the West for his ownership of top English club Chelsea). That has included money for a new stadium, a new training complex, players' fees, and a €4 million ($6.24 million), two-year contract for the team's star trainer, Dutchman Gus Hiddink.

It's a similar story at Russia's leading soccer club, UEFA Cup winner Zenit St Petersburg, which was acquired by national gas concern Gazprom (GAZP.RTS) in December, 2005. Since then, Gazprom has splashed out on everything from new players to a new stadium. Thanks to the energy company's largesse, the club's budget is $120 million this year, up from just $25 million in 2005. Although still a far cry from the $400 million budgets of the top European clubs such as Manchester United or Real Madrid, Zenit is already in the same financial league as second-tier European clubs such as Stuttgart or Everton.

Other leading Russian clubs have also been acquired by large corporate owners and have budgets in the tens of millions of dollars. For Russian business, the fashion for investing in sport stems from various motives. Many top Russian businesspeople, such as Abramovich and Gazprom boss Alexei Miller, are keen soccer fans who are to some extent indulging personal fancies.



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