Nhl Financial Situation Essay
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RIGA, Latvia – Most non-Latvians may not consider spending a winter in Riga, where average temperatures in February hover around 24 degrees, particularly enticing. But newly arrived American Tim Sestito recently assured his hometown newspaper, the Rome Sentinel of Rome, N.Y., that he had “nothing but good things to say” about his new home.
“It was beautiful, it was a great atmosphere,” Sestito said. He even brought his young family to Latvia to join him.
Part of the reason he had such a good time may be that Sestito is a professional hockey player. Though his team, Dinamo Riga, failed to make this season’s playoffs, which are underway (the league finals are scheduled to start April 7) Sestito was well-compensated for his services – courtesy of the Kremlin.
When Russia annexed Crimea in 2014 and the West slapped Moscow with biting sanctions, the Kontinental Hockey League – a new, fast-growing, Russia-based league for elite players from around the world – looked set to become one of the so-called new Cold War’s first victims. The KHL was, after all, built on oligarchs’ rubles and Kremlin connections as well as international players’ desire to play in Russia – for a healthy salary, of course. With many of those business leaders now on U.S. and EU sanctions list, it stood to reason that the hockey league they helped finance would languish.
More than a year later, however, the KHL seems not only to have survived, but thrived — on the surface, at least. It’s planning further expansions, both to the east, into China, and to the West, into the Baltic states — countries where most things Russian don’t usually receive a warm welcome these days. The league is in talks with a hockey team in Estonia, which has been among the most vocal about Russian aggression and whose president, Toomas Hendrik Ilves, sends out a steady stream of anti-Kremlin tweets.
But the KHL hasn’t been able to entirely outrun – or outskate, as it were — geopolitics. Just as the KHL’s ties to the Kremlin aided its rise, they are now starting to hinder its growth. Its teams and players are still welcomed by some hockey fans in the West, but others dismiss them as propaganda tools. Some of its plans for expansion have been met with open hostility, while others have been hindered by Western sanctions. The hockey league’s estrangement from Europe is starting to mirror the country’s broader diplomatic estrangement. “They’ve got the best hockey in Europe,” said one European hockey executive who has worked for the league and wants to see more ties between Western Europe and the KHL. “Together, we’d be able to stand up to the NHL.”
Russia’s renewed Cold War, in short, is starting to impose significant collateral damage on Russian hockey – and, by extension, its No. 1 fan, Russian President Vladimir Putin.
The Kontinental Hockey League was created eight years ago, when 24 teams from Russia and neighboring countries joined forces, replacing the Russian Superleague. (The Superleague, comprised of 20 teams, was a replacement for the Soviet Championship League, which fell apart in 1992, a year after the Soviet Union itself.) Although the Russian Superleague played fine hockey — by some accounts inferior only to North America’s NHL — it lacked meaty salaries, which meant its players were vulnerable to poaching. Indeed, according to the Russian sports news site Sports.ru, several years ago Putin called the NHL a “vacuum cleaner” that sucked up all of Europe’s good players.
By some accounts, the KHL was the brainchild of Putin, who missed the vibrant – if fraught – West-East hockey rivalry of Soviet days, when Olympic hockey games and Hockey World Championships became proxy battles between the superpowers while providing phenomenal entertainment for worldwide audiences. “It seemed to me that after the confrontation, in the best sense of the word, between North American and Soviet hockey, hockey lost a lot: The sharpness was lost, the interest was lost,” the website Sports.ru quotes him as saying in 2011. Outgoing KHL President Alexander Medvedev called the league “primarily … [Putin’s] creation” in a meeting with Putin in 2014, suggesting that Putin not only came up with the KHL but secured financial backing for it as well. Putin has also vocally backed the KHL’s expansion outside Russia, telling Russia’s Interfax news agency in 2009 that it should become a pan-European league.
The Russian Superleague saw some private financing, but the 28 team-strong KHL is a financial powerhouse: Although the finances of individual teams are opaque, the league as a whole has sponsorships from some of the largest companies in Russia, including Russian energy giant Gazprom. According to sponsorship consultancy SE Sponsorship, the league’s other sponsors include oil and gas exploration company Eriell and gas supplier OJSC Severneftegazprom, which is owned by Gazprom, as well as Germany’s Wintershall and E.ON. Gazprom also has two billion-ruble sponsorship deals (worth $57 million when they were signed in 2014; $24 million today) with the Siberian team Avangard and St. Petersburg’s SKA team.
With reported average salaries of $300,000 to $500,000 and bonuses as high as 75 percent of salary for good performance, the league regularly recruits top foreign players from leading hockey nations, including Canada, Sweden, Finland, the Czech Republic, and the United States. It lured back some of Russia’s biggest stars, including left winger Ilya Kovalchuk, in 2013, from the NHL; in some cases, entire teams have switched from their leagues to the KHL, including Slovan Bratislava in 2012 and Medveščak Zagreb the following year. Teams based as far apart as Vladivostok and Riga now travel unimaginable distances to games during a season.
Lately the league has taken a hit from the recent decline in the ruble, leaving foreign players with salaries worth much less abroad, and Czech team Lev Prague left in 2014 due to financial difficulties and is currently not playing in any league. In 2012, an expansion to Italy also fell through. But this year the league signed a deal to launch China’s first KHL team — the Beijing-based team will play its first game in September. And the league scored a massive coup in the summer of 2013, when it recruited the Helsinki-based team Jokerit away from Finland’s elite hockey league. Although Jokerit wasn’t Finland’s best team, it was from a hockey-crazed country, beloved by its fans, and an institution in the Finnish capital. The KHL continues to actively recruit more teams from Western Europe: KHL President Dmitry Chernyshenko said this year that teams from Estonia and Britain have applied to join the league and that a decision will be made in April.
The league’s aggressive expansion efforts haven’t been welcomed everywhere. The KHL has also energetically been trying to recruit a Swedish team, and last year an unidentified team from the Swedish Hockey Federation applied to leave Sweden’s top league and join the KHL. The prospect, however, had Swedish hockey fans up in arms. “Swedish hockey fans don’t like the thought of a Swedish team in the KHL,” said Uffe Bodin, editor-in-chief of the hockey news website Hockeysverige.se. “There’s a lot of skepticism towards Russia in Sweden today.”
After frenzied speculation about whether the team would be granted permission, on Jan. 31 the Swedish Hockey Federation took a surprisingly strong stand, banning not just the team but every other Swedish hockey team from defecting to the KHL. The KHL immediately hit back, banning its Swedish players from playing for the Swedish national team.
The Russian reaction to the Swedish hockey league’s understandable desire to keep its teams may have seemed heavy-handed, given that national and club teams are two separate things. But politics probably played a role: Sweden and Russia are not just two of the world’s best hockey teams but neighbors and regional rivals as well. Recently their relations have deteriorated sharply, with Russian military planes crossing into Swedish airspace and this year chasing Swedish military aircraft in the skies above the Baltic Sea. Sweden and Finland are two of just a handful of Western European countries outside NATO; in the wake of Russia’s annexation of Crimea, the two countries’ debate about the dangers posed by their massive neighbor has taken on new urgency.
Although most hockey fans in Finland were sad to lose a team that had fueled some of the league’s best rivalries — Finnish hockey reporter Tuomas Heikkilä called Jokerit ‘the team that every other team’s fans loved to hate” – there was widespread skepticism about the KHL’s Kremlin ties. It wasn’t helped when, soon after the handoff, Jokerit’s new owners, Gennady Timchenko and Arkady and Boris Rotenberg, were placed on the U.S. Treasury Department’s sanctions list as a result of their activities on behalf of the Russian government; the Rotenbergs quickly sold their shares in Jokerit to Boris’ son, Roman Rotenberg, who was later added to the sanctions list. Some Finnish news outlets predicted that Jokerit could be banned from playing in Finland because of the team’s Russian ownership.
But the hockey went on. Jokerit’s KHL debut season was a success, and in the current season the team played extremely well, though it was eliminated in the playoff’s quarterfinals.
The league’s Kremlin ties run deep: Timchenko, Jokerit’s part-owner, is a Putin confidante and serves as chairman of the KHL’s executive board. Arkady and Boris Rotenberg, Jokerit’s former owners, also sit on the board and are Putin’s former judo sparring partners. Juris Savickis, a Latvian energy executive who is president of Dinamo Riga, is a former KGB officer who is thought to have served in the intelligence agency’s German department with Putin. The list goes on: The KHL’s board also includes Viacheslav Fetisov, a legendary Soviet hockey player and NHL star who is now a Russian senator; executives from Russia’s largest companies, including pipeline giant Transneft; and a high-ranking sports ministry official.
The suspicions of those whose teams have been either poached wholesale or plundered for players are vague so far: that the KHL is a “propaganda tool,” as Heikkilä, the Finnish hockey reporter, puts it, or insinuations that Russian ownership of important sports institutions will eventually lead to greater political influence.
“Finns love ice hockey and many of us would like to promote cooperation with Russia, but not at the expense of EU unity or our national security,” said Alpo Rusi, former foreign policy advisor to ex-President Martti Ahtisaari of Finland. “Unfortunately after Russia’s annexation of Crimea, nothing is easy anymore.”
Jokerit weakened the national hockey league in Finland by moving to the KHL, Rusi said. There are also concerns across the Baltics that Russian-backed teams will be used to promote Russian political interests: “[Latvian team] Dinamo Riga’s budget for the current season is €10 million, but in Latvia it’s impossible to get that kind of money through sponsors alone; you need a donor,” said Sandijs Semjonovs, a Latvian filmmaker who recently made a documentary about Dinamo Riga. “And in this practical world, nobody gives anything for free.”
Despite the political overtones, the KHL still features good — often excellent — hockey. “It’s a completely different style of hockey,” Sestito, of Dinamo Riga, told the RomeSentinel. “They don’t dump and chase the puck like we do here. They don’t hit like we do in North America. There’s just so much more room and time to work with.” Unlike the NHL, the KHL plays on larger, international-size rinks. And audience figures have often been respectable. “We’re seeing a new generation of Russian coaches and Russian players either staying in the league instead of leaving for the NHL, the AHL [the American Hockey League, a secondary league to the NHL], or Canadian youth leagues at age 18,” said Pavel Taranin, a Muscovite fan. “Some are even coming back. The NHL is still a dream for many, as it’s the strongest league in the world, but few will stay in AHL now.”
That is good news for Russia’s image. Although the league expansion is meeting pockets of resistance, Moscow may eventually turn the KHL into a soft-power tool that creates more goodwill toward Russia than propaganda channels like RT ever could, said Charly Salonius-Pasternak, a foreign policy analyst at the Finnish Institute of International Affairs. “The Kremlin’s intention, besides providing bread and circus to their population, is to make it harder to portray Russia in a one-sided way. And it does make daily interactions such as games and scores more normal, but I suspect it won’t truly sway most Finns’ views on Russia.”
Indeed, there’s no disputing that Aleksandr Radulov, a 29-year-old winger previously with the Nashville Predators and now a star with CSKA Moscow, plays a brilliant game of hockey—one that excites even Putin’s many foes. In fact, the NHL was eagerly hoping to get Radulov back when his CSKA contract expires this year. Then the announcement came in late January: Radulov has decided to stay in Moscow.
Photo credit: EPA/YEVGENY REYTOV
Elisabeth Braw is a nonresident Senior Fellow at the Atlantic Council.
Tags: Dispatch, Eastern Europe, Europe, Russia, Sports
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