How an English football club became trapped after the Russian invasion of Ukraine

The sale of one of the world’s best-known soccer clubs was aimed at creating a $4.8 billion lifeline for Ukrainians fleeing a Russian invasion.

But two years later, the money obtained from the sale of Chelsea Football Club remains blocked in a frozen bank account in the United Kingdom.

The club’s former owner is Russian oligarch Roman Abramovich, now accused of having close ties to the Kremlin and Vladimir Putin.

This is what we know.

Who is Roman Abramovich?

Abramovich was once described by a UK judge as a “moderately successful businessman” before becoming one of Russia’s best-known billionaires.

Orphaned at four years old, he joined the army as a young man and eventually moved to Moscow.

The breakup of the Soviet Union made him one of the richest men in Russia, and he participated in a controversial oil trade deal that established his fortune and influence for years to come.

It was that fortune and influence that made it possible for him to purchase one of the UK’s most popular football clubs, Chelsea, for a whopping $240 million in 2003.

He then invested millions in the club over the next two decades.

During his tenure, Chelsea dominated the Premier League, FA Cup and League Cup.

According to Deloitte’s Football Money League 2024, Chelsea was the ninth highest-earning football club in the world.

So why did Abramovich sell?

When Russia invaded Ukraine, countries began cracking down on it and its allies.

In the United Kingdom, the government and the European Union targeted people it thought had close ties to the Kremlin; one of those people was Abramovich.

Charging…

Abramovich saw the writing on the wall, some media outlets say, and tried to dump Chelsea before becoming the target of Britain’s “largest-ever” sanctions package against Russia.

The Foreign, Commonwealth and Development Office was quick to act, calling him a “designated person and therefore subject to financial sanctions”.

He alleged that he had close ties to the Putin regime and had benefited from a friendly relationship with the Russian president.

It is a claim that Abramovich has denied.

“The foundation will benefit all victims of the war in Ukraine.

“This includes providing critical funds for the urgent and immediate needs of victims, as well as supporting long-term recovery work.

“Please know that this has been an incredibly difficult decision to make and it pains me to part ways with the club in this way.”

Where did the money go?

As a result of the sanctions, “all funds and economic resources owned, maintained or controlled directly or indirectly by [Abramovich] must be frozen immediately.

That included money from the sale of Chelsea and any of the club’s activities in the meantime.

The sanctions meant the club could not sell new tickets or merchandise, could not transfer or acquire players and limits were placed on travel for matches.

Chelsea was effectively left in the hands of the UK government while different billionaires fought in the background to take over the club.

A “consortium of investors,” including Los Angeles Dodgers co-owner Todd Boehly, secured the winning bid at $8.2 billion, making it the most expensive team transaction in professional sports.

It was an agreement made up of $4.8 billion for the club itself, plus $3.3 billion for investments over the next 10 years.

Two years later, where is the money now?

Tom Keatinge is director of the Financial Crime and Security Studies Center at the Royal United Services Institute in the United Kingdom, and said the money received from the club’s sale is locked up in a trust controlled by lawyers.

“It is important to remember that this money still belongs to Abramovich,” he said.

“When assets are frozen by sanctions, ownership does not change, they cannot be accessed or sold. That’s why Abramovich needed a license from Her Majesty’s Treasury sell Chelsea so that it could continue functioning.

“When assets are frozen, the user cannot access them without a license.”

The leave, together with the difficulties facing setting up a new independent foundation and political differences over its spending, means the UK government will now spend two years with money still blocked in the same account.

Some of the concerns about the delay were detailed in a report by the UK parliament’s European Affairs Committee.

“When asked about the reasons for the delay… the Minister for Europe told us that there is a ‘disagreement’ between the parties about who should benefit from the fund and where the money should be spent,” the report reads.

Keatinge said the situation caused a stalemate.

“I think Abramovich wants the assets to be used for other causes, such as displaced Russians, and as he controls what happens to the assets (subject to a license from the UK government), if he doesn’t agree, nothing will happen.” “, said. .

“They are your assets.”

The report still called for the government to speed up its processes to secure the money.

“We urge the government to use all available legal levers to quickly resolve this impasse, so that Ukraine can receive much-needed, promised, and long-overdue relief,” he said.

“All funds should be spent in territories controlled by the Ukrainian government.

“[This money] It has the power to transform the lives of many victims of conflict, allowing them to move on with their lives.

“The funds have the potential to dramatically improve the situation of victims and survivors and uphold their right to reparation, rooted in international human rights and international humanitarian law.

“It has also been reported that a dispute has arisen between the government and the foundation over whether the funds will go exclusively to Ukraine or Ukrainian victims, or for broader purposes.”

However, Keatinge said the government is probably no closer to accessing the money than it was two years ago.

“In fact, probably further, because the United Kingdom had an opportunity for influence when it granted Chelsea FC the sales license,” he said.

Charging…

“It should have been more proscriptive about what should happen with the assets.

“It was not like that and that is why now the assets are frozen somewhere, without benefiting the Ukrainian people.”

In recent months, pressure continues to mount around the release of funds, while other countries also grapple with the issue of frozen Russian assets.

At a European Union summit late last month, leaders said they would begin investigating different ways to tap into revenue streams from frozen Russian assets and how to invest them in support of Ukraine.

While some countries are interested in starting to use money from frozen assets to start paying for aid and weapons in Ukraine, others have questioned the legality of the move and what kind of precedent it could set.

Keatinge said many Western countries were dealing with the same problem as the UK when it comes to Russian assets.

“Because these assets still belong to the oligarchs, even if they are frozen,” he said.

“We need to go through a legal process to prove that they are, for example, the product of corruption or crime.

“We can’t just expropriate assets from people we don’t like.

“Otherwise we are no better than an authoritarian like Putin.”

What is happening at Chelsea?

The Premier League has launched an investigation into how Abramovich previously funded the club, but its terms, framework and any findings have not been publicly revealed.

University of Stirling economist Carl Singleton said sanctions imposed on the club left their mark in 2022 and an investigation into the club would likely take “a long time”.

“If the investigation finds that Abramovich was using creative methods to circumvent financial rules, the culprits would appear to be the Premier League itself and the UK Government, both of which have the power to be tougher on who can do business in the UK. “United Kingdom and who can buy and invest in football clubs,” he stated.

“Punishing Chelsea FC and its fans now, for the actions of its previous owner, would only deflect blame from the Premier League, which has long spoken of a tough game in managing financial fair play and ‘proper and adequate’, but that has repeatedly fallen short.”