Why did Roman Abramovich buy Chelsea?

Words By James Montague Illustration by Philippe Fenner
October 27, 2018
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No one seemed to know who Roman Arkadyevich Abramovich was when it was announced that the Russian billionaire had bought Chelsea FC in 2003.

He was young, publicity shy, a governor of a faraway, frozen province in Russia and had made a lot of money in oil and gas.

He gave one interview, to the BBC, saying that he had wanted to buy a football club, essentially, because he was bored and wanted a new challenge.

Chelsea wasn’t his first choice. Pini Zahavi, the Israeli super agent and fixer, had offered a number of options: Portsmouth FC was mentioned, as was Manchester United. But Chelsea offered something attractive. For one, the club was in London, which Abramovich had made his second home amongst the wealthy Russian elite. Chelsea was also in dire financial straits.

Ken Bates had dragged the club into the modern era after buying it for £1 in the early 1980s. But by 2003, the club had a huge amount of debt and was struggling to meet a $23 million interest payment. Enter Abramovich, who – according to then Chelsea CEO Trevor Birch – concluded the deal in just 15 minutes.

Abramovich came from humble beginnings. He was born in 1966 in Saratov, on the Volga river, into a Jewish family. But he would be an orphan at 5 and was brought up by an uncle, then his grandmother in Moscow. He studied highway engineering (although no evidence exists that he graduated) and entered the army for his national service.

When he came out in 1986 the world was changing. Mikhail Gorbachev was now trying to reform a creaking Soviet state, introducing the concepts of Glasnost (openness) and Perestroika (economic and political restructuring).

Abramovich seized the opportunity and started a series of businesses, some successful, some not. One involved the trade in toys, especially rubber ducks, out of an apartment he shared with his first wife in Moscow. It brought him a handsome income compared with others in the Soviet Union.

The collapse of the Soviet Union presented ambitious men with greater, more controversial opportunity. The exact nature of Abramovich’s early fortune is unclear, but what is known is that he soon moved into trading in oil, arguably Russia’s greatest natural asset.

In the chaotic, post-communist years, that industry was fraught with danger but the rewards for those that navigated it were huge. By 1993, Abramovich was considered of sufficient interest and wealth to be invited to a meeting on a yacht in the Caribbean featuring some of the leading businessmen to profit from the post soviet era.

There he met Boris Berezovsky, a mathematical genius who had made a fortune in trading in Soviet-made cars. The two became partners and agreed on that fateful day to try and rationalise the oil industry through vertical integration, essentially grouping different companies involved in extracting and refining the oil, under one umbrella company which they would control.

This was realised thanks to the now infamous “Loans for Shares” programme. Boris Yeltsin was elected Russia’s first post communist president, in part, for his role in ending a coup in 1991. He embarked on a series of painful free-market reforms. But in 1996 his re-election campaign, up against the communist Gennady Zyuganov, was in the balance. He needed money and good press. 

So he struck a deal with Russia’s newly enriched “oligarchs.” They would ensure his election and in return would be given first dibs on the privatisation of state assets. With Yeltsin’s campaign coffers swelled, and wall to wall positive coverage in media controlled by his oligarchs, Yeltsin won the election. Subsequently, Russia’s most valuable state assets were sold at a fraction of the market price.

After Yeltsin’s re-election, Berezovsky and Abramovich bought Sibneft for $100 million. It is thought that its true worth was close to $3billion. It made them billionaires at a time when most Russian citizens were struggling to put food on the table.

Under Yeltsin, the oligarchs wielded extraordinary power and became to be despised in Russia for their greed and exploitation. But by the end of the 1990s Yeltsin was ill and struggling with alcohol addiction. He was forced to step down at a time when he was deeply unpopular, largely thanks to 1998 financial crisis when the rouble collapsed.

Enter Vladimir Putin, a former KGB man who had built a power base in his native St Petersburg and was Yeltsin’s chosen replacement.

Berezovsky, as well as other “Yeltsin Oligarchs” like Mikhail Khordorkovsky – who bought Yukos Oil and was Russia’s richest man – had their own ambitions for power or reform and didn’t see Putin as much of a threat. But, seeing the writing on the wall, Abramovich quickly aligned himself with Putin, who had promised that he would smash the oligarchs and bring their wealth back under state control.

One by one, their fortunes were taken, their assets seized by the state and the oligarchs jailed, usually on trumped up tax charges. In 2003, Khordorkovsky was arrested for tax evasion and fraud, amongst other charges. But not Abramovich. Putin demanded absolute loyalty if they were to keep their fortunes, including abandoning any thoughts of political power. Part of that, according to defectors and several investigations, involved paying a form of tribute.

Abramovich and others allegedly contributed millions of dollars to projects close to Putin, like investing in a Black Sea palace that has been dubbed “Putin’s Palace” and to buy a state of the art yacht for Putin called “Olympia”. Abramovich has always denied this. When the BBC’s Panorama made the allegations again in 2016, he lawyers dismissed them as “a rehash of speculation and rumour.”

One man who did talk was Boris Berezovsky, who had openly said he refused to contribute, thus starting a split between him, Abramovich and Putin that would eventually lead to Berezovsky’s exile in London.

Many of those details came from the single biggest civil litigation in British legal history, the 2012 Berezovsky v Abramovich case, which laid bare the lengths both men had gone to keep their fortunes. Berezovsky alleged that Abramovich, on the orders of Putin, had conspired to take away his fortune and his ORT television station, which had been especially critical of Putin. Abramovich vehemently denied this.

In the end, Berezovsky’s claim for billions of dollars from Abramovich failed, the judge finding that Berezovsky was an unreliable witness. But the case had laid bare how business was done and fortunes kept. Masha Geesen, an experienced Russian journalist who covered the trial for Vanity Fair, wrote: “In defending himself, Abramovich had made an important admission: “being in opposition to Putin was dangerous to business and to the people who ran them, and had been since the earliest days of Putin’s rule.”

A year later, Berezovsky was dead, by what appeared suicide. But the coroner’s court left an “open” verdict.

Abramovich has been a key Putin ally. He sold Sibneft in 2005 to Gazprom for $13.1 billion, making him one of the richest men in the world. He was the governor for the remote province of Chukotka until 2008 and was a key figure in Russia’s successful 2010 bid to host the 2018 World Cup finals.

But it is for his investment in Chelsea that he is best known around the globe. His care free attitude to spending – including £2 billion in his first 10 years – transformed the game, terrifying other top clubs who could not compete. Being a millionaire was no longer enough. Only a member of the Billionaires Club could compete.

Under his watch, Chelsea has been transformed into one of the biggest clubs in the world. Since 2003, no English club has won more silverware, the 2012 Champions League title being the icing on the cake. Forbes estimates that Chelsea is now the seventh most valuable football club in the world, above Juventus, AC Milan and Liverpool. And next, they will move into a state of the art, re-built stadium on the site of Stamford Bridge, cementing his legacy and adulation amongst Chelsea’s fans.

Abramovich’s reasons for buying Chelsea remain opaque, given his secretive nature and given the publicity that buying a Premier League club was bound the get. But given that Abramovich has kept his fortune, whilst many of “Yeltsin’s Oligarchs” have lost theres, buying Chelsea perhaps made sense. Football gave him a non-threatening international profile, and perhaps even insurance against it all being taken away.

But there is no denying that his money has transformed the club, whatever the reason he decided to buy Chelsea and transform it into a genuine, global super club.

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