Russian legislators want state corporations to be banned from funding sports clubs

MOSCOW, November 26./ITAR-TASS/. - Recent proposals by several Federation Council (upper house of parliament) members for banning Russian natural monopolies from financing sport clubs have caused a mixed reaction from athletes and coaches and the sports-related circles. Some describe the initiative as fatal for professional sports. Experts believe, however, the chances for the bill to be adopted are slim.

Seven members of the Federation Council, among them retired ice hockey star Vyacheslav Fetisov, recently introduced a bill that would first of all affect soccer. If it is adopted, of course. The senior legislators suggest amendments to the federal law on natural monopolies that would prohibit natural monopolies from financing sport teams’ activities. The authors explain it is the consumers who would ultimately bear the burden of such expenses and pay state-run companies' soaring bills.

Senators suggest the financing of professional sports be handed over to the state, while the institution of direct sponsorship will be abolished. The lawmakers believe the money that the monopolies now expend to support professional sports should be funneled to the federal budget and then reallocated in the interests of the national teams.

The explanatory note says the law would affect such companies as the Russian Railways (RZD), Gazprom, JSC Russian Grids, Rostelecom, IDGC Holding, Transneft, Russian Post as well as their subsidiaries and affiliates. Spending hundreds of millions of roubles to buy an athlete is not fully compliant with the needs of those who consume natural monopolies’ products and services, as these expenses affect these companies’ tariffs, the note says.

Gas production and export monopoly Gazprom is the undoubted leader by the number of supported sports projects. The company is the main sponsor of the Russian Federation of Rhythmic Gymnastics, Russian Federation of Volleyball, Russian Chess Federation, Union of Russian Biathlon, Russian Football Union, Russian Canoe Federation, International Judo Federation, and St. Petersburg Football Club Zenit. In 2006 Gazprom entered the international arena when it started financing Germany's football club Schalke 04. In Serbia, the country where Gazprom’s subsidiary Gazprom Neft maintains vast operations, the monopoly has been financing Crvena Zvezda since 2010. Lately, Gazprom got involved in ice hockey to have purchased St. Petersburg's SKA Hockey Club and Avangard in Omsk. Gazprom does not disclose the amount of financing, yet some sources say the budget of FC Zenit alone exceeded 8.5 billion roubles in 2012 ($260 million).

The Russian railways RZD sponsors football club Lokomotiv, beach soccer FC Lokomotiv, same-name hockey club in Yaroslavl, and the volleyball club in Novosibirsk, as well as basketball club Lokomnotiv-Kuban. The company does not disclose its spending, either, but the 2012 report shows it spent 4.7 billion roubles in that year on the sponsored football club ($142 million).

The major natural monopolies have expressed their disagreement with the initiative. Gazprom’s spokesman Sergey Kupriyanov argues that the company’s support for Schalke 04 is its competitive edge.

Meanwhile, a high-ranking source in Gazprom talking to Itar-Tass on the condition of anonymity expressed the certainty the State Duma would reject the initiative.

RZD President Vladimir Yakunin believes that “pragmatically, it would not be bad, if sports were financed from other sources, but it would be a disaster if sports lost the main sources for development and received no other funding.”

The director of the Strategic Analysis Institute, Igor Nikolayev, quoted by the online newspaper Gazeta.Ru is sure the effect of such a law would not be significant.

“Such a law, if adopted, will not appreciably reduce state companies’ spending,” the expert said. “There will be a certain effect, but it is not to be exaggerated.” He added the bill was rather a populist proposal with few chances of getting through the State Duma.

Meanwhile, in the sports world the prospects of losing state companies’ billions have caused an uproar.

The Novye Izvestia daily quotes the president of the Russian Football Union, Vychesklav Koloskov, as saying: “Sport is now primarily living on monopolies’ funding. They finance not only sports clubs, but also the Paralympic Games. In my opinion, adopting such a law would be a bad mistake, if not a crime.”

The State Duma’s Deputy Speaker from the political party LDPR Igor Lebedev said the initiative was “half- baked.”

“A strict ban will kill Russian sports that still carries on mainly thanks to state corporations’ funding and Russian regions’ support. It is common knowledge that sports clubs worldwide are financed commercially, but in our country sports commerce is underdeveloped,” Lebedev is quoted by the Sovetsky Sport daily as saying. “We find the initiative right only to a certain extent. Financing should not be banned completely - gradual restrictions are needed instead.”

Lately, sources in the State Duma and economic policy committee quoted by Vedomosti daily assure “the bill’s prospects are minimal.