• The London Finance Journal

The economic muscle of petrostates in football

Given the incredible wealth and affluence of the sport of football, with it being the greatest common entertainment commodity enjoyed by billions, looking at the financial threading of the game has become of increasing prevalence within the last decade. Financial controversies have thrown the economics and finance of football into the spotlight. From the alleged deep institutional financial corruption regarding the 2022 Qatar World Cup1 with supposedly just under $1 billion being paid to guarantee the tournament be awarded to the wealthy nation, to the recent hefty ban by UEFA to Manchester City Football Club following financial fair play foul play2. The commonality in both of these instances of financial incredulity is that both entities involved are controlled by the arms of wealthy petrostates, and their influence in ‘the beautiful game’ is only growing, and the question is what this means for the future of the sport.

In the instance of Manchester City, the 2008 takeover of the club by Sheikh Mansour through the Abu Dhabi United Group, an Emirati quasi-state body involved in sports investments, has seen a mid-table club with relatively little success in terms of trophies become the most successful English team domestically of the decade. Quite simply this can be put down to the incredible investment that has been pumped into the club since this takeover (over $1.3billion by the Sheikh and the UAE3) which has seen the club become a powerhouse in the transfer market and set world class foundations for future success with an elite youth football network and facilities4.

Given this new era of ultra-rich clubs with this new backing by wealthy oligarchs and states, the governing body of the sport in Europe, UEFA, implemented Financial Fair Play regulations in 2013. Essentially these regulations sought to implement the ‘break-even’ principle of ensuring that clubs balanced ‘relevant income’ balances with ‘relevant expenditure’ with deviations being allowed of up to €5 million; though critics of this have pointed out that these could be easily altered by clubs to their benefit and avoiding FFP altogether5. Though one of the main criticisms of FFP in general both in the sports economics

literature and in the footballing world, is that FFP seeks to entrench the historic elite club’s hegemony in the football world both in terms of financial prowess and therefore results on the pitch6. Therefore, an argument against the imposition of such financial regulation is that it is anti-competitive in nature and essentially protects the more established clubs by limiting the scope for new investors to come in and make new inroads with historically less successful and smaller clubs. However much of these debates have been neutralised by the fact that, UEFA until this significant sanction on Manchester City, had done very little in enforcing these regulations despite the fact that with these petrostate owners, the depth of their pockets seemed to be infinite and the equilibrium in the football world being greatly pushed.

Therefore, looking at the future of the game it is likely that these, predominantly Middle Eastern, petrostates and oligarchs that have had an increasing stronghold within the football world with funding being essentially limitless considering this vast state backing will continue to increase their influence in the game. Though UEFA’s shift in seemingly wanting to regulate the financial side of European clubs could have something to say about this depending on the success or not within the courts. Globally, with the 2022 World Cup being held in Qatar, despite an array of allegations regarding not only financial malpractice but also human rights violations, the sway of Middle Eastern oil revenues to influence football will only likely increase – particularly if Saudi Arabia begin their own significant involvement in the sport.

By Rahul Kumar