Date
18 October 2017
In 2015, CEFC China Energy bought 59.97 percent of Czech club Slavia Prague. Photo: Slavia Prague
In 2015, CEFC China Energy bought 59.97 percent of Czech club Slavia Prague. Photo: Slavia Prague

Energy sector using soccer power to drive global industry growth

Rosneft is a name that many people will be unfamiliar with, yet it is increasingly occupying a position that is center stage in the global geopolitics and business of football. Who is involved in Rosneft, why they are there, and how the company is engaging with the game reveals a great deal about football in the 21st century.

One of the biggest companies in the world, Rosneft was established in 1993 in the wake of the collapse of the former Soviet Union. Many of its assets are effectively previously state-owned and run by the Russian Ministry of Oil and Gas. Now though, Rosneft is a privately owned, integrated oil corporation with sales listed as being worth upwards of US$64 billion.

It was therefore somewhat surprising that in recent weeks a deal was signed that resulted in a small Chinese company acquiring a stake in Rosneft. Based in Shanghai, CEFC China Energy has paid US$8 billion for around 14 percent of the company. The deal is striking for several reasons, not least because it is unclear what the relationship is between CEFC and China’s government, the Chinese Communist Party and the People’s Liberation Army.

Also, this is the first overseas investment deal concluded by a Chinese company since the country imposed stringent measures aimed at stemming capital flows out of the country. Among these measures have been a series of interventions designed to curb excessive (labelled by the Chinese government as “irrational”) spending in football.

The stake acquired by CEFC was formerly owned by Glencore, an Anglo-Swiss multinational commodity trading and mining company. Glencore had purchased its Rosneft stake last year, in conjunction with the Qatar Investment Authority (QIA) which paid approximately US$3 billion for its share of the deal. The QIA will continue to retain ownership in Rosneft with a holding of 4.7 percent of its shares.

Given the financing, arrangement and destination (Russian intermediaries, Russian companies) of these various deals, sanctions imposed on Russia by the United States government following the former’s annexation of Crimea, will probably have been circumvented. This may partly explain the incredibly fractious relationship Qatar currently has with its pro-US neighbors such as Saudi Arabia.

As has already been observed in another piece written for this column, Brazilian international Neymar’s signing by Qatari-owned French football club Paris Saint Germain has been one of the most visible manifestations of Qatar’s response to the conflict currently dividing the Gulf region. It will be interesting to see whether Rosneft will be drawn into this conflict, especially given the company’s growing links to the world’s favorite sport.

The origins of Rosneft’s links to football go back as far as 2006, when Russian oligarch Roman Abramovich, owner of the English Premier League club Chelsea, purchased a US$300 million stake in the company. Following recent unsubstantiated rumours of a Chinese bid to acquire Chelsea, it therefore seems ironically coincidental that CEFC has just bought into Rosneft.

After all, in 2015 the Chinese energy company bought 59.97 percent of Czech club Slavia Prague. Some people even now are probably still mystified by CEFC’s investment in the club, which took place at a time when other Chinese businesses were targeting much larger, more attractive European clubs such as Atletico Madrid and Manchester City.

However, any confusion begins to clarify when one understands that the Czech Republic was one of the first countries in the world to sign a memorandum of understanding with China to promote the East Asian nation’s One Belt, One Road (OBOR) initiative. OBOR is a massive, decades-long, project instigated by the Chinese government to open-up East-West trade routes in a manner that mimics the old Silk Road.

Slavia Prague has been one of several such CEFC investments in the Czech Republic that have also included an acquisition of the brewer Pivovary Lobkowicz Group. In a recent interview, Wang Mingtai, an executive of CEFC Group Europe, was reported saying: “Brewing and football are associated with Czech culture and lifestyle. So, we invested and saved the entities”. He went on, “Our participation has brought the football club back to life. Local fans sincerely thanked us. These two acquisitions also help to narrow the distance between the Czechs and China.”

Any philanthropic or altruistic motives aside, more tellingly senior managers from CEFC have talked about the company becoming China’s new Sinopec, China’s second largest energy giant and Asia’s top oil refiner. The company was initially believed to be planning the creation of a retail fuel network, with gasoline supplies coming from refineries in Romania and China. Following the purchase of its stake in Rosneft, which owns nine refineries in Russia and has a stake in a further three in Germany), CEFC’s network is likely to be larger and more ambitious than originally envisaged.

While it is a little too early to draw a line from Beijing to Berlin, CEFC’s development in Europe has led to a different line already being drawn between Beijing and Brno, with Rosneft and football in the middle of what is an increasingly dense network of energy and geopolitical interests.

For observers of China’s influence on football, CEFC’s strategy provides telling insights into how Chinese investors have taken an interest in European football. Indeed, in recent Chinese government statements about external currency flows, the authorities have emphasised that overseas football investments will, in future, only be given the go-ahead if they are linked to OBOR projects.

As for Rosneft, thus far in its history, the company does not appear to have been particularly interested in football. Indeed, it has mostly invested in ice hockey, Vladimir Putin’s favourite sport, and now owns the CSKA Moscow team (which plays in Russia’s leading Kontinental Hockey League. At the start of the 2016/17, the KHL agreed that China’s Kunlun Red Star could join the league, a move that China acknowledged as being a commitment from both sides to the success of OBOR.

Exactly where Qatar might fit into an East Asian mid-winter ice hockey match remains to be seen. Yet, with the thus far largely anonymous Rosneft helping join the dots in a network facilitated specifically by football, but also by sport in general, we should be alert to the connections between the likes of CEFC and the QIA, and how these are pulling these dots together.

– Contact us at [email protected]

BN/RA

One of the biggest companies in the world, Rosneft was established in 1993 in the wake of the collapse of the former Soviet Union. Photo: Reuters


In 2006, Russian oligarch Roman Abramovich, owner of the English Premier League club Chelsea, purchased a US$300 million stake in Rosneft. Photo: Reuters


Rosneft has mostly invested in ice hockey, the favorite sport of Russian President Vladimir Putin. Photo: Reuters


Simon Chadwick is Professor of Sports Enterprise at Salford University Manchester in the UK, where he is Co-Director of the Centre for Sports Business. He is also a Senior Fellow of the University of Nottingham's China Policy Institute.

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