Wednesday, February 18, 2009

Oil Price Collapse, Stock Market Crash, Sinking Currency Hurting Russian Sports Add a Comment February 18, 10:34 AM by Evan Weiner, Business of Sports Examiner« PreviousBy Evan Weiner (New York, N. Y.) -- The summer of 2008 was a good one for Russian sports. The ruble was high, the Russian stock market was doing well and oil was at $147 a barrel. The old Russian bear came out of hibernation and was ready to step back on the international stage was a major player as the 2014 Winter Olympics host in Sochi and with a new hockey league that was going to eventually challenge the National Hockey League for international supremacy. The hockey league had oil money behind it and was run by Alexander Medvedev, the Deputy Chairman of the Board of Executive Directors of Russian energy company Gazprom, and the Director-General of Gazprom's export arm Gazprom Export The International Olympic Committee was impressed by the Sochi bid and in July 2007 awarded the 2014 games to the Black Sea resort area. The President of the International Olympic Committee Jacques Rogge, said at the time that Russia won because the local bid committee was able to "in persuading the members that they can rely on three essential issues: well-known quality of Russian sport, in the top three in the world; total commitment of the Russian government and President (Vladimir) Putin and the legacy this project is going to leave for the city and the region." Things were going well for the Russians. Then August came along. There was there Russian-Georgia war, after that the bottom fell out of the oil market in September which caused problems with both the Russian stock market and the value of the ruble. By October, the Russian stock market lost two-thirds of its value and oil continued to tumble and all of that wrecked havoc on Russian sports. Despite the faltering economic conditions, both the KHL and work at the Olympics site went on. The Kontinental Hockey League was formed out of the Russian Super League about a year ago. It opened in September with 24 teams, 21 were based within the Russian Federation and three teams were located in Belarus, Latvia, and Kazakhstan. The new league, with the oil money, began signing players with the biggest name and biggest salary being NHL superstar and future Hall of Famer Jaromir Jagr. There were a number of other NHL players including goaltender Ray Emery and Nashville forward Alexander Radulov. Jagr was contractually done with his NHL team, the New York Rangers but Radulov still had a year left on his Nashville Predators contract when he signed with Salavat Yulaev Ufa and that did not sit very well with the National Hockey League or with the International Ice Hockey Federation. Radulov's deal was announced after the NHL, IIHF and the KHL had signed a deal that all leagues would honor existing contracts. The KHL with Jagr, Radulov, a host of former NHL players looking for one final big paycheck along with a handful of North American coaches is nearing the conclusion of season one. The grandiose plans of expanding into Europe seem to be on hold and in fact, there are some ominous words from Medvedev which appeared in the Sports Business Journal about the league's future. "We decided that players should receive adequate salaries. We believe there was unnecessary escalation of salaries in recent years and the crisis has put it in order," Medvedev said in the Sports Business Journal interview. "Next season, the salary cap per club will drop from $24 million to $17.4 million (US funds)." That is a significant drop in salaries. The ruble continues to stagger and has dropped about a third of its value since last summer. There are some KHL teams that are broke as owners and sponsors don't have money. Last fall Radulov fired a warning shot across the bow and told the NHL to "stop robbing us" meaning Russian hockey should stay home. But with the KHL in apparent disarray, it is likely younger Russians with talent with expired contracts will continue to jump at the opportunity to play in the NHL with or without an NHL-Russian transfer agreement in place. As the KHL reorganizes for next season, the Sochi Olympic Committee is also reeling. The Russian government is looking to save billions in construction costs and that it has slashed 15 percent of the Sochi Olympics budget. Money is very tight. The Russian bear wanted to re-emerge on the sports stage. At this point there are far more pressing problems, the collapse of oil prices, the collapse of the Russian stock market and the collapse of the ruble. All take center stage well ahead of Russian sports.

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