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Monday, December 06, 2021

‘No one buys a football club to make money’… so what’s behind Saudi picking up Newcastle United

From sports washing to sports diplomacy, there could be many ways to understand this latest move to buy a European club

Written by Mira Patel | Mumbai |
Updated: October 23, 2021 9:33:48 am
premiere league clubs, English Premier League football club, Newcastle United, indian express, sports news, current affairsThe biggest question surrounding the Newcastle takeover is how it passed the Premier League’s so called ‘fit and standards’ test which was designed to prevent individuals associated with allegations of wrongdoing from owning a football club.

“Some people think football is a matter of life and death. I assure you, it’s much more serious than that”

– Bill Shankly

Saudi Arabia recently joined its neighbours, Qatar (Paris Saint Germain) and the UAE (Manchester City), in the upper echelons of football ownership with its purchase of Newcastle United, obstinately made through the Saudi Public Investment Fund or PIF. Their stakes within European football have inexorably changed the landscape of the game and sparked intense debate over the competitiveness and identity of the sport, and the ethical implications of allowing unscrupulous global actors to use football as a means of laundering their own reputations.

The biggest question surrounding the Newcastle takeover is how it passed the Premier League’s so called ‘fit and standards’ test which was designed to prevent individuals associated with allegations of wrongdoing from owning a football club. The argument put forward by Amanda Staveley, a part owner of Newcastle, and the person responsible for facilitating the deal, is that the club would be owned by the PIF and not the Saudi State. That argument, according to Derek Shearer, a former US Ambassador to Finland, and current Professor of Diplomacy at Occidental College, is “nothing short of a joke”.

In fact, just last year, the League itself stated in a letter to Newcastle that the PIF is “expressly under the direction of a government ministry” and that its function is to “serve the national interest” of the state. Yet the League now claims that it has received “legally binding assurances” that the state wouldn’t control the club.

This about face might have more to do with broadcasting rights. In 2017, Saudi Arabia and its allies including the UAE, suspended diplomatic relations with Qatar and prevented Qatari businesses like beinQ, the PL’s broadcast partner for the Middle East, from functioning within its territories. In parallel, the Saudis supported the operations of beoutQ, a cheekily named pirate broadcaster that was illegally streaming PL games. Given that broadcasting revenue is extremely lucrative to the League, the Saudis’ actions were financially significant and the League refused to approve the sale until the situation was resolved.

In January, noting a change of temperature in the White House with Biden’s arrival, the Saudis agreed to make peace with Qatar and promised that the ban on beinQ would be overturned, and beoutQ, shut down. Months later, the PL approved a new takeover bid, proving that in the world of commercial football, money trumps integrity every time.

An influx of riches

Amongst other concerns, opposing fans objected to the takeover for reasons similar to those expressed when Abu Dhabi bought Man City and Roman Abramovich bought Chelsea. Simply put, that much money would blow other teams out of the water and reduce the competitiveness of the League.

However, according to James Dart, the Editor of Guardian Sports, while that has been true in some situations (notably PSG), it may have an opposite effect in others. He argues that the Premier League remains as appealing as ever and that the influx of more money, for better or for worse, will only empower more teams to challenge for the title.

According to Nick Miller of the Athletic, this is because money doesn’t necessarily make one team considerably stronger than its rivals. “With Man City and Chelsea, it’s not that they can buy players that clubs like Liverpool cannot, but that they can afford to make mistakes that clubs like Liverpool cannot,” he writes.

However, given that Man City and Chelsea have won six out of the last ten Premier League titles, that argument may seem slightly hollow. Since 1992, only Blackburn Rovers (1994-95) and Leicester City (2015-16) have been able to break the dominance of the so-called rich clubs. Liverpool and Arsenal, both behemoths of football but more fiscally conservative than their rivals, have only won the League four times in the last 29 years. In France, PSG have won in seven out of the nine seasons since being bought over. It is therefore increasingly rare for teams to challenge for top honours without having the advantage of considerable financial backing.

For what it’s worth, there are rules in place to prevent a newly-minted club like Newcastle from buying all the best players in the world overnight. UEFA’s Financial Fair Play (FFP) standards dictate that clubs cannot make losses of more than $35.2 million over a three-year period if they want to play in European competitions like the Champions League.

However, there are ways around FFP, as PSG and Man City have demonstrated. In order to fund the transfers of Neymar and Mbappe, the Qatari club had to generate revenue that would offset their exorbitant transfer fees and salary costs.

So to fund the purchases, PSG onboarded a slew of Qatari sponsors and associations linked to its owners, including signing one sponsorship deal with the Qatar Tourism Authority for $111 million per season. When UEFA commissioned an independent body to analyse these agreements, it found that the deal in question was worth less than $5.8 million. Despite these findings, PSG was not punished for their alleged violation of FFP. In 2020, when Man City were similarly accused of overstating revenue, UEFA did hand them a two-year ban, although that was later overturned by the Court of Arbitration for Sport.

This in turn has damaged the credibility of FFP, and, along with the high-profile scandals that plagued governing bodies like FIFA and UEFA in the last decade, has damaged the reputation of the sport.

To prevent something similar from happening again, after the Newcastle takeover was announced, the League held a meeting between representatives from all of the teams. During that meeting, 18 out of 20 clubs voted to issue a temporary moratorium on practices that would allow a subsidiary of a team to overpay for sponsorship deals. Man City abstained from voting and Newcastle voted against the measure. In theory, this means that a company owned by the PIF could not pay $100 million for marketing rights next season that were previously valued at $5 million. How that plays out in practice is uncertain.

However, for now at least, both Man City and Newcastle will have to abide by the spirit of FFP. Still, given the conservative nature of Newcastle’s previous owner and transfer amortisation rules, Newcastle could potentially spend over $250 million in the upcoming transfer window without falling afoul of FFP. Fans will hope that the money is used to prevent relegation (a very real possibility at the moment), but according to Dart, it’s more likely to be a “slow burn”.

There are also concerns over the creation of a feeder system, similar to that employed by the Emiratis who own City Football Group, an umbrella organisation spanning across four continents that owns teams including Man City in the UK, Melbourne FC in Australia, and Montevideo City Torque in Uruguay. Multi-club ownership in theory allows players to be developed at a smaller club like Melbourne FC and later sold to a larger club, like Man City, at a discounted price. Till date, there has been no evidence that City Football Group has used this system as a smokescreen and according to Miller, no evidence that the Saudis are attempting to create a feeder system of their own. However, it is nonetheless a concerning prospect, albeit one that will likely play out only in the long term.

So, if money arguably makes the League more competitive, the only concern remaining from a sporting perspective, is how this would impact the landscape of the game.

In How Soccer Explains the World, Franklin Foer says football is a way of thinking of how people identify, organise, and express themselves in a global age. According to Dart, Newcastle in particular could feel proud of being rooted in the community and with the recent purchase, “there’s a concern that this identity could go away.”

That concern is not unfounded. Football derives meaning from an existential identity linked in part, to the behaviour and values of match going fans. With the main money coming from abroad, Miller argues that local fans are now less important. The League earns so much money from international broadcasting rights, he says, that they can basically allow fans to attend games for free and still be profitable.

Dart takes that argument one step further, asserting that the primarily international influx of money has made the European Leagues so centralised, that the only logical next step is the creation of a football Super League. Earlier this year, amidst widespread protests from local fans, the proposal for a European Super League was put on hold. But Dart believes that given the finite amount of money the Premier League can generate, a Super League is inevitable. This would enable a number of salivating matchups to be played regularly (think Real Madrid vs Bayern Munich twice every season), but would also, in effect, render domestic leagues and by extension, smaller teams, irrelevant.

There are legitimate sporting concerns surrounding the takeover of Newcastle, but context as always is important. Football has seen increasing amounts of money being funnelled into the game for decades which has unsurprisingly already had ramifications for the sport. The seminal moment, according to Dart, has come and gone with the acquisition of Chelsea in 2003. The Saudi takeover will therefore change very little in terms of how the game is played but it will speak to a larger issue of whose money people are willing to accept.

Sports diplomacy?

Acquiring a football team gives its owner considerable political currency. One only needs to look at the NBA in China to understand how sports can be used as a bargaining chip for other matters. Just recently, Boston Celtics player Enes Kanter publicly criticised China for its policy towards Tibet. Almost immediately, the Chinese streaming service Tencent cut the live broadcast of Wednesday’s NBA game between the Celtics and New York Knicks. A day later, Chinese social media was flooded with messages criticising the team. A few years ago, a similar incident occurred with LeBron James and the fallout of it was so financially damaging that the player was forced to apologise for offending Chinese sentiments.

Amnesty International refers to the PIF takeover of Newcastle as the latest example of “sportswashing” in football. The group had also criticised the Abu Dhabi United Group’s takeover of Man City as “one of football’s most brazen attempts to ‘sportswash’ a country’s deeply tarnished image through the glamour of the game.” Qatar’s purchase of PSG came under less scrutiny but the decision to award the 2022 World Cup to Qatar was mired in controversy, with the Norwegian, Dutch, Danish and German Men’s National Team protesting the move.

However, the response has never been more heightened than it is now. According to Miller, “with the Saudi-Newcastle takeover, there has been a lot more talk about the background of these people, and how they use football to further their own image.” This is primarily due to the particularly bad reputation of Saudi Arabia.

Newcastle fans are unperturbed. In a survey last year, 97 per cent of Newcastle fans welcomed the prospect of the takeover and in their first match since the current owners arrived, supporters decked themselves in Arab headgear in a misguided show of support for the new regime. Dart suggests that opposing fans will target the new owners’ horrific human rights record but is sceptical of how much of a difference that will realistically make. On the matter, he says, “it doesn’t help the League’s reputation, but I don’t think it’ll do any lasting damage as a brand” nor will it “spark any prolonged outcry against human rights abuses in Saudi Arabia.”

Some people, like Stuart Murray, an Associate Professor in International Relations at Bond University, believe the outcry altogether is unjustified. He claims “states have always competed against each other, and have done so through traditional means (war, land) and non-traditional means (soft power, culture, art, sport.)” Dart agrees, stating that “no clubs like foreign ownership, whether that be American or something else, but this degree of backlash can be linked to the insularity of the UK.” That insularity or, as Miller puts it, “awareness” has heightened in the last ten years. If you look at the two massive takeovers of English clubs, Man City in 2009 and Chelsea in 2003, he says, “there wasn’t much talk about whether these were the best people to be associated with the club but more along the lines of are they buying success.”

There is also a question of hypocrisy. Qatar sponsored Bayern Munich and Barcelona long before it bought PSG and Real Madrid have sold their stadium naming rights to Abu Dhabi. Stan Kroenke, the owner of Arsenal, agreed to a sponsorship deal with Rwanda and donated money to the campaign of Donald Trump. Murray quotes an old friend of his in making this argument, stating that anyone who has the enormous sum of money it takes to buy a Premier League team, is unlikely to have come about that money in a particularly nice way.

Murray and Miller also make the point that Saudi Arabia and other Middle Eastern countries have already invested in cultural icons across the UK. The latter states, “the argument is that if Saudi money is good enough for the UK Government, then it is good enough to buy a football team.” The Qatar Investment Authority is a major stakeholder in Heathrow Airport; Abu Dhabi entered into a billion dollar property deal with the Manchester City Council; and the PIF has invested in companies carrying significant cultural currency like Citigroup, Disney, Facebook and Boeing.

Moreover, as Murray argues, Britain sold $2.7 billion in arms to the Saudi government, some of which would have likely gone towards waging the war in Yemen. “Britain’s arms exports to Saudi Arabia are far more important to the UK government than a sports club,” says Murray. “When placed against this backdrop, the acquisition of a football team for a small sum of money is tiny.”

Murray also takes issue with the term ‘sportswashing’, describing it instead as a normal practice in international relations “of rich and powerful foreign individuals, institutions and funds buying sports clubs in other countries.”

Instead, Murray prefers the term ‘sports diplomacy,’ describing it as the use of “sport as a diplomatic tool that all governments use to enhance their image, brand and policy objectives, whether those are in trade, tourism, diplomacy or security.” Famous examples include Hitler awarding subsidies for Mercedes and Audi for adorning a swastika in motorsport pre-World War Two and the US government using baseball to improve relations with Cuba. To be clear, Murray does not condone the actions of the Saudis but at the same time, he believes that the reaction to the takeover must be considered in terms of the greater game played by states for power, influence and acquisition. “German Nazis, Italian fascists, Soviet and Cuban communists, Chinese Maoists, Western capitalist juntas – all have played the game and believed in it,” he states.

Shearer, on the other hand, doesn’t believe it is sports diplomacy at all, referring to it instead as diplomacy by other means. Noting that with the globalisation of sport there are more Manchester United fans in China than there are in Manchester, Shearer states that “countries are using micro-diplomacy to further their interests” without necessarily using the same sports diplomacy tactics (hosting a tournament for example), that were used in the past. He also acknowledges the potential political benefits that such a move could produce. “By going into the PL and putting money into the British economy, will that dampen criticism of Saudi policy by the British Government,” he asks. “I don’t know, but I bet that is underlying some of the rationale.” If we go by the example of China leveraging NBA broadcasting rights to silence criticism, Shearer’s argument does not seem as far-fetched as one may assume.

Political benefits

The Saudis claim that the acquisition is in line with their aim of diversifying their economy away from oil. However, Dart puts it simply when he says, “I don’t think anyone buys into football to make money.” One only needs to look at the returns of Man City and other clubs to see the value in such an assessment. Miller adds to Dart’s sentiments, stating that “while the official line is that it’s an investment, more realistically, this is an attempt to use the currency that football has in Europe to present places like Doha and Riyadh as a desirable destination.”

While the net economic benefits of owning a football team can be debated, there is merit in Miller’s assumption of intangible economic returns. In addition to positioning Middle Eastern countries as vacation destinations, sports can be used as a conduit for other business deals. Describing the Saudi investment as a “loss leader”, Shearer gives the example of American sports, in which owners invite other businesspeople to games and use them as a setting for doing other deals. The value of the deal to the Saudis was made evident when leaked communications reported by the Daily Mail suggested that MBS, Crown Prince of Saudi Arabia, sent messages to British Prime Minister Boris Johnson, warning him that relations would be strained unless the Newcastle deal was reversed.

He also refers to the fact that England is benefiting from the money and other countries are using that to improve their relationship with the UK. In a post-Brexit world, Britain is desperate to find other trading partners, even those whose reputation may be questionable. As the Pandora Papers exposed, London is a hub for money laundering, and allowing states like Saudi Arabia to whitewash their reputation through sport, in exchange for other investments, is a victory for the Brits as much as it is for the Saudis. Shearer describes it best as “an attempt to create an economic relationship which may then have political benefits.”

However, Dart is quick to clarify that the political benefits manifest differently for different clubs. Giving the example of Man City and PSG, he says that the former does not have the same pull as other clubs in the UK, whereas with the latter, it brings in far more benefits for Qatar in terms of positive PR. This is because buying a sports club in isolation doesn’t in and of itself improve a country’s reputation. Qatar for example has combined its sports diplomacy with other diplomatic initiatives. It is currently spending $250 billion to bring the 2022 World Cup to its nation alone and spending potentially infinitely more in sponsorships and investing in broadcasting stations that dominate rights for major sports in leagues expanding into Asia, Europe and North America.

However, Qatar is also getting considerable political currency by hosting refugees coming out of Afghanistan and by acting as a mediator for the American withdrawal. The Saudis and Emiratis will have to engage in a similarly cohesive blueprint if they want to significantly improve their reputation on a global scale.

The Saudi’s look likely to replicate that strategy in terms of sports, but diplomatically they have made some considerable missteps according to Shearer. In particular, the state’s culpability in 9/11 and the killing of Washington Post journalist, Jamal Khasshogi, in the Saudi embassy has resulted in widespread global condemnation. Saudi Arabia has attempted to position itself as a hub for tourism by establishing a F1 Grand Prix in Qiddiya in 2023, creating a new high-tech city, Neom, and investing in a slew of malls and hotels that could potentially attract visitors to the country. Against that context, buying a football team is chump change for them. Whether their soft power strategy will mitigate their poor reputation in the West is yet to be seen.

Additionally, the strategy of drawing attention to a particular country could backfire. For example, Qatar has faced considerable backlash over reports of 6,500 migrant deaths during the construction of stadiums for the World Cup. In response, the Qatari government had to actively prove that it was improving working conditions. According to Miller, they have been successful to a point in convincing the world that they’ve improved their human rights record, but there will be a lot of scrutiny in the year leading up to the tournament. Shearer adds to that by asserting that buying a football team does not mean that the Saudis will not be criticised for human rights. In fact, it could result in more scrutiny and in turn, become a lightning rod for more criticism.

However, when it comes to the relationship between the Middle East and the West, realpolitik will always come first. Countries like the US and the UK need allies in the Middle East and unless that changes, they will continue to maintain a relationship with countries like Saudi Arabia, Qatar, and the UAE. Purchasing a football team may facilitate some diplomatic and cultural exchanges but in the grand scheme of things, national interest will always dictate the nature of the relationship. Ultimately, the oil-rich Gulf states need prestige and the culturally dominant West needs money. If you take morality out of the equation, they’re a match made in heaven.

More interesting perhaps is how these acquisitions could impact regional politics. With Qatar gaining more influence on the global stage, the powers that be in Saudi Arabia likely recognised that it would be unwise to continue their boycott of their tiny neighbour, according to Shearer. However, it would be seen as a sign of weakness if they were to simply end the blockade and make peace. While it is unlikely that the Saudis bought Newcastle under the pretence of restoring relations with Qatar, it definitely helped make the case easier. Similar to how the Chinese used Ping-Pong diplomacy to open lines of communication with the US in the 1970s, in a show of good faith, Qatari owned PSG has agreed to play a game in Riyadh. Leaders from both countries will presumably attend the game, which will give them a pretext to meet outside of run of the mill state visits. Saudi Arabia has actually used this tool before, helping to restore relations with Iraq through an exhibition match of football.

At the end of the day, there is dirty money in football, as there is in almost every other facet of society. As Dart points out, “it’s all intertwined and if you follow the money, there is a lot of complacency towards human rights across the world.” He argues that sports are used as a distraction technique but if we take a closer look at most aspects of our lives, we all associate with or gain from unsavoury institutions and consequently, “we are all complicit, it’s just about how blatant that complicity is.”

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