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FIFA & Stadium Finance, Russian Style

2010 December 6
by Skip Sauer

Most of the commentary following FIFA’s award of the 2018 and 2022 World Cups to Russia and Qatar has focused on the voting process, the objectives of FIFA, and potential corruption.  But for me, FIFA’s decisions are remarkable for their consistency.  They are allocating the right to host the tournament to emerging countries, as they did with South Africa in 2010 and Brazil in 2014 (although Brazil is a world power in soccer, it’s economic potential is what intrigues).  So these allocations seem consistent to me.  Moreover, it’s not exactly news that FIFA is corrupt.  What is news is that tolerance of known corruption lasts only only as long as your country’s bid remains in play.

Another consistent feature of FIFA is its award of the tournament to countries without ready-made stadium infrastructure.  In Russia’s case, this makes for a somewhat novel means of financing stadium construction.  Here is Paul Hayward of the Guardian:

In the press conference, I asked Putin what role he had in mind for Abramovich in the run-up to 2018 and the oligarch thrust himself forward on his chair to await the answer. “You know, Mr Abramovich worked on Chukotka [where he was governor] for several years and his work was not bad,” Putin started out. “Many people say he is a tycoon and he bought Chelsea football club. It is taken positively and negatively in Russia but Mr Abramovich helps to develop football in Russia.

“He supports one of the clubs.” Putin then appealed to Abramovich to name the team but received only a smile. “No, he’s not going to tell us because of internal procedures. He’s very attentive to the development of Russian football and in general he will be preparing the World Cup.

“This work is called public-private partnership. With the construction of stadiums I have mentioned the Spartak stadium will be constructed by the Lukoil company and another will be built with the support of the VTB bank.

“In other territories we would like to attract the business community to minimise the state expenditure and I do not rule out the possibility that Mr Abramovich could participate in one of those projects.”

With this Abramovich began clapping and giggled his approval. Anxiety, maybe. Or delight at being asked. Or fear. His eagerness to please was palpable. The applause spread across the Russian benches. “He can give us money, he has a lot of money in stock,” Putin went on, grinning now, and pointing at Chelsea’s benefactor, who will not be saying no.

Memo from the Kremlin to business, and to oligarchs: you will pay for this World Cup. Socialism is alive in Russia, sort of, because the rich will foot the bill for the transformation of stadiums and perhaps the infrastructure too, as Putin finds ways to repatriate wealth from the billionaires of the Yeltsin era.

This story in the Moscow Times confirms Hayward’s take on the plan, albeit without the western slant.  Still, the following bit from the Moscow Times piece is intriguing:

The total price tag of the 2018 World Cup for Russia could exceed $50 billion, which includes almost $4 billion on the construction of stadiums, $35 billion on new roads and railways, more than $1 billon on airport upgrades and more than $10 billion on the development of tourism infrastructure…

Markets welcomed the news of the win on Friday, with construction companies and steelmakers making gains.

I wouldn’t be surprised if FIFA executives shared in those gains!  The organization appears to be  well versed in rent-seeking, in both theory and practice.

2 Responses
  1. bevo permalink
    December 6, 2010

    Like soccer in American, Brazil has spent the last 30 years being the next big economy.

  2. Nick Evans permalink
    December 7, 2010

    You’re quite right that people only seem to take issue with the corruptability of these bodies when they lose. After all, the English press were quite happily reporting the fact that their bid team had bought designer handbags for all of the FIFA executives’ wives a year or so back, and it was all part of the game then.

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