Monday, June 24, 2024

28 European soccer teams ignored Ukraine war sanctions in player trades with Russian clubs

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Dinamo Moscow, a century-old soccer team from the Russian capital, proudly displays the sponsorship of VTB Bank on its jerseys. VTB Bank owns the club and home matches are played in the VTB Arena. As the second-largest financial institution in Russia, most of VTB Bank is publicly owned. The bank has been sanctioned by the European Union and the United States for its involvement in the Russian invasion of Ukraine, but European soccer clubs like Real Sociedad (Spain), Turin (Italy), and Bologna (Italy) have all bought players from Dinamo. In last summer’s transfer market, they paid over €15 million ($16.2 million) to a team whose owners are subject to restrictions aimed at weakening the Kremlin’s war machine.

These are not isolated cases: 28 teams made 30 trades with Russian clubs, despite the sanctions that prohibit paying over €100,000 ($108,000) to any Russian entity, or doing business with people and companies connected to Putin. Yet these European clubs directly paid restricted clubs €66 million ($71.2 million) for 18 players or deposited the funds in European bank accounts associated with the clubs and their owners. Both transactions are prohibited by the European Commission and member states. These 30 trades account for two-thirds of the 45 player transfers between 39 European teams and Russian clubs since the war began.

Follow the Money, a Dutch investigative journalism organization collaborated with European news outlets, including Le Monde, Die Standard and EL PAÍS, for its Offside Deals report about violations of Russia sanctions by European soccer clubs. EL PAÍS compared publicly available data from the transfer market, and from the owners and managers of Russian teams, to the lists of entities sanctioned by the EU, U.S. and the United Kingdom. The clubs themselves are not on the sanctions list, but club owners like VTB Bank are. EL PAÍS then shared its findings with experts, the clubs, soccer federations and associations, and the European Commission.

State banks, oil companies, Forbes-list millionaires and even warlords like Chechen leader Ramzan Kadyrov (nicknamed “Putin’s attack dog”) have been involved in player transfers with European clubs. Kadyrov sold players to Olympique Lyon (France) and Red Bull Salzburg (Austria), and Spanish clubs like Real Sociedad, Espanyol, Cádiz, Almería and Elche have also made transfers that were flagged as potential EU sanction violations.

“These clubs may have violated the sanctions. If a team is owned by an oligarch or a sanctioned entity, it can be easily deemed as a breach,” said Ángel Saz-Carranza, director of the Center for Global Economy and Geopolitics at Spain’s ESADE business school. Heleen Over de Linden, an attorney and expert on Russian sanctions agrees: “These transfers are not permitted under the sanction regulations.”

The 30 cases listed in the table involve problematic transfers to and from sanctioned Russian entities. Teams like Real Sociedad and Elche bought players from Russian clubs subject to sanctions (Dynamo Moscow and Spartak Moscow, respectively), so payment for the transaction is prohibited. Espanyol’s purchase of a player from FK Krasnodar is different in that the owners of the Russian team are not on any sanctions lists. But the transaction violated the EU rule about making bank deposits over €100,000 to Russian entities. Teams like UD Almería and FC Cádiz that sold a soccer player to a Russian team with owners on the sanctions lists face another issue, as the assets must be frozen upon leaving Russia.

Since February 2022, at least 99 agreements have been signed globally between Russian and foreign teams. Following the invasion of Ukraine, professional soccer players valued at €300 million have been transferred to and from Russia (this figure does not include players on non-financial loan arrangements). Meanwhile, many international companies have abandoned lucrative businesses in Russia due to the ban on working with companies linked to Kremlin oligarchs or financiers of the war in Ukraine.

Offside transfers

In August, Real Sociedad had a pressing need to replace star midfielder David Silva after his retirement due to a serious injury. The club began the process of signing Arsen Zakharyan from Dinamo Moscow, but quickly ran into problems depositing nearly €13 million ($14 million) in Russian banks while war raged in eastern Ukraine.

It wasn’t the first time Zakharyan had trouble leaving his Russian team. A few weeks earlier, Chelsea had given up on signing him after everyone thought it was a done deal. The English club was blocked from sending money to Russia and even suggested paying later once the sanctions were lifted. With no end to the war in sight, Dinamo Moscow logically rejected this idea. Real Sociedad then swooped in and announced on August 19 that it had signed Zakharyan with a tweet in Russian: “Do Добро пожаловать Арсен Захарян!!” (Welcome Arsen Zakharyan!!).

When we asked Real Sociedad about the transaction, they only replied that the Spanish bank that executed the transaction did not object. “We verified this thoroughly and the ‘soccer player’ category was not included in the sanctions lists,” said a club spokesperson. The Zakharyan transfer was similar to others made by European first division teams like Turin, Bologna and Standard de Liege (Belgium).

The transactions by three Spanish clubs with Spartak Moscow would normally be fairly routine: Srdjan Babic was sold by UD Almería for about €5 million euros; Théo Bongonda was sold by FC Cádiz for €7 million; and Ezequiel Ponce was bought by Elche CF from Spartak Moscow for €4 million. The problem is that Spartak Moscow is owned by Lukoil, one of the largest oil and gas companies in the world, and has been sanctioned by the United States ever since Russia annexed Crimea in 2014. The U.S. sanctions have “extraterritorial jurisdiction,” which means that it has the authority to impose fines or restrict business dealings between U.S. companies and the sanctioned entity that took place outside its borders.

None of the Spanish clubs that traded players with Russia complied with its responsibility to engage Spain’s Ministry of Economy, which oversees sanction enforcement. “It is the duty of every individual to adhere to the obligations arising from the European regulations, and consider seeking assistance to ensure compliance,” said the Ministry in response to our inquiry.

Several Spanish and European clubs like Red Bull Salzburg, Nice (France) and Sparta Prague (Czech Republic) said they consulted with international soccer organizations like FIFA and UEFA that monitor player transfers. Since neither organization objected to doing business with Russia, these clubs never contacted EU or national authorities.

How was payment made?

Direct payments to companies owned or controlled by a sanctioned individual are prohibited. A European Commission spokesperson pointed to the EU regulation stipulating that funds or economic resources cannot be made available “to or for the benefit of entities owned or controlled by sanctioned persons,” according to rules created after Russia’s invasion in February 2022.

But not paying is not an option according to UEFA rules. The European association does not allow professional soccer clubs to be in debt to other clubs. The punishment: exclusion from European competitions. In April 2022, UEFA sent a letter to national soccer federations in Europe to assist them in resolving issues with Russian clubs. Teams must show that they have made every effort to pay for a player. If unsuccessful, they can deposit the payment with the national soccer association. While the letter was not published, it’s posted on the Bosnian soccer federation’s website.

But this last resort offered by UEFA also has problems. A Russian person or entity cannot have more than €100,000 euros in a European account, according to the regulations. The Dutch and Belgian federations confirmed that several clubs used this payment route, but the Spanish federation declined to comment or confirm that it received and shared the UEFA letter with Spanish clubs.

Out of the transfers analyzed, at least 18 involved the purchase of players from Russian clubs by European teams. However, none have provided specific details regarding the payment method. The only club that provided a partial response is PSV Eindhoven, which said it followed UEFA’s instructions. Two Spanish clubs say they agreed with Russian clubs to deposit funds in third-party accounts in other European banks, not the national soccer federation. For instance, Espanyol deposited €2.5 million in a European bank account to get Tonny Vilhena from FC Krasnodar.

A minefield of problems

Understanding the extent of sanctions is crucial. Do they solely impact the sanctioned individual or entity, or do they also extend to their possessions and assets? “If the sanctioned person owns over 50% of a company or controls a subsidiary, it implies control over its assets subject to sanctions,” said José Luis Iriarte, a law professor at the Public University of Navarre (Spain). All of the clubs identified in this investigation conducted transactions with individuals and entities that meet the sanction criteria. Iriarte says paying millions to Russian clubs like Dinamo Moscow is “a minefield of problems… It’s likely that the European Superior Court of Justice will have to intervene to clarify how to interpret the European regulations.” But it’s not always easy to determine the ownership of an entity or bank account receiving funds for a soccer player purchased from a Russian club. “We have seen agreements in other business sectors where a subsidiary that owns a European company refrains from transferring funds to its Russian parent company. In other cases, the ultimate owner was a not Russian or not a sanctioned entity,” said Iriarte.

Similar cases have been detected in Spain and Europe, says Mariano García Fresno, who works in money laundering prevention for a Spanish legal association. “One common approach is to use corporate structures in countries not subject to sanctions, making it difficult to determine the true owner of a legal entity. Another method involves conducting transactions outside European banking circuits, using banks in countries unaffected by these sanctions.” Problems also crop up when the money is being received from a sanctioned entity. “The financial institution receiving these money transfers must block the corresponding funds.”

With less than three weeks to go before the winter transfer market kicks off, European clubs seem to have passed the ball to FIFA and UEFA. But Heleen Over de Linden said, “It doesn’t matter if UEFA says ‘these are our rules’ because European regulations are still applicable.” This means that to ensure compliance with European regulations, someone in each club must step up and take responsibility.

‘Offside Deals,’ an international investigation

The ‘Offside Deals’ investigation was coordinated by Follow the Money and involved the follwing media outlets: Le Monde (France), EL PAÍS (Spain), Paper Trail Media (Germany), Der Standard (Austria), De Tijd (Belgium), Denik N (Czech Republic), Oštro Hrvatska (Croatia), Reporters United (Greece), Daily SME (Slovakia) and ICJK (Slovakia).

The data on players, clubs and amounts comes from the Transfermarkt database. Information on owners and managers has been extracted from a wide range of official public sources, such as the Russian Commercial Register and the clubs’ own documentation.

Russian clubs, their owners, and managers have been compared to the sanctions lists of the EU, U.S., U.K. and Ukraine to assess their relationships with sanctioned entities. The findings have been discussed with sanctions experts, involved clubs, national authorities, the European Commission, and soccer federations.

Not all entities are sanctioned in the same way. For example, Russian Railways, owner of FC Lokomotiv Moscow, has only been sanctioned in relation to capital market instruments and securities. But Chechen leader Ramzan Kadyrov’s FC Akhmat Grozny has been sanctioned for his large-scale contribution to the war in Ukraine since Russia’s annexation of Crimea in 2014.

Transfer amounts are based on Transfermarkt information, which primarily uses press releases as sources. If a club doesn’t disclose the amount, the estimates may not be accurate. Certain teams like Standard de Liège, Red Bull Salzburg, and Olympique Lyonnais claim their transfers didn’t involve any money flows to or from Russia.

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