Roman Abramovich has been an untouchable billionaire free to bankroll Chelsea's unprecedented success for almost two decades, but that changed on Thursday morning. The U.K. government announced sanctions against seven Russian oligarchs with what it believes are close ties to Russian President Vladimir Putin's murderous regime, with the move following two weeks of intense pressure to act amid the country's ongoing invasion of Ukraine.
Abramovich -- along with Igor Sechin, Oleg Deripaska, Dmitri Lebedev, Alexei Miller, Andrei Kostin and Nikolai Tokarev -- has had his assets frozen and faces a ban on all transactions with U.K. individuals and businesses. Abramovich, who bought Chelsea for £140 million in 2003, has always denied links to Putin's government, but the U.K. government offered a comprehensive and damning alternative view in a document accompanying the decision published by the Treasury's Office of Financial Sanctions Implementation.
"Abramovich is associated with a person who is or has been involved in destabilising Ukraine and undermining and threatening the territorial integrity, sovereignty and independence of Ukraine, namely Vladimir Putin, with whom Abramovich has had a close relationship for decades," it read. "This association has included obtaining a financial benefit or other material benefit from Putin and the Government of Russia."
The decision, in place until May 31, directly impacts Chelsea, which has been frozen as an Abramovich asset in a manner he had previously tried to avoid by creating a degree of separation between himself and the club.
On Feb. 26, as criticism over a lack of sanctions began to focus on Abramovich, among others, he passed "stewardship and care" of Chelsea to the trustees of the Blues' charitable foundation. However, sources have told ESPN that as lawyers began to work out the details of this ambiguous term, fears quickly grew that it would not stand up to scrutiny were sanctions to arrive.
Amid skepticism from the trustees over whether the foundation was a suitable vehicle to run the club -- reporting the situation to the Charity Commission for further clarification -- and suspicion among Abramovich's advisers that it would not be enough to insulate Chelsea from any punishment targeting the Russian, he put out a second statement on March 1 confirming the club would be put up for sale. Bidders have since circled -- although sources told ESPN that no interested party has so far come close to matching Abramovich's £3 billion valuation -- but this government intervention casts a Chelsea sale and even the day-to-day running of the club into unprecedented uncertainty.
Chelsea, 117 years old on March 10, have won 21 trophies during Abramovich's 19-year tenure -- more than any other English club -- but his ownership is coming to an ignominious end. ESPN looks to answer the key questions.
How much of a surprise is the government's decision to act?
It's massive. Sources have told ESPN that senior figures at Chelsea, the Premier League and UEFA were all taken aback by Thursday's decision. It was always a possibility given the mounting pressure on the government to intervene -- Labour leader Sir Keir Starmer last week called outright for Abramovich to be sanctioned -- but the expectation was that, rightly or wrongly, he would be given time to sell.
Raine Group, the New York merchant bank appointed to handle the sale, set a deadline of March 15 for interested parties to submit bids for Chelsea, and sources describe it as "no coincidence" given that this was also the date upon which the government could act on emergency legislation, known as the Economic Crime Bill, once it passed into law. (The bill would make it harder to hide assets in the U.K., as well as make it easier to issue sanctions moving forward.) As it turns out, they didn't need it, which will likely be the subject of some heated political debate in the weeks to come.
Abramovich can appeal the decision, but as of Thursday afternoon, nobody connected to the 55-year-old had indicated whether he will do so.
What is their basis for targeting Abramovich?
Published by the Treasury's Office of Financial Sanctions Implementation, the document detailing the government's reasoning is as comprehensive as it is damning. After outlining their belief that Abramovich "has had a close relationship" with Putin "for decades," it suggests a wide range of questionable activity including companies linked to Abramovich receiving tax breaks, buying and selling shares from and to the Russian state at favourable rates and the contracts received in the run-up to the FIFA 2018 World Cup.
Abramovich is accused therefore of receiving "preferential treatment and concessions from Putin and the Government of Russia," while also being targeted for his shareholding in steel mining and manufacturing company Evraz PLC. That company is accused of supplying steel to the Russian military, which "may have been used in the production of tanks" used in the Ukraine invasion.
Can Chelsea still be sold?
Yes, but it's much more complicated now. The process is on hold because the immediate consequence of these sanctions is to freeze Chelsea as an asset, therefore meaning Abramovich cannot put in or take out any money of the club, or pass ownership to someone else. But he can apply for a licence to allow for the sale of the club.
Sources have told ESPN that the Department for Culture, Media and Sport would be clear that any such licence would not allow Abramovich to benefit from the sale of the club while he remains subject to sanctions. Those sources added that DCMS and the Treasury are working closely with the club and the Premier League on the implications of today's announcement, but that where money would go would be considered under the terms of a new licence application to permit a sale.
However, the starting position is expected to be that he cannot benefit while assets are frozen. Sources claim his charitable foundation could not benefit either, although he has previously suggested he will donate any "net proceeds" of a sale to victims of the war in Ukraine, through an as-yet-unspecified charity. (The government would have to be satisfied proceeds of any sale would not benefit Abramovich in any way. The precise destination of any proceeds would be determined in discussions with the government when the application for a sale licence is made.)
Abramovich would also have no chance of achieving his £3bn asking price if the government effectively took control of the sale: that price does not reflect independent market valuations of the club, which have put it between 2bn to £2.5bn at best. (Government involvement would be determined once that license for a sale was submitted: they would play a significant role but it's as yet unclear as to how that would work.) Buyers might well seek to revise their position and downgrade their offers accordingly given the latest revelations, but it is too early to know how interested parties will react.
If Chelsea are frozen, can they still play matches and operate as a club?
Yes. As part of the action against Abramovich, Chelsea were given a licence to continue operating as a club because of their importance independent of their owner. Britain's minister of sport, Nadine Dorries said: "Football clubs are cultural assets and the bedrock of our communities. We're committed to protecting them."
This means that Chelsea's teams can play games and pay staff -- around 1,000 employees in total -- but there are a number of restrictions. The club essentially cannot generate fresh revenues from this point on because Abramovich could technically benefit financially through his ownership of the club. That means tickets can no longer be sold, the club shop has already been closed and staff at the Stamford Bridge hotel have been told they cannot accept bookings for the foreseeable future.
Season-ticket holders and fans with individual match tickets already purchased can attend as normal because those transactions pre-date Thursday's decision. However, cup matches are not included with Chelsea's season ticket, so they face playing Champions League matches behind closed doors. Furthermore, away supporters will not attend matches at Stamford Bridge if those tickets were not sold before Thursday, and Chelsea fans have since been told they cannot purchase tickets for their FA Cup quarterfinal at Middlesbrough a week on Saturday.
The Premier League and UEFA are yet to clarify the situation, but this might now be the case for all future Chelsea away games for which tickets have not already been sold.
Any money generated by the club within existing agreements -- for example specific matches picked for television, which would trigger an extra broadcast payment -- would be paid to Chelsea as written, but would be frozen until such time either Abramovich is no longer under sanction or the club is sold.
There are also strict limits in place for their operating costs for the foreseeable future. The club are limited to £500,000 in the cost of staging a home game, while away travel expenses are capped at £20,000. Although sources have indicated there is some flexibility in both of these figures, it will likely mean cutting back on the number of backroom and logistical staff travelling to games: it is estimated a typical away trip in Europe costs around £30,000, and only slightly less for a Premier League away game.
Chelsea travel to Lille next week for their Champions League last-16, second-leg tie, but that is likely to have been pre-paid and is in any case a short one-hour flight from London -- if anything, it's a place even accessible direct by train. That said, European trips in later rounds should Chelsea advance -- they lead 2-0 after the first leg -- could be more problematic.
In a statement released on Thursday afternoon, Chelsea indicated they are seeking more leniency in general in their operations. "We intend to engage in discussions with the UK Government regarding the scope of the licence," it read. "This will include seeking permission for the licence to be amended in order to allow the club to operate as normal[ly] as possible."
What about existing contracts?
The club cannot re-sign players to new and revised deals, which poses a particularly urgent problem in the case of several players with contracts set to expire at the end of the season. On the men's side, Cesar Azpilicueta, Antonio Rudiger and Andreas Christensen are all free agents this summer, while among Chelsea Women, Ji So-yun, Maren Mjelde, Jonna Andersson and Drew Spence are all affected. Sources have told ESPN that Chelsea Women's coach Emma Hayes is seeking clarification over her position given she is on a rolling one-year deal.
Sponsors have reacted negatively to the news, with Three -- the club's main shirt sponsor in a deal worth £40m a year -- temporarily suspending their agreement and asking for their logo to be taken off all kits, advertising hoardings at Stamford Bridge and at the club's Cobham training base. Car manufacturer Hyundai, who pay around £10m per year to Chelsea, are "currently assessing the situation," as are official partner Zapp.
What about transfers?
Chelsea will have been planning for the summer despite the transfer market currently being closed, but no new transactions can be agreed while the club is frozen. Outstanding payments on existing deals -- for example, players already at the club signed on deals where the cost was spread over a number of years -- will continue as normal, assuming the cash exists in the club to meet those obligations. Sources have told ESPN that this includes payments relating to the deals for Ben Chilwell from Leicester City and Timo Werner from Red Bull Leipzig.
Does the club have the cash to keep going?
According to their accounts published in December for the year ending June 30, 2021, Chelsea's cash balance was just £17m. For comparison, this figure is a fraction of their domestic rivals, including Manchester City (£130m) and even Liverpool (£38m).
The club will continue to receive funds from existing broadcast and sponsorship deals, though that money will also be frozen in accordance with the sanctions. However that money can be used for things like employee wages, travel costs, taxes, payments to other clubs and matchday logistics, as outlined in Section 4 of the license the club was granted in order to remain in operation. The club has previously made no secret of how reliant they have been on Abramovich's personal wealth, with loans totalling £1.514bn at the last count. The £17m figure may have been artificially low as the impact of the coronavirus and games being played behind closed doors will have impacted upon their revenue, this was still a period when the club won the Champions League.
Chelsea's reliance on player sales to offset operating losses is well-established -- the club has averaged a £75m annual profit since 2014 -- and they will need the freedom to act in the summer so they can continue building this revenue stream when the transfer window reopens. Three's decision to suspend their kit sponsorship could also heighten pressure on cash flow given that other partners are considering following the same path.
The club's latest set of accounts mentioned above also revealed an income of £153.6m in commercial revenues. The construction of those deals is confidential. If payments are made on a singular, annual basis then the club will already have received the income, but if it is staggered throughout each season, there might be an immediate financial impact in addition to the obvious public relations damage. There have even been suggestions Chelsea could be placed into administration if they run out of cash -- an action that could lead to a points deduction -- but given the government's apparent openness to granting a licence for sale, this current stress test of the club's finances without Abramovich might not get that far.
That said, the pace of any negotiations over a sale is impossible to determine, and without further concessions from the government on their licence to operate, the more this pressure will grow if Abramovich remains sanctioned and Chelsea do not have a new owner.