Dinamo Moscow: A history of incompetence

The old Dinamo Stadium.

This is part two of an investigation to Dinamo Moscow’s long-term ownership troubles and financial disrepair. Read Part One first here.

To understand why the famous side, one who was the first Soviet club to visit the UK in a historic tour of 1945, has such troubles as outlined yesterday, it is necessary to understand it’s history.

READ MORE:?Dinamo Moscow’s 1945 Goodwill Tour of Britain

Before relegation to the FNL in 2015/2016, Dinamo was the only club in Russian/Soviet history to?never have been relegated. But last time Yashin’s club won a championship was in 1976 (42 years ago). Their only trophy in Russian history was the Cup of Russia in 1995. This is too poor a performance for such a top club.

Lev Yashin Graffiti
Lev Yashin graffiti piece in Moscow. | Photo: RFN/Danny Armstrong

Dinamo Sports Society was created by the KGB (OGPU in that time) in 1923. today, t is considered as the society of the FSB, Ministry of Internal Affairs (police), Ministry of Emergency Situations and so on. That’s why Dinamo fan’s rude nickname is “Musora” (Cops). Chief’s of KGB and FSB actively participated and are participating in the club’s management. Such specific management style and corruption are the main reasons for the?constant ups and downs of the club.

We can look at the example of another Moscow club, CSKA, which had similar management. However, now the Army no longer manage nor own he side at all, private FC CSKA (hence PFC CSKA) became the most successful Russian club. The quality of management in Russian football clubs is rather poor in general, but Dinamo’s management is even worse.

Fedorichev’s era

Aleksei Fedorichev is a Russian businessman from Monaco. His company Fedcominvest exported sulfur and fertilizer from countries of the former USSR and was a title sponsor of AS Monaco. Dinamo again had financial troubles and just avoided relegation in 2004. According to reports, Fedorichev received 70% of FC Dinamo and had to pay off the debts and invest in the side.

On the other hand, however, the businessman was pushing for a? development project in Petrovsky Park (the area around the Dinamo stadium). For two years he invested about €200 million in the club. He bought seven Portuguese players and one Greek international who participated in the Euro 2004 Final. But only Miguel Danny had a good career in the RPL. He spent big, but with little results.

Curator of Dinamo, former Head of the FSB and former Russian Prime-Minister Sergei Stepashin prevented registration of the estate for Fedorichev’s structures. Because of this conflict, Fedorichev returned his shares to the society and quit Russian football completely.

VTB and Rotenbergs: the golden nightmare

In 2006, Dinamo sports society signed a partnership contract with state bank VTB (the second biggest bank in Russia). Management company Dinamo (the company created for managing the project of new stadium construction and developing of Petrovsky Park) bought shares from Fedorichev using VTB loans.

As Fedorichev said, some “important man” helped him to return some money. The bank was going to invest $1b in the project developing the surrounding area of the Stadium. In 2008 they moved stadium to allow development on the old site, then gave away their own shares to VTB Bank as a guarantee on loans.

Next years VTB loans made up 75% of the side’s budget. The only way to return the loans was to convert them into shares. So in 2009, the parties signed a memorandum on the?transfer of shares to VTB. The deal was closed in two years.

By 2013, VTB prepared to start development of the “VTB Arena Park” territory. At the same time, VTB paid?€83-86m?annually to Dinamo as part of a sponsorship contract. It was three times more than sponsorship contracts of the European elite (Barcelona, Real and Bayern had contracts for about €30m p/y) and about €20m for rent of property in Petrovsky Park.

Rotenberg is still an onimous figure at Dinamo today | Photo: Sport-Express

At the same time hockey club Dinamo also had financial troubles. To save the side it was proposed to sell 75% to Arkady Rotenberg, a known acquaintance of Vladimir Putin (he was even the former sparring-partner of the President of Russia in judo school). At the same time, his brother Boris Rotenberg was assigned as CEO of FC Dinamo. In 2013, VTB and the Rotenberg’s announced the future merging of the football and hockey clubs.

Boris Rotenberg hired Guram Adzhoev as Sporting Director of the club. Adzhoev was a Soviet football player and manager of the amateur Night Hockey League, where Putin with officials, oligarchs and celebrities played hockey. Adzhoev (now CEO of Arsenal Tula) oversaw the sale of 28 players without any compensation whatsoever. The list of such players includes Fedor Smolov, Andriy Voronin, Kevin Kuranyi, Cristhian Nobo and Artur Yusupov.

Smolov later sarcastically claimed that he was very pleased to have known Adzhoev as he wouldn’t have been able to leave Dinamo as a free agent if CEO the was “a professional”. Adzhoev said that it was necessary to decrease the payroll of the club, but in reality, they still spent more than €90m over two years on just wages alone.

After Anzhi’s spectacular collapse in 2013, Dinamo signed six Anzhi players (Aleksandr Kokorin, Igor Denisov, Yuri Zhirkov, Christopher Samba, Vladimir Gabulov and Aleksei Ionov) for €67m. It was very strange, Dinamo could take them for free – but chose not too. Within a year, Dinamo also signed Mathieu Valbuena, William Vainqueur and Alexander Buttner.

Deciding to spend money on the “free” contingent from Anzhi is very questionable – although nothing untoward has ever been proven. According to Vedomosti the side received a €75m loan from a shell company in Cyprus associated with the Rotenberg’s. Money was paid out to Anzhi’s owner Sulieman Kerimov for players. As a result money was transferred, Rotenberg received Dinamo’s property as security on a loan, but the club lost assets.

Dinamo fans hold up a banner to the owners immediately after suffering relegation: “What have you done, you devils?”.

READ MORE: The Fall of Dinamo Moscow

None of these aforementioned players are at the club any longer. Not only does the whole scandal question the deal itself in terms of finances, but also brings to light the utter inability to run the club as a sporting asset.

All of these issues (over-spending and lack of profit) came to a head in 2014/15. Despite reaching the last 16 of the Europe League, the club’s troubles with FFP were announced. “Surprisingly” Dinamo won only four games from last 14 matches and finished fourth. UEFA banned Dinamo from European football for? failure to comply with FFP regulations. At the end of the season the Rotenberg’s and Adzhoev left.

Dinamo’s management and owners (VTB and sports society) did almost nothing to comply with the regulations. The financial scheme when the owner (VTB) financed current activity of the football club was ineligible from the beginning. UEFA considered that the fair price of the €90m VTB sponsorship contract was nine times less.

According to a UEFA report, from 2012-2014 VTB spent more than €260m but the side’s budget deficit was €307m (with correction of loss for fair value of the VTB contract). Dinamo’s net loss for three years was about €100m when the permitted limit was just €45m.

By the end of the season Dinamo’s owners had jumped ship with the club kicked out of Europe, seriously debt-ridden and had just sold off their infrastructure (stadium and academy) to these former owners.

Dinamo Moscow’s new home still lies unfinished in the city. | Photo: James Nickels/RFN

It got even worse in 2015/16. As aforementioned, for the first time in history the white-blues were relegated from the top-tier of Soviet and Russian football, where it had played since first USSR championship in 1936.

The new management team (though still being owner by VTB and the Sports Society) cut the costs heavily over the course of the year. According to Sports.ru Dinamo’s budget in 2015/2016 was $55m v $160m in 2014/2015. They once again sold or released the players to decrease the payroll. For example former Anzhi players Russian internationals Kokorin (transfer paid €19m) and Zhirkov (€15m) were transferred to Zenit for a combined €2.6m, Samba and Gabulov left the side as free agents, Denisov transferred on loan to Lokomotiv to share about 50% of his salary and then finally transferred as free agent.

New management

In August 2016, Vladimir Strzhalkovsky (a former colleague of Putin in KGB service) was appointed as Chairman of the Dinamo Sports Society and immediately appointed Muraviev as CEO. The club had huge debts (about €140-150m), but was likely saved by the sales of the club’s shares in the VTB Arena project (properties in Petrovsky Park).

On December 29, 2016 the Society accepted VTB’s offer to buy its share of? the club for one (yes, one) rouble under the condition that VTB would continue sponsorship of the Dinamo clubs for three years.

Strzhalkovsky has been operating the club at roughly a 60% cut compared to prior the “takeover” (estimated as €20m) and suggested looking into possible criminal investigations of the previous management.

So, the club have now lost their stadium, academy, the surrounding office buildings and real estate under construction – previously vital assets. The only assets of the side are the old training base in Novogorsk and players’ contracts.

?New stadium

Dinamo played the last match in their own stadium in 2008. The new VTB Arena Park should’ve opened in October 2017, but now the opening is planning by the end of 2018 (and will almost certainly be delayed again).

An early concept of the new VTB Arena.

But now the question is appeared who will play in the new stadium. One year ago, Muraviev said about troubles between FC Dinamo and management company Dinamo:

They [management company] forgot for whom they are building the stadium…If it will be continuing such way, we will play in another ground. The problem is in the financial model.

Of course, by such announcements the club is going to minimize the rent price. But really Dinamo is doomed to play in this stadium and anyway there will be political decision about rent’s price and who will pay it.

Denouement

Dinamo’s current dealings and utter incompetence has a long history, and is unfortunately just part of everyday life for their long-suffering fans. Flitting from private to state-owned, back to private-company and then again to a state-owned company, Dinamo is the pinnacle evidence of the instability blighting Russian football.

The apparatchiks have no idea how to run a club and even less appetite for even wanting to do so. If one of the most historic club’s in Russia is in such a malaise, how is anyone outside of the RPL expected to survive?

Times are dark at Dinamo, and the future is uncertain. First they must find a way to be profitable, develop from the outside in and sustain success in the top flight, then buyback their precious assets and find an owner who can firstly confirm the long-term commitment. Either that (like Loko and CSKA), or just strike a pot of gold and spend (within means) their way to the top (like Zenit and Spartak).

Avatar

Author: Vitaly Leonov

Football fan. Former reporter and chief-editor of the Inform Agency PESKI.RU (www.peski.ru). I like travel and visit stadiums and attend matches in Europe. CSKA Moscow fan.

Comments

  1. I cannot believe that with such a beautiful new stadium, rich history and large fanbase, Dynamo Moscow cannot attract a new professional ownership group that can properly manage the club and lift it to the highest levels of European football.

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