To Russia With Love

In 1995, with the country on the verge of bankruptcy, a coterie of oligarchs went to president Boris Yeltsin with an offer: We'll bail out the government, but only if the state collateralizes our loans with further shares in national industries. Yeltsin had little choice. When the loans came due and the state could not pay, the oligarchs added to their portfolios for mere kopeks on the ruble. A year later, with the country deeper in crisis and the Communists poised to beat Yeltsin at the polls, the oligarchs rushed in to prop up their patron with cash and with favorable coverage in the media they owned. Yeltsin won another term, and the fortunes of the oligarchs and the Kremlin became even more intertwined.

Enter Vladimir Putin, who succeeded Yeltsin in May 2000. A former Leningrad city judo champion, Putin brought to the presidency an athlete's comfort with confrontation. He read the mood of the public, which had come to regard the oligarchs as kleptocrats. As Putin told The New York Times , "The state appointed them as billionaires. It simply gave out a huge amount of property, practically for free. Then .?.?. they got the impression that .?.?. everything is permitted to them." Using tactics worthy of the black belt that he is, Putin played them for his own purposes.

The flow of oligarchs' cash into Russian sports can be traced to a July day in 2000 when Putin summoned the nation's most prominent billionaires to the Kremlin. They could keep their riches and operate freely, he told them, so long as they paid their taxes, didn't meddle in politics and tithed to the interests of the state when asked. The fates of two oligarchs, media mogul Boris Berezovsky and oilman Mikhail Khodorkovsky, would soon prove instructive. In 2001, after his TV station infuriated Putin with its criticism of his response to the Kursk submarine disaster of 2000, Berezovsky fled to England in fear of being arrested. Since then he has been the target of several thwarted assassination attempts. Khodorkovsky, for his part, supported opposition parties and tried to circumvent Putin's foreign policy to cut oil deals with U.S. companies and the Chinese government; in 2003 a government SWAT team seized him at gunpoint while his private jet refueled on a Siberian runway, and soon he was watching his oil holdings disappear while he served out a nine-year prison sentence for tax-code violations and fraud. It's not hard to read between the lines of the slogans of Putin's political party, United Russia—they include " Putin's Plan for Russia: Victory!" and "United Russia is an athletic Russia!"—and conclude that keeping the First Fan happy is a small price to pay for the freedom to continue to accumulate and enjoy one's wealth.

" Putin did an amazing job of frightening the oligarchs into doing what he wanted," says Jim Riordan, a professor emeritus at Britain's University of Surrey who has written widely on Russian sports before and after the breakup of the Soviet empire. "If they demur, they know they will lose not only their gas, oil and metals assets. They may end up shot, poisoned, pickaxed, debris in a helicopter crash or working in a Siberian labor camp."

Paying tribute to the state might mean buying back cultural artifacts that had wound up in private hands, such as Malcolm Forbes's nine Faberg� eggs (repatriated by the oil, gas and metals magnate Viktor Vekselberg) or Kazimir Malevich's painting Black Square (which now hangs in the Hermitage thanks to conglomerateur Vladimir Potanin). But more and more it means underwriting sports. Usmanov, the oligarch who holds the stake in Arsenal and serves as head of the Russian Fencing Federation, also helps bankroll the Russian Olympians Foundation, as do Vekselberg, Abramovich, Deripaska and Potanin. The latter three are also underwriting much of the infrastructure for the 2014 Winter Games.

NO ONE has more artfully pulled off the delicate dance between prosperity and politics in the New Russia than Abramovich. Orphaned by age three—he lost his mother to a botched abortion and his father in an industrial accident—Abramovich wound up with relatives in Moscow and, after secondary school and military service, seemed ticketed for a dull Soviet-era life. Then, in the late '80s, he took advantage of new economic freedoms under Mikhail Gorbachev, sinking a 2,000-ruble wedding gift from his in-laws into cosmetics, dolls and plastic ducks that he sold at various markets around Moscow. As the Soviet state crumbled, he turned to banking, then oil trading. With Berezovsky's sponsorship, he gained entr�e to Yeltsin's inner circle. During the loans-for-shares episode, he and Berezovsky jointly acquired a controlling interest in the Siberian oil giant Sibneft for less than $200 million. Not six years later, their stake in the firm was worth 75 times that.

Unlike Berezovsky, Abramovich recognized the importance of flattering the Kremlin even more slavishly after Putin rose to power. In 1999 he helped bankroll Putin's political party, and the next year, at the president's request, took over as governor of Chukotka, the desperately bleak far eastern province from which it might be said that one can see Sarah Palin's house. Abramovich wound up pouring some $1.3 billion of his own fortune into building or upgrading hospitals, schools, shops, roads, bridges, recreational facilities and supermarkets, pulling back from the brink a region where many people still subsisted on whale blubber. His service put him in such good graces with the Kremlin that, in 2005, Gazprom, the energy giant, had no reservations about paying $13 billion for 72% of his stake in Sibneft.

The story goes that Abramovich spent about $233 million to buy debt-ridden and downtrodden Chelsea in 2003 after spotting the club's stadium during a helicopter flight over London. Moscow mayor Yuri Luzhkov decried him for "spitting" on his homeland by not sinking that fortune into Russian soccer, criticism that resonated among a population whose annual per capita income is less than $8,000. But in short order Abramovich would set things right. Following Russia's humiliating 7--1 World Cup qualifying loss to Portugal in 2004, Putin ordered the Russian Soccer Union to collect oligarchs' cash to help restore the honor of the motherland. Abramovich took a place at the front of the line, bankrolling a soccer-development binge that in three years has propelled the national team from 34th in the FIFA world rankings in November 2005 to eighth last month. He has sunk hundreds of millions into the National Academy of Football, a foundation committed to establishing 9,000 soccer schools and building 75 artificial-turf fields around the country; a new national team training center; the salary of national team coach Guus Hiddink, a Dutchman; a new national stadium in Moscow; and at least part of the funding for another 10 stadiums around Russia. This is more than a matter of paying protection money, insists Abramovich spokesman John Mann: "The pundits and outsiders say, 'Oh, Putin told them they must give back.' But that doesn't account for the fact that they love their country as much as anybody, and for specific sports they're willing to help out."

In the meantime Abramovich has poured more than $1 billion into Chelsea, hoping to build a global brand to rival Manchester United's. "The idea is to play catch-up, to increase the value of the club," says Mann. With fresh buzz and cachet, Chelsea generates more annual revenue than ever in tickets, rights fees and merchandise. But Abramovich has spent so much on player signings that the club is running up huge operating losses, and it's hard to see a path to the black. Imagine Warren Buffett or T. Boone Pickens buying the Pittsburgh Pirates and stocking the roster with A-Rods and Teixeiras. Abramovich, who grants virtually no interviews, has made one public comment that begins to explain himself, and it could serve as the Oligarchs' Credo: "The goal is to win. It's not about making money. I have many much less risky ways of making money. I don't want to throw my money away, but it's really about having fun, and that means success and trophies."

An additional benefit goes unsaid. Abramovich may be a Russian Jew who speaks halting English, and Chelsea may be the team historically supported by Britain's anti-Semitic, xenophobic right—but the standing ovations he receives at games, as well as the Russian song Kalinka sung by fans in CHELSKI caps and shirts in the stands, suggest that he'd have a refuge if he were ever to fall out of the Kremlin's favor.