Gazprom’s Sponsorship of Schalke
German team FC Schalke 04 are currently in first place in the Bundesliga. If they win the championship, it will be their first league triumph since 1958. A Bundesliga title would be quite an achievement for a club that had an estimated 100 million euro debt only a few years ago.
This turnaround has been made possible in no small part by a massive sponsorship deal with Russian energy giant Gazprom. This lucrative sponsorship (25 million euro per year, which beats out Bayern Munich’s 20 million euro deal with Deutsche Telekom) has helped Schalke immensely, but may ultimately prove even more beneficial to Gazprom.
It’s a BIG deal
The importance of the deal can be seen by looking at those behind the agreement. It was signed in 2006, “not by coincidence” at a time when German chancellor Angela Merkel and Russian president Vladimir Putin were meeting. And former chancellor Gerhard Schroeder likely also played a role, as he is an advisor to Gazprom, a position he began soon after leaving government.
All sponsorship deals are intended to bring benefits to the corporations that sign them. But the Gazprom deal is different for two reasons: 1) the company is a joint venture of private Russian industry and the Kremlin and thus reflects political as well as economic interests, and 2) the results Gazprom hopes the deal will achieve are far more clear than in most sponsorship agreements. As Rob Hughes wrote in the International Herald Tribune last year, the deal “represents a direct line connecting soccer, commerce and political power.”
Created from the privatization of the former Soviet natural gas industry, Gazprom has never completely lost its connection to the Kremlin. Today, it is a public company, but one in which the Russian government continues to maintain a majority stake. It only began allowing foreign ownership of its stock in 2005.
As a company controlled by the Kremlin, Gazprom has often reflected official government policies. The most obvious manifestation of this has been the recent occasions in which Gazprom has cut flows of gas to neighbors with which it has disputes. Ukraine, Belarus, and Georgia have all felt the wrath of Gazprom.
Ukranians protest Russian gas cuts in 2005
As gas was cut off to these former Soviet states, supply to Western Europe was also affected. Pipelines which normally carry gas through Eastern Europe ran dry, meaning access to gas at the Western European outlets decreased and prices increased. Not surprisingly, some anger arose among those in Western Europe, who began to wonder if Gazprom (and thus Russia) could be counted on to reliably supply energy. A German resident of Gelsenkirchen, where Schalke is based, told the BBC in March, “The Russian government, by the leverage which they have over several energy firms, has found it easy to put pressure on Ukraine, on Lithuania and Latvia. Why should they one day not put pressure on Germany?”
It is this mistrust that Gazprom’s sponsorship of Schalke is intended to counter. And what better way than to sponsor a popular team in Germany, a country which gets nearly a third of its gas from Russia? After all, how can you hate the team whose money just helped your team buy a new striker?
Gazprom officials have been clear that improving the company’s image is a large part of the Schalke deal. Claus Bergschneider, head of marketing for Gazprom’s German operations, has said, “In marketing, you have a natural sequence of ‘Know It, Love It, Buy It’.”
Knowing Gazprom and perhaps loving it will come as Germans see the company’s logo on Schalke’s shirts. At least, that’s what the company is hoping. By improving its image with the German people, Gazprom wants to lower the chances of the German government seeking out other energy suppliers.
Recent changes in EU laws also now make it possible for Gazprom to sell directly to German consumers. The Russian company hopes that its name being seen by millions of soccer fans will lead them to arrive at the last step of the “natural sequence” and buy gas from Gazprom.
Two weekends remain in the German Bundesliga. If Schalke can win their remaining matches, they will become champions for the first time in nearly half a century. It is nearly certain that the team from Gelsenkirchen will be playing in the Champions League next year. Schalke’s fans will be ecstatic to see their team’s royal blue jerseys playing in stadiums across Europe. And carried on these jerseys will the logo of Gazprom, a company with as much to gain from Schalke’s success as the team itself.
Yes! I’m improving European opinions of a Russian oil monopoly!
May 9th, 2007 07:05
A very interesting subject you have chosen to write about. There certainly are more factors here than in most sponsorships. But to be honest, I don’t find it particularly more shady than, say AIG/Man Utd. Of course these sponsors will have their own ideas about what might benefit them, and of course many of these have nothing but profit (and in some extent monopoly= in mind. When you talk about such large corporations, political consequences are unavoidable.
May 9th, 2007 07:15
HeiaVincent - I don’t necessarily think Gazprom sponsorship deal is shady. What interests me most about it is how Gazprom is in fact a proxy for the Russian government, and thus the deal is essentially an act of diplomacy. Also, one difference about this deal is that its goals are so clear. Most sponsorships are designed, of course, to improve business, but they rarely have such clear objectives.
May 9th, 2007 10:35
i agree with you david. this deal is interesting because of its political associations. however i was just wondering how can gazprom improve its image to germans overall when its just sponsoring one team. surely, other germans of rival teams esp, would have more reason to dislike gazprom for all its links with kremlin and now, funding its rivals!
May 11th, 2007 09:59
It will be interesting to see if Gazprom decide to go a step further and actually take part ownership of Schalke. When the sponsorpship deal went through last year the Russians said they had no intention of owning Schalke but that might change. They obviously have the means to do it, and Bayern Munich are part owned by Adidas.
May 11th, 2007 17:58
Kevin - In some of the articles I read, when the sponsorship deal was signed, some thought there might be more to it than met the eye and that Gazprom had in fact acquired a stake in Schalke. It wouldn’t surprise me if they did so - Gazprom already have a controlling stake in Zenit St Petersburg.
May 14th, 2007 13:05
Considering the power the Schalke fanbase has, I’d be surprised if Gazprom try to acquire the club - at least it won’t happen without a fight and much noise, something Gazprom would not want.