Firstly, to allay the fears of both my long-suffering readers, this blog isn’t about Energy. It is, however, about Russia and why Europeans just don’t seem to be able to ‘get’ it when dealing with her on the international stage. In this particular case, a scan of news articles this morning led me to a story that Russian businesses were attempting to renege on a contract signed with American firms that Vladimir Putin himself pushed to be ratified. The contract in question: the RIHF-NHL transfer agreement for the Russian ice hockey phenom Evgeni Malkin.
The background to this is pretty simple. Malkin was drafted second overall in the 2004 entry draft by the NHL team the Pittsburgh Penguins, even though he was playing under contract in Russia at the time. This sort of deal is fine: under the International Ice Hockey Federation (IIHF) rules, foreign clubs are compensated for players that are drafted into the National Hockey League (NHL), which is essentially where everybody wants to play. For a long time the Russian Ice Hockey Federation (RIHF) had resisted collectively signing up to this agreement as the clubs preferred to negotiate their own terms for transfers. However, the IIHF had warned that continuing this behaviour would result in Russia risking its NHL players not being available for International Competitions. Putin himself is a huge hockey fan and has a clearly stated desire to see Russia win the World Championship when it’s played on home ice in Moscow next year. So Putin intervened with the Federation, supporting the takeover of the chairmanship by Vladislav Tretiak, former USSR superstar goaltender and member of the Russian Duma. Tretiak wrested power back from the club owners and signed a treaty, which was ratified earlier this year.
However the saga hasn’t ended there as the Malkin development reported this morning proves. The club owners have backed away from the agreement and are demanding a higher transfer fee for Malkin then the paltry $900,000 agreed under the trade agreement for a number two draft pick. They are demanding that Pittsburgh must ‘buy his contract from us’ and pay closer to market value for the player. So where does that leave us and more importantly, why am I banging on about it? Well, the negotiations that will take place are between the IIHF and the RIHF and on precedent the Penguins will probably enter a costly court battle to reach a settlement on Malkin’s value. But if the international threat is heavy enough, will Putin intervene again to ‘crush the oligarchs’ (in this case the errant club owners)? I would say so. The RIHF receives significant government funding and Tretiak is chairman of the State Duma Committee on physical culture, sport and youth. This isn’t going to be a Yukos-style takeover but could see the state intervening to create the situation that is best for Russian hockey.
And in many ways, that’s the mindset we need to get into if we ever want to understand the Russians. The state will act in the manner that is best for the state industry concerned. It’s natural, it’s what every country tries to do. In this case the actions of the clubs are probably valid - $900,000 is a ridiculously paltry fee for a player of Malkin’s quality – the club itself is calling is a ‘handout’. So why did Russia ratify the trading agreement? Well, unlike the Energy Charter Treaty that they still haven’t ratified, hockey exists in Russia beyond the companies concerned, i.e. with the national team. In energy, Gazprom is the national team and you can bet your bottom dollar that Vladimir will act in what he perceives the best interests of them as well. You can’t imagine if it was in Russia’s interests to build up their domestic league that they would have given a second glance to the trading agreement and be damned what the rest of the world wants. But in hockey the NHL is what counts and if other countries want to get a piece of the American-Canadian pie, their best shot is in international competition. With this in mind those club owners that insist on resisting the transfer and endanger the national squad’s chance of home-ice glory in 2007, will probably find their lives becoming a little more uncomfortable.
Pittsburgh shouldn’t panic; one way or the other they can be pretty sure that Evgeni Malkin will be skating in the steel city next season, because if he doesn’t then the consequences for Russia might be uncomfortable and you can be sure that the state will not allow that to happen. Equally though, anybody that thinks Russia will ratify the Energy Charter Treaty any time soon is living in cloud-cuckoo land. The latest advert for Gazprom in Russia shows a little boy sitting in a frozen urban wasteland and dreaming of being an ice-hockey player. Then in a flash he is standing on the rink, fully kitted out and ready for the puck to drop. In a blink he’s back in his wasteland but the message has been received. In Russia, gas makes dreams come true. The international community should heed this when they try and gain leverage over Putin, particularly in terms of energy (okay, so I lied a little bit about what the blog was about). I once read a piece that claimed that ‘if cricket was the sport of gentlemen and horse racing was the sport of kings then ice hockey was the sport of toothless Scandinavian serial killers’. It’s this sport that both the little boy and our Vlad are fans of. As long as Putin remains in charge, the Russian bear wears skates and a helmet and is mean on the Power Play.