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Sanctioned Russians Are Making a Killing From the World Cup

U.S. sanctions are supposed to hobble Putin’s top allies, but the World Cup has handed them multimillion-dollar contracts and tie-ups with some of America’s biggest brands.

Photo Illustration by Elizabeth Brockway/The Daily Beast

The global effort to hold Vladimir Putin accountable for human rights violations, spiraling corruption, and the annexation of sovereign territories has become dominated by a sanctions regime targeting the companies and individuals that helped Russia make a mockery of international law.

By turning Putin’s cronies into pariahs, the U.S. and its allies thought they could amp up the pressure on the Russian president.

But instead of cowering from the glare of the global media, the Russian president and his gangster state lieutenants will spend the next six weeks basking in the reflected glory of one of the greatest shows on earth.

The World Cup—with its international TV audience of billions—is being hosted in Russia for the first time, and bringing with it a multimillion-dollar orgy of sponsorship, tourism, global advertising, and massive construction projects.

Despite their supposed exile from the global economy, companies and oligarchs targeted by the U.S. Treasury were among those securing some of the best contracts linked to the showpiece finals.

Some of the stadiums that will be draped in Western brands, graced by the world’s finest soccer players, and beamed around the world were constructed by sanctioned oligarchs including Gennady Timchenko and Oleg Deripaska, who was featured in the Mueller indictments. Contracts for other infrastructure projects for the World Cup were handed to other members of the U.S. Treasury sanctions club, including alleged Michael Cohen associate Viktor Vekselberg and Putin’s former judo partner Arkady Rotenberg.

While there is no suggestion that soccer governing body FIFA or the global brands that bankroll these sporting mega-events have directly breached the law, sanctioned people have undoubtedly benefited from the tournament.

It’s clear that many of these companies have no moral compass and are willfully ignoring the spirit of these sanctions to make money.
Bill Browder

It was a tougher job to secure sponsorship for this World Cup after the corruption scandals that rocked FIFA, and Chinese brands have stepped in where some Western brands backed out. Other major multinationals have been more than happy to continue their association with this year’s controversial tournament.

Coca-Cola, for example, was so impressed by the stadium in Nizhny Novgorod, which was built by Timchenko’s sanctioned Stroytransgaz company, that it posted a love letter to its construction on Coca-Cola Russia’s official website celebrating the stadium’s elemental “themes of the Volga nature—air and water” with “wave-like tribunes” that are “both beautiful and convenient for viewers.”

Visa went a step further last month, launching a Visa World Cup credit card with the sanctioned Sberbank emblazoned with World Cup wolf mascot Zabivaka that gives users discounts at select sports stores and restaurants.

Bill Browder, who campaigned for the introduction of some of these sanctions against Russia, says the associations between Western companies and sanctioned entities should be considered unacceptable. “It’s clear that many of these companies have no moral compass and are willfully ignoring the spirit of these sanctions to make money,” he told The Daily Beast. “The obvious implication is that the U.S. government needs to aggressively enforce the sanctions so the commercial risk to these companies outweighs any gain.”

On Saturday, Lionel Messi, the best player in the game right now, will embark on a personal mission to secure his place in the pantheon of all time soccer greats by leading Argentina to World Cup glory.

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As the world watches, Messi’s stage will be Spartak Stadium in Moscow, home to the capital’s Spartak FC. It was built thanks to IFD Kapital, a Russian holding company that was sanctioned by the U.S. for taking over a hotel complex in Crimea after Russia’s annexation of the Ukrainian province.

Stroytransgaz, owned by billionaire oligarch and Putin crony Timchenko, built two of the stadiums where the likes of England, Nigeria, and Japan will square off. The U.S. named both Stroytransgaz and Timchenko in 2014 sanctions designed to punish Russia for its annexation of Crimea.

Deripaska, who was sanctioned by the U.S. in April for allegedly acting as an arm of the Russian government, has been probed by special counsel Robert Mueller because of his long-standing links to former Trump campaign chairman Paul Manafort in Ukraine. His Transstroy company was the on-again, off-again holder of the construction tender for the stadium in St. Petersburg that will host one of the World Cup semi-finals. Gazprom, Russia’s most powerful state-owned company and a favored target for U.S. sanctions, also helped build the Krestovsky Stadium.

A number of national soccer teams will also be traveling through Russia via airports owned by Deripaska. Basel Aero, one of Deripaska’s companies, manages airports in Sochi and Gelendzhik where European soccer teams have landed on their way to the games.

Ilia Shumanov, deputy director for Transparency International in Russia, explained that links to these entities were unlikely to breach any rules because the oligarchs are so adept at evading sanctions—or indeed any legal scrutiny.

“There are facilitators, lawyers, intermediaries—so many proxies. Especially at the World Cup, there are a number of proxies between sanctioned persons and the companies who do their business and manage the stadiums,” he said. “So it’s more of an ethical problem than a legal problem, but if you disclose this information publicly and [brands’] banners are hanging on these stadiums, of course it becomes an ethical problem, especially in the U.S.”

We should remind people that at the end of the day these are sanctioned individuals. I’m absolutely surprised that Visa are not more sensitive.
Roman Borisovich, anti-corruption campaigner

Roman Borisovich, an anti-corruption campaigner with Clamp-K, an anti-corruption lobbying group, said it was appalling that Western companies would continue to promote sanctioned Russian entities. “We should remind people that at the end of the day these are sanctioned individuals. I’m absolutely surprised that Visa are not more sensitive,” he said. “It should be a social taboo to enter in terms of sponsorship or any other transactions with them.”

The Daily Beast asked six of the World Cup sponsors, including Coca-Cola and Visa, about the tournament’s links to sanctioned entities, but none of them chose to reply.

Embarrassing though these associations may be, the cup’s corporate sponsors are unlikely to be in any legal danger over their promotional work with sanctioned entities.

“Can you play in a stadium owned by or built by a specially designated national? Yes. Can you fly in and out of an airport built by a specially designated national or owned by one? Yes. Because you’re not engaging in a direct financial transaction with them,” Doug Jacobson, a lawyer at Jacobson, Burton, Kelly PLLC who specializes in sanctions and trade law, told The Daily Beast.

Visa’s partnership with the sanctioned Sberbank certainly raises eyebrows, but the executive order the Obama administration used to sanction Sberbank along with the directive providing guidance on implementation are relatively lax. “The Executive Order 13662, Directive 1 prohibitions are limited to dealings in new debt or new equity of varying tenors (dependent upon when the debt/equity was issued),” Erich Ferrari, a sanctions lawyer and partner at Ferrari & Associates, said in an email. “As such, it doesn’t seem readily apparent to me that the cobranding of the payment card would offend those prohibitions.”

Vladimir Ashurkov, the executive director of Alexei Navalny’s anti-corruption fund, said the sanctions levied against the likes of Sberbank in the aftermath of the annexation of Crimea had always been too weak to have a meaningful impact.

“They wanted to hurt Putin a little bit without risking that much retaliation,” said the former Alfa Bank executive, who was granted political asylum in Britain. “Until there are formal restrictions that would prevent Visa from working with Russian banks, I don’t see them doing what some people may consider moral… what can I say? The world is full of hypocrisy.”

Not all sanctioned entities are so fortunate. The much more comprehensive sanctions against Iran meant Nike refused to provide footwear for the Iranian national team at the World Cup for fear it could run afoul of the recently re-imposed sanctions on the Islamic Republic.

It seems a tougher sanctions regime could have forced global brands and bodies like FIFA to think twice about effectively endorsing the Kremlin and its backers. We now know, if it’s purely a question of moral judgment, it’s a challenge too far.