As Chelsea’s players celebrated victory in the 2021 Champions League final, Roman Abramovich made one of his rare public appearances.
The club’s owner had been unable to attend home matches at Stamford Bridge for three years, after the UK government indicated it was unlikely to renew his visa.
But that year’s Champions League final was held at the Estádio do Dragão in Portugal, a country that had granted Abramovich citizenship just months earlier. Grinning in the warm Iberian night air, he hugged his players and drank in the fans’ gratitude.
The oligarch hadn’t just transformed Chelsea.
His free-spending strategy was among the factors that forced the footballing authorities to overhaul the regulation of the game, via financial fair play rules.
More recently, it has reignited debate over who is “fit and proper” to run a football club, particularly since 2022, when sanctions were imposed on Abramovich over “clear connections” to the Kremlin, jeopardising Chelsea’s very existence.
Back in 2003, the year that Abramovich bought the club, the rules governing football investment were virtually nonexistent and few observers queried the mystery man ready to save Chelsea from punishing debts.
Even then, it was well known that his fortune derived from Sibneft, an oil and gas giant created from the privatisation of state assets, amid the tumult of Russia’s journey out of communism.
But as the years passed, Chelsea’s financial accounts offered scant insight into the origin of the ballooning interest-free loans that Abramovich pumped into the club.
Now, the Oligarch files – a cache of leaked documents from Cyprus-based offshore financial services provider MeritServus, which was hit with sanctions last week after revelations in the Guardian about how it moved money for Abramovich – laid bare how the Russian billionaire turned Chelsea into world-beaters.
They reveal a labyrinthine network of offshore companies used to route money from enclaves of Abramovich’s empire into Stamford Bridge.
They also demonstrate how this money derived from two transformative Russian business deals struck under the watchful eye of the Kremlin.
Huge spending brings success
At the time of Abramovich’s £140m takeover of Chelsea, in July 2003, the Labour MP and Chelsea fan Tony Banks was a rare sceptic.
“We need to look at the source of his money, what his track record has been in Russia, to establish whether he is a fit and proper person to take over a football club in this country,” the Labour MP told newspapers. “At the moment I don’t like it.”
In the end, the Office of Fair Trading waved through Abramovich’s takeover, in line with a broader climate in which the British establishment embraced new Russian money.
Businesses and politicians were enthusiastic in hailing Vladimir Putin as Yeltsin’s successor as president of Russia, seeing the opportunity to charm this young and dynamic leader of a sleeping economic giant.
“The red money carpet had been rolled out and people were welcome to bring their money to the UK,” Tom Keatinge, the director of the Centre for Financial Crime and Security Studies, said.
“I doubt anyone was in the mood to ask questions about where this money was coming from.”
Accounts for Chelsea’s parent company, Fordstam Ltd, show an initial interest-free loan of £224m after the takeover but there was no obligation to document the origin of the funds.
Companies House filings stated only that the auditor KPMG believed “sufficient funds will be provided to finance the business for the foreseeable future”.
The Oligarch files offer new insight. Leaked documents show that the initial loan to Fordstam, Chelsea’s new parent company, came from Kelvedon Worldwide Ltd, a company incorporated in the British Virgin Islands (BVI) and owned by Abramovich.
Kelvedon’s cash was transformational.
In the first two years of Abramovich’s ownership, £382m was routed via this BVI company into Chelsea, funding deals for players including the mercurial winger Arjen Robben and the free-scoring striker Didier Drogba.
Chelsea’s £230m transfer spend in those first two seasons outstripped the combined outlay of European giants Manchester United, Real Madrid and Juventus.
The investment paid off quickly.
Fifty years after Chelsea’s only English title, the club won two in succession, in 2005 and 2006. Three more titles followed, as well as two Champions League trophies, in a prolonged period of success that few English clubs have matched.
But MeritServus files do not only show how the oligarch’s cash flowed into Chelsea during that golden era, they shed new light on the source.
The year 2003 was pivotal not just for Chelsea, but for Abramovich, Putin and Russia. In the spring, Abramovich had agreed a merger between his oil and gas business Sibneft and its rival Yukos, which would have created a new global oil giant.
The prospective $36bn mega-merger triggered excitement in financial circles, symbolising Russia’s emergence as a democratic economy of global significance.
But by the end of the year, the Yukos-Sibneft deal stood for something else entirely – Putin’s iron grip on power and brutal suppression of his opponents.
In October 2003, the oligarch Mikhail Khodorkovsky – the billionaire who had built Yukos – was arrested on an airport runway in Siberia and charged with fraud and tax evasion.
Khodorkovsky would spend 10 years in prison, targeted – according to international humanitarian observers – for increasingly vocal opposition to Putin’s illiberal reign.
Soon after, Abramovich called off the Sibneft-Yukos merger. Yukos was instead seized by the Kremlin and broken up for auction.
“Khodorkovsky’s arrest was a warning sign to the other oligarchs that Putin meant business,” said John Lough, an associate fellow of the Russia and Eurasia programme at Chatham House, who worked at the Anglo-Russian oil venture TNK-BP.
“They could enjoy a level of wealth, they could run these businesses responsibly but their loyalty wasn’t to shareholders or employees, it was to the Kremlin.”
As one oligarch fell, another rose.
Abramovich, Lough said, had always been regarded as showing the requisite fealty.
He had become governor of the Siberian region of Chukotka in 2001, using his own wealth to bankroll investment in the underresourced region.
Indeed, when Abramovich bought Chelsea, the deed of incorporation filed at Companies House gave his address as a nondescript apartment block in Anadyr, a frozen, windswept town that is Chukotka’s administrative capital. “Someone as shrewd as Abramovich would have understood the new rules of the game,” Lough said.
“He would have known that you have to stay on the right side of these people.”
The new climate for oligarchs under Putin was precarious.
The result, Lough believes, is that Abramovich could not have bought Chelsea if the Kremlin had disapproved. Abramovich has always denied seeking Putin’s approval for the purchase and his lawyers said any such allegation was false.
Abramovich emerged from the chaotic collapse of the Yukos deal a much richer man.
The merger had been structured mostly as an exchange of shares but it also included a cash component, with Yukos paying $3bn for 20% of Sibneft.
Yukos shareholders would fight for years to retrieve that payment, but to no avail.
According to legal documents submitted during later arbitration between the shareholders and the Russian state, a first instalment of $1.25bn was paid in May 2003. As the majority owner of Sibneft shares, the money inflated Abramovich’s fortune just as he prepared for the costly business of buying and funding Chelsea.
The entity that received that first billion-dollar instalment, according to leaked files, was the Cyprus-based Kravin Investments.
One email, sent in May 2005 from Kravin’s auditor Deloitte to an employee of several Abramovich companies, suggests Kravin may have gone on to play a role in the Chelsea takeover.
In the email, the Deloitte employee questioned why there was “no mention of the Chelsea deal Kravin was involved with”, speculating that this might be “disclosed at a later stage”.
Kravin was ultimately owned by the Cyprus-based Sara Trust, of which Abramovich was the beneficiary, an ownership structure chart shows.
There is no evidence as to what role, if any, Kravin may have played in the takeover and it is not possible to show a direct relationship between the Yukos instalment and the funds used to buy Chelsea.
But Kravin’s immediate parent company was Kelvedon Worldwide, which went on to pump more than £1bn of interest-free loans into Chelsea.
Files detailing Kravin’s accounts refer to “money actually paid” by Kravin to Kelvedon, describing an amount of $1.288bn. Lawyers for Abramovich declined to comment on the relationship between these companies. Chelsea said these matters were for the club’s former owners to address.
The abortive Yukos deal swelled Abramovich’s fortune.
But the landmark deal came in 2005, when the Russian state oil and gas company, Gazprom, bought his remaining 73% stake in Sibneft for $13bn.
Information reviewed by the Guardian suggests Abramovich used the proceeds to bankroll Chelsea to new heights, via an international network of offshore companies.
One key document, from 2012, is a “declaration of beneficial ownership”, drawn up by document certification company based on the Caribbean islands of Curaçao and Aruba.
It provides more detail about Kelvedon, which had been renamed Lindeza Worldwide Ltd in 2011. Lindeza’s source of funds, it said, was the “sale of OAO Siberian Oil Company (Sibneft)”.
That lucrative deal owed much to Abramovich’s talent for thriving under successive Russian leaders.
It was Boris Yeltsin who presided over the post-Soviet carve-up of Russia’s natural resource assets. Abramovich and his allies lobbied Yeltsin and his inner circle furiously during the privatisation process, gaining control of Sibneft via a series of auctions.
Less than a decade later, when he sold the company back to the state, the deal took place in Putin’s new Russia, where oligarchs such as the Chelsea owner could prosper as long as they showed loyalty.
Now Abramovich had practically limitless resources at his disposal.
The loans from Kelvedon began to increase rapidly, reaching £578m by 2007 and more than £1bn by 2014.
As the cash poured in, English footballing authorities, UK regulators and politicians showed little interest in where it had come from.
A report by the parliamentary culture, media and sport select committee in 2011 pondered chiefly whether such lavish spending might distort the transfer market.
The Premier League introduced an “owners and directors” test for prospective owners only after the Chelsea takeover, in 2004.
In the absence of any significant scrutiny of its funding, Chelsea threw its proprietor’s cash around freely.
The club broke the English transfer record in July 2006 with a £31m deal for Andriy Shevchenko, then again in 2011, tempting Fernando Torres from Liverpool.
Chelsea became the first London club to win the Champions League, in the 2011/12 season. During the 2017/18 season, Chelsea spent more than a €250m on players.
“Abramovich turned football from a millionaire’s plaything into a billionaire’s plaything,” Kieran Maguire, a football finance expert and the author of The Price of Football, said.
“The acceleration in wages, transfers and management compensation set new benchmarks against which other clubs had to commit themselves.”
As the spending racked up, KPMG wrote repeatedly to A Corp Trustee Ltd, a Cyprus-based company that managed trusts that administered Abramovich’s wealth.
On at least six occasions, documents show, KPMG sought assurances that funds would be available to keep the loss-making club afloat.
Each time, a trustee promised that funds would keep coming, first from Lindeza and, after 2015, from a fellow BVI company, Camberley International Investments.
One such letter, sent in September 2014, informed KPMG that Lindeza had “increased the [loan] facility to £1,150,000,000”. The lending would top £1.4bn by the end of Abramovich’s reign. KPMG declined to comment.
Meanwhile, UEFA, the European footballing authority, had become increasingly concerned about benefactor-backed clubs’ unsustainable spending, described by the then Arsenal manager Arsène Wenger as “financial doping”.
The outcome of a Uefa review was financial fair play (FFP), a system of regulations introduced in 2011 that, in theory, would rein in spending.
“Without Abramovich and [Manchester City owner] Sheikh Mansour we wouldn’t have financial fair play,” Maguire said. “They changed the industry.”
A source close to Chelsea said it had acted professionally and in good faith at all times and that “where appropriate, transactions and interactions between Chelsea and any club involved external professional advisers to ensure full compliance with all laws, rules and regulations”.
By the time FFP arrived, Chelsea’s “Roman empire” was already self-sustaining.
When UK sanctions forced him to sell the club in 2022, Abramovich wrote off his loans .
His lawyers said: “The sale of Chelsea FC was conducted under licence from the UK government and our client stated that the full proceeds of the sale will be donated to a charitable foundation when he announced the sale of the club, prior to the imposition of sanctions.”
Abramovich had built a giant in his image, a globe-straddling colossus that drew on ruthless opportunism to leapfrog rivals, funded by a fortune amassed amid the chaos of post-Soviet Russia.
Yet until Putin’s war on Ukraine made Abramovich into persona non grata, the football authorities and governments around the world asked no questions.
By then, football had changed for ever.
Additional reporting Harry Davies