Arabian Knights are the last game in town.

I tuned into the Apple documentary on the Superleague expecting a lot of whining, to quote Teddy R.

I instead thought it was very good. Especially in realising that, whilst this proposed solution didn’t work, the problem isn’t going away. Au contraire, Blackadder.

I love that phrase…  be careful what you wish for.

The crux of all of this stands out like a Pirlo in a conference league midfield.

European football is structurally loss making. And the status quo doesn’t work at all.

Recap on the story to date.

European football loses huge amounts of capital. By not controlling the cost lines of player talent.

It is arguably losing younger generations.

In main countries, like France and Germany, the competition is a foregone conclusion.

Small countries and their teams are consigned to callous and pitiless irrelevance, despite such tradition in teams like Red Star, Anderlecht, Ajax, Celtic, Benfica.

Every club not English can’t compete with EPL broadcast revenues.

Agnelli being interviewed by the FT on the show reads out of the headlines from all the media, screaming of the losses that European football endures.

And you ask me about a lunch with Fiorentino?

I need to give credit where it’s due. At the start of the 4-part series, it transmitted the usual lazy mantra of Greed is Good and how the “football” good guys won. But to be fair, especially in episode 3, it gave a very balanced critique of UEFA and Ceferin.

Let’s tell the truth, if we want to solve this problem: UEFA has for 25 years dropped its pants at every turn to appease the big clubs. It has been Neville Chamberlain leadership. In my eyes, they have NO moral high ground. They are a restriction-of-trade organisation that condemns clubs to operate in their home market, no matter how small. It has no separation of powers between the legislative, executive, commercial and judiciary. It is deeply flawed as a concept.

No one’s fault. Few more than me understand pragmatism and realpolitik. But,

UEFA is now looking unfit for purpose.

The bottom line is simply this: without strict controls on player wages, this European industry of soccer isn’t feasible for any investor who has an idea of making a return on capital.  And UEFA, a political monopoly, has backed down in front of the big petrodollar clubs on that crucial issue of FFP. Indeed they’ve now made them key allies.

Each football fan can view this story from whatever perspective they like. Here is the one I’ve espoused for four years. I argue, with some consistency and coherence.

You have every right to despise the rules and language of business and product when talking about football, but just make sure you don’t need their capital to cover your losses. Because if you do, they will seek a return.

The chess board has however now moved on. This article is about that shift.

The smart American investors, those who deploy capital for return, have likely now drawn a line under this asset class.

Never invest in an industry where your competitor has unlimited funds,
doesn’t need to make a return, and pretty much controls the regulator.

Read that again. Let it sink in. This is how great investors of capital think.

So the petrodollar has in the last two years seen off Big Finance from football; the oligarchs are gone, and the table stakes are way too high for anyone else.

The future may not be a Superleague, but perhaps The Petrodollar League, the new nomenclature for the English Premier League. They could own all the clubs. And chase away every other investor.

Here is where the story gets very layered and complex. 

Saudi has big objectives. As explained here.

 

This 2030 strategy of Saudi, with at its centre the TMT oasis of NEOM, will be a massive driver for the future of entertainment, media, sport, sporttech and finance. It’s a long-term play, that is NOT focussed on five-year ROI like private equity.

But it is more than that. Much much more.

Many many people, not least those most vociferous in the media, against Agnelli and co, have a very strong moral issue with Arabia.

Not democratic.
Authoritarian.
Death penalty.
Dreadful human rights.
Women and gays second class at best.

That’s their beef. Fair enough and I get that. I challenge any real football fan when they saw Messi, with a rain cheater jacket on, when lifting the Cup, not feeling queasy.

I tend to think these critics are actually genuine. They are good people, who have concerns. If slightly naive and inconsistent. (The Tariq Mbappe interview for example was like a white baptism consummated in a mud bath. If you are going all calvinistic zealous, make sure that when you get the chance to meet the cardinal, you ask the question about wee altar boys and coverups! Not if he hopes to be Pope.)

Anyway, each to their own coherence. P.S. I thought Tariq was very good over the four episodes.

The Sistine Chapel of big pictures.

The naive bit instead comes from a misunderstanding of the very very big picture with Saudi. The Sistine Chapel of big pictures.

It is this.

We, the West, the United States of America, have a 50-year deal with the Kingdom of Saudi that is the most  diabolic of pacts. Mephisto, Lucifer, Faust, Satan. Whatever is your devil label of choice. It has dominated the geopolitical landscape of our world for all of our adult lives.

Termsheet
For the guarantee of the supply of energy to us, we shall protect you, and tolerate your regime, even when you are involved in flying planes into our buildings.
That’s the deal….but with one major non-negotiable extra condition.

All your oil must be traded globally in $.
To the layman, this is a detail. Even a non sequitur. Who cares right?

But to those who know what having the reserve currency really means, it’s the golden clause. The apple in the Garden of Eden.

The outrageous privilege.

It’s called “outrageous privilege”. The term was coined in the 1960s by Valéry Giscard d’Estaing, then the French Minister of Finance.

In the simplest terms, it’s this. If you have the global reserve currency, and all trade is in $, it means two things:

1. Countries all need to hold dollars in their wallet, in treasury bond bills. Creating demand for the American coin. Allowing the US to run huge deficits financed by those foreigners.
2. The USA pays for its imports in dollars, and if push came to shove, could print more Benjamins to avoid any balance of payments crisis.So, when Henry Kissinger did the deal with the Saudis half a century ago, around the same time they came off the gold standard, the hegemony of the USA was secured, and Saudi was untouchable, a “made man”.

The biggest geopolitical issue of our time.

Perhaps the biggest geopolitical issue of our time now is this one.

Saudi seems to be distancing itself from that deal with the USA, and getting very close to their rival in the Thucydides Trap, China. The Biden administration rhetoric seems to be encouraging this, for some bizarre reason. As did Obama‘s nuclear deal with Iran.

The Chinese are now offering the Saudis a bargain that appears to be exactly modelled on the U.S-Saudi deal that has stabilized the Middle East for 50 years. Arms, tech and protection, in exchange for oil, denominated in yuan.

If this happens, everything we’ve known for 50 years is up for grabs. If the dollar’s reserve status is threatened, a whole load of very big dominoes start to fall. Have a read here.

 

Saudi really really matters.

Throw in the Sunni Shia differences, as the volatility cherry that peers over Straights of Hormuz, and “Powderkeg” doesn’t cover it.

In this context here, anyone having micro moral complaints about the behaviour of Saudi is conflicted.  It’s the tip of the iceberg, and anyway, the West came to terms with this nose-holding compromise a long time ago.

• Remember:
  We sell a lot of arms to them, creating a lot of jobs.
  Our Corporates sell a lot of product and services to them, again creating jobs.
  They are massive investors in our capital markets and PE funds. Capital which arrives everywhere, including sport.

We, our Governments, are all complicit in any guilt we want to throw at Saudi. Death of a Princess, Khashoggi, Twin Towers and Bin Laden.

And they know it. They know we need the energy under their desert. And we certainly can’t let it go to China. It has always always been thus. He, who controls energy and water, wins.

This was explained very well in the film
Three Days of the Condor.

 

The Robert Redford character would say this:

Certain things, like democracy, freedom of speech, human rights, women’s freedom, etc., are too important to be brushed off so easily. It took centuries and a lot of blood to conquer them. Sports’ true values are also an expression of a lot of the good things that humanity has managed to overcome since the Greek Olympics.
So, letting sport be rescued by countries where women can not even show their hair freely, forget getting an education, no thanks!

It is complex.

A thought leader from 2000 years (who I follow a lot) said it best: “He who is without sin can throw the first stone.”

So, for sport, we all need to work out how comfortable we are with all that realpolitik, given the biblical outpouring of angst we saw for the Qatar World Cup.

So far, it seems that sport is “cool” with it all. People are being condemned to death, but we have all kinds of official sports events, Italian and Spanish Supercups, F1, boxing and Asian games there. Bidding for World Cups and Olympics anon. Saudi or Qatar buying United or Liverpool?

This is the problem with whining. Not offering any ideas to solve things. They don’t go away and usually fester. And they box you into unintended consequences.

Summing up…

European fans don’t want a closed league, and thus pay a heavy price for relegation. Risk equals higher cost of capital.

UEFA can’t however impose a serious salary cap.

European football has horrendous political governance.
Ergo, it makes massive losses. It needs capital.

For 25 years capital has however come from oligarchs, petrodollars, and American big finance.

But now:

Oligarchs gone.
American big finance can’t see a return.
No Superleague.
No FFP.
Psg Qatar own UEFA and Ceferin is their vassal.

Only one game in town, and there will be for sure more petrodollar ownership in sport.

Fans will not care, as all they want is money spent on the best players.

Who will however care, tomorrow, if not today?

The poor EPL clubs not chosen as beneficiaries of Arab largesse.

European clubs with big brands.

The morality warriors. The idealists. The pure.

Whichever of China or America that doesn’t have the oil deal.

No, this problem isn’t going away.

Because the status quo is not an option.

Life is in the main the choice of least bad options, and we should always be careful what we wish for when making that choice.

I would have gone for the Superleague. Because I don’t think sport is ready for the dominance of Arabia that is now the only alternative.

I am… are you?