Gazprom’s Steady Ascent in Europe and Soccer

With a reported income well above $100 Billion in 2012, Gazprom, Russia’s privatized but partially state-owned natural gas company, is the largest natural gas company in the world.  It was in 2006 that the company came under state government control and also when a Russian Federal law gave Gazprom complete exclusivity and monopoly over the export of natural gas.

It is not a coincidence that this time period coincides with the start of what would become a significant and coordinated marketing and services push across Europe.

A year before the export exclusivity law in 2006, Gazprom bought a controlling stake Zenit St Petersburg and became both owner and shirt sponsor for the club leading to over $100 investment in both players and a new stadium which has led to three Russian Premier League Titles, a UEFA Cup championship as well as a UEFA Super Cup since the take over.

Following Zenit St Petersburg, Gazprom’s next push would be westward into Germany.  In 2007 Gazprom signed a significant sponsorship agreement with Schalke 04, the second largest sports club and one of the most popular soccer clubs in Germany.  Though specific details of the whole sponsorship agreement were not released, it certainly established Gazprom as the primary shirt sponsor for the German club as well as significant and dedicated signage around the Veltins Arena, Schalke’s home field.

It would be a couple of years before Gazprom’s next move within soccer. 2010 represented the third time the Russian energy giant signed a major sponsorship agreement involving shirt and signage sponsorship.  In an agreement that  also involved  youth team sponsorship, Gazprom began their partnership with Serbian record holders Red Star Belgrade.  The deal involved a 5-year contract that reportedly included domestic and European performance incentives with the contract reportedly worth $3.8 million a year.

Gary Cahill - Photo Courtesy of Chelseafc.com

Gary Cahill – Photo Courtesy of Chelseafc.com

2012 would be the next major soccer swoop by Gazprom as the energy company picked up a triple threat in recent Champions League winners Chelsea FC based in London as well as deals with UEFA involving their Champions League and UEFA Super Cup competitions.

These agreements represented a shift from Gazprom’s previous deals in Russia, Germany and Serbia.  With Chelsea and UEFA, Gazprom became corporate partners rather than sponsors.  The new agreements do involve signage at Stamford Bridge, during Champions League, and UEFA Super Cup matches like previous sponsorship agreements but the global energy partnership agreement with Chelsea brought a unique exclusive energy supplier agreement.

Gazprom began domestically in Russia followed by significant individual European forays in Serbia and Germany. They would continue with a flourish onto the pan-European stage through agreements with a Champions League winner as well as UEFA, giving the company a taste of a global marketing profile.  With an appetite for more, Gazprom’s latest and certainly most impressive deal was just announced within the past couple weeks by an agreement with FIFA taking the energy supplier’s global visibility to a whole new level.

Obvious publicity aside, each agreement represents a significant strategic step for the company from a growth stand point and coincides with major business movements in the corresponding geographic region.  As noted before, the Zenit St Petersburg deal preceded the eventual monopolization of Russian gas exports by Gazprom creating a significant amount of goodwill domestically as well as raising visibility for a company with plans for incredible expansion.

The next move would be into Germany with Schalke 04.  In 2012, according to Gazprom, Germany was the largest consumer by far, of Gazprom natural gas.  The significance of Germany to Gazprom is not coincidence, in 2006 Gazprom and German companies E.ON and BASF agreed on a $6 billion contract to build a gas pipeline that would serve to connect Germany and Russia through the Baltic Sea, underneath it to be specific.   The agreement was celebrated publicly by both Gazprom an the German government and certainly played a part in building Germany into the largest consumer of Gazprom natural gas.  With this context it seems only natural that in 2007, the following year, Gazprom would build a partnership with Schalke, one of the most widely supported clubs in Germany in a bid to win over public approval.

The trend continues from Germany into Serbia. In 2008 Gazprom made moves controversially into Serbia’s state oil company NIS through the purchase of 51% stake at what was perceived to be a dramatically knock-down price.  The stake was purchased with plans in mind to develop a new pipeline called the South Stream that would open up the Southern European market.  Combine the controversy surrounding the NIS purchase and the expected long term involvement in Serbia surrounding the proposed construction of the pipeline and the 2010 partnership with Red Star Belgrade becomes a fairly straight forward move.

England proves to be no different than Germany or Serbia.  Though certainly aided by the fact that Chelsea FC is owned by Russian oil magnate Roman Abramovich, the partnership with Chelsea also coincides with a general energy services push across England by Gazprom’s marketing and trading arm GM&T.  The push has resulted in a significant market share with over 14,000 clients that include restaurant chains, pharmaceutical companies, and banks solidifying itself among major competitors in the business gas market.

Taking the three country examples into account with the fact that Gazprom maintains roughly one third of the aggregate gas import to Western Europe and the UEFA agreements along with the recent FIFA announcement and each one becomes a logical move in a pattern established and started seven years ago.  With US shale based oil production and EU legal proceedings threatening the stability on Russia’s hold on Western Europe, Gazprom’s deal with FIFA and UEFA appears that much more significant with regards to their global image.  Beyond that they have moved to solidify their German image further by bringing German Legend Franz Beckenbauer on board with a personal endorsement deal to become an ambassador for the company’s “Football For Friendship” social project initiative.

Marketing and sponsorship agreements fundamentally serve to raise the profile of companies and can certainly contribute to an increase in business activity while enhancing a public image.  The impact of this is made significantly more effective when coordinated with a corporate expansion plan exemplified by Gazprom’s business dealings around Europe specifically in Germany, Serbia and England.  Whatever the controversies surrounding Gazprom and what they mean for the future energy landscape of Europe, Gazprom’s synergistic implementation and coordination of marketing and corporate strategy should at the very least be recognized.

Reporting on the business side of the world's game.