Why does Abu Dhabi want to own a Premiership football club? Manchester City are officially owned by Sheikh Manosur, the brother of the Crown Prince, but in effect they are an an asset of the state, this is evident when one looks at the ties between the club and state-owned assets such as Etihad Airways as well as the closeness of Mansour to the de facto leader.
Why does Abu Dhabi want to own a Premiership football club? Manchester City are officially owned by Sheikh Manosur, the brother of the Crown Prince, but in effect they are an an asset of the state, this is evident when one looks at the ties between the club and state-owned assets such as Etihad Airways as well as the closeness of Mansour to the de facto leader.
If you are oil rich country you need to invest to safeguard your country when the oil runs out. You also need to create local employment to avoid the upheavals seen in the Arab Spring where youth unemployment was a big factor.
Abu Dhabi has the largest sovereign wealth fund in the world. It’s $1 trillion of assets eclipse those owned by equivalent funds in China and Russia. Spending about £800m on Manchester City represents less than a quarter of 1 per cent of global investment and a tiny fraction of oil exports in a single year.
Most of Abu Dhabi’s investments are restrained 10 per cent investments in global corporations of the kind that offer prospects for long-term growth and make a return even in a recession. But they also have assets which are all about profile like Manchester City and the 90 per cent share in the iconic Chrysler Building in New York. In a similar way, Qatar has purchased Paris Saunt-Germain and Harrods.
Tourism is an important source of diversification, in particular one that creates employment. Dubai has made the greatest progress there, but the ownership of assets like City helps visbility and recognition.
However, ultimately this is all about geopolitics and security. These may be very wealthy naftions, with 9 per cent of the world’s oil reserves, but the Emirates are vulnerable to an unpredictable regional power like Iran. They all remember what hapened when Iraq invaded Kuwait. Iraq may be out of the picture, but the risks of a military conflict between Iran and Israel and/or the US are real. Such a conflict would have adverse effects on these states.
Purchasing and investment in high profile assets like City is a form of political insurance policy. It reminds those in the west that these states exist and hopefully from their point of view it wins them friends.
One constant threat to City’s efforts to displace Manchester United and win the title comes from Uefa’s financial fair play regulations which have the paradoxical effect of preserving the status quo by making it difficult to challenge existing top clubs.
Even if the sponsorship deal with Etihad is accepted as valid, City are likely to be in breach of the rules when the first assessment is made in 2013. However, I have always thought that they were vulnerable to a legal challenge. Interestingly, Sir Alex Ferguson made the same point last week, although he was referring to ‘ways round’ the rules.