Financial issues, oil policies could bring about the end of the KHL
Is this how the KHL ends? Not from a failed competition with the NHL but as a result of Saudi Arabia's confrontational oil production policies? That's the concern as league officials meet today to discuss an across-the-board salary cut and other dramatic measures in response to crushing economic pressures that are ravaging Russia's economy and the viability of the league.
The KHL is in real trouble here. The league has never had a practical business model, at least not one we'd recognize in North America where such things as cheap tickets and sparse attendance would eventually empty the coffers and put an end to the business.
Things are different in Russia. In that system, teams are propped up by “business arrangements” with local governments or national companies, including global oil giant Gazprom. Without that support, the math doesn't work and players don't get paid.
That's the reality for many of them now as those localities and corporations have larger issues than local hockey clubs to deal with. The Russian economy is in tatters as a result of falling oil prices along with other factors, including U.S.-led economic sanctions enacted as punishment for Russia's military incursion into Ukraine. That's led to the abandonment of some sponsorship deals that has left three teams on the verge of collapse and others scrambling to deal with the new, and constantly shifting, economic picture.
Consider the involvement of Gazprom. That company pumped two billion rubles into the coffers of SKA St. Petersburg and Avangard Omsk just last summer. At the time, the commitment was worth $57 million in U.S. dollars. Today? It's just over $30 million ... if the entire sum ends up being honored.
The lack of funds has led to players and coaches missing paychecks and that's led to wildcat strikes. So far those protests have been short-lived, but the likelihood of them becoming something more damaging to the league grows if salaries are unilaterally cut today.
But while drastic cuts or missed checks may mean the exodus of lower-level foreign players, don't expect high-profile stars like SKA's Ilya Kovalchuk or CSKA Moscow's Alexander Radulov to come crawling back to the NHL ... at least, not yet. Even if their clubs suffer, players like them will be made whole because of their importance to the brand.
You have to wonder, though, what impact salary cuts will have on the quality of play in the league and whether home cooking will offer enough appeal to counter the prospect of facing ECHL-level competition night after night.