Will plummeting Russian ruble kill the KHL?

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HELSINKI, FINLAND - MAY 09: Ilya Kovalchuk (#71) of Russia looks dejected after the IIHF World Championship group H match between Russia and France at Hartwall Areena on May 9, 2013 in Helsinki, Finland. (Photo by Martin Rose/Bongarts/Getty Images)

Russia v France - 2013 IIHF Ice Hockey World Championship

HELSINKI, FINLAND - MAY 09: Ilya Kovalchuk (#71) of Russia looks dejected after the IIHF World Championship group H match between Russia and France at Hartwall Areena on May 9, 2013 in Helsinki, Finland. (Photo by Martin Rose/Bongarts/Getty Images)

The talk of actual hockey in the KHL has moved into the shadow of other topics. The most pressing: In light of the massive free-fall of the Russian ruble over the last two days, there’s a financial crisis the sheer volume of which the country hasn’t seen since 1998. 

In two months, the Russian ruble lost half of its value to the U.S. dollar and the Euro. This is an ongoing crisis, which means that the exchange rate for the Russian currency has not bottomed out. The ineptness and reactive rather than proactive response from the Russian Central Bank has not has the desired effect on the markets.

Arkady Rottenberg, President of Dynamo Moscow and one of the most influential people in the KHL, mentioned that the League should move away from the U.S. dollar.

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He said the following to Pavel Lysenkov of Sovetsky Sport, during media day for the Russian national team in Novogorsk:

“We live in the Russian Federation, and all transactions are conducted in rubles.”

But surely probably all foreign-born players in Russian KHL clubs are shell-shocked by the recent developments. As it stands, since the beginning of the KHL season, their salary dropped by 50 percent. This is because all contracts with Russian clubs in the KHL are agreed to in Russian rubles.

(It should be noted that non-Russian KHL clubs are not tied to the Russian ruble).

Moreover, KHL contracts do not have any provisions tying the Russian ruble to any other currency, meaning there is no way to index their salary.

The monetary crisis is now affecting player personnel decisions.

Sibir goaltender Mikko Koskinen stated that he will not play another game for the club under the current conditions. It’s interesting that he was traded to SKA right away and is playing for the club nevertheless. Perhaps rubles in St. Petersburg are different from the rest of the country.

Also, from James Mirtle: 

What is this situation leading to? The end result is that the KHL will lose a lot of players, just like Russia lost a lot of players in the 1990s.

It is evident, however, that top KHL players like Ilya Kovalchuk and Alexander Radulov will still be taken care of – creativity is not dead.

Gazprom and Rosneft will pay any money to keep the faces of the League in Russia. But would they even want to play in the League where the level of play may plummet as fast as the ruble did over the last two days?

Also, there are clubs that are primarily financed from local budgets. With the Russian economy slated to contract in the coming year, there may not be any “discretionary” funding left to finance those clubs.

The real social infrastructure is where the money will go, not a social project like a KHL team.

This is a serious threat the KHL is facing today. This is the topic the new KHL President Dmitry Chernyshenko will discuss with the clubs tomorrow. It has been a month since Chesnyshenko was appointed President of the KHL. And thus far he hasn’t said a word. This may be the toughest test for any leader, let alone a newcomer (to the KHL at least).

How will the KHL survive? How will they save hockey when due to the vertical fall of the ruble Russia is being overcome by panic?

The KHL is in its seventh season. Seven is a lucky number. But it is turning out to be a black one for the League.

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