Why now for a Russia–NHL Agreement

By Eugene Belashchenko

Note: The opinions expressed below are solely of the author and are not those of the site as a whole.

It has been four years since the last agreement between the Russia and the NHL expired during the summer of 2004.  During those four years. both Russian hockey and the NHL have both undergone fundamental changes. The NHL suffered under a season-long lockout but has emerged a stronger league from that ordeal.  Russia’s premier hockey league, the Super League, has enjoyed a meteoric rise to prominence in the past several seasons due to increased funding that largely stems from the ever-increasing oil prices that translated into immense wealth within that country.  Unfortunately, despite the seemingly positive changes on both sides of the ocean, the two sides are still unable to reach an equitable deal that would satisfy both the management of both the Russian and the NHL clubs.  They did fortunately meet in Switzerland this month to discuss the differences and agreed to put a working group together to achieve an agreement by Oct. 3. However, it is at this point unclear whether an actual deal will be completed, as there have been false starts in the past when the two sides came close, but were never able to iron out a final deal. 

The aftermath of the current status quo has been a number of unsuccessful lawsuits launched by the Russian side to attempt to retrieve some compensation back for departing players, as well as a number of cases where Russian players bolted for home after failing to find quick success in the NHL, leaving their signed contracts in tatters.  So what will it take for the two sides to go beyond the recently achieved “gentleman’s agreement” between Russia’s new KHL league head Alexander Medvedev and NHL Commissioner Gary Bettman regarding not poaching players from either league who have existing contracts and actually achieving an official agreement by Oct. 3? 

Are the Russians right?

First, let’s examine why the Russians have legitimate arguments against the transfer agreement proposed by the NHL.  The agreement proposed a couple of years back upped the offer to a seemingly unheralded $1,000,0000 US for the first overall pick player with a gradual descent in transfer fees throughout the first round, ending up at $200,000 for every player drafted thereafter.  To a naked eye this seemed like a reasonable offer, especially when considering the limited entry-level contacts usually offered to young prospects.  However, the first problem with the deal was that despite the million seeming high and likely agreeable to most European leagues, it was still well below the threshold of Russian clubs for the services of players such as Alexander Ovechkin and Evgeni Malkin, who were drafted first and second overall in 2004 and for whom the first-round transfer scheme seemed to have been largely created for.  Prior to their departure from Russia, both players had existing contracts worth well more than the one million and would right now likely command salaries many times larger.

This problem is further exasperated in the latter rounds where the NHL offers just a couple of hundred thousand dollars in transfer fees.   First, the Russian league average salaries are now much higher than the $200,000. This is again the average for all Super League players, not just the cream of the crop NHL prospects.  Furthermore, when considering how low the Russians have been drafted in the past few years, but how important many of them have become to their Russian teams, such an amount would be quite insignificant, as the club’s salary for the player is likely many times more and it’s not agreeable for a club to lose a cornerstone player of the likes of say Viktor Alexandrov, Sergei Mozyakin, or Nikolai Kulemin

But is the argument valid?

If a player has an existing contract in Russia, the league’s managers are in the right to demand higher compensation for the annulment of those deals.  However, there has been so much dirt and irregularities thrown in by the various Russian league officials to murk up the waters that it is impossible now to look at Russian hockey as an innocent victim being poached by the NHL.  

To begin with, in the cases of Ovechkin, Malkin, now Nikolai Filatov, and numerous other players, the Russian team officials resorted to some less than proper methods in some cases first attempting to keep the players, and in other cases claiming the players still had active contracts when in actuality they did not. 

In the case of Malkin, the player claimed the team strongly pressured him to sign a deal for an additional season with the club when he really just wanted to cross the ocean to North America.  There was no stopping Ovechkin from coming over, but HC Dynamo claimed that he was under contract with the club and thus the club deserved compensation. In fact, it was found during the hearings that Ovechkin was not under contract so there was no issue to even discuss.  Now the case of Filatov is surfacing, where, according to the player’s agent, the club gave the player his walking papers and signed his release, but the league in turn claims that due to the KHL’s new regulations, the talented young player is still under contract with his Russian club. So, while the club’s officials closest to the player have already said their goodbyes, the league continued to cry foul.  

Beyond the Russian officials’ accusations that the NHL is unlawfully pillaging their young talent, those same officials have often been guilty of a very similar practice, luring that same Russian talent back across the ocean and ignoring the NHL contracts those players have already signed. The latest and likely biggest yet example of this has been the signing of Nashville Predators young star Alexander Radulov by Russia’s HC Salavat Yulayev.  This young player has enjoyed two strong NHL seasons and is entering the final year of his rookie deal with Nashville.  Reportedly he has been offered more than $12 million to play for three years with Salavat Yulayev and will not honor the last year of his deal. 

Other recent cases of such practices have been those of Dallas Stars defensive prospect Vadim Khomitsky, Ottawa Senators center Alexei Kaigorodov and at one point Phoenix Coyotes speedy winger Enver Lisin. While Lisin has learned his lesson and returned to spend almost an entire season in the AHL before getting his chance to truly contribute in the NHL, the others have unfortunately relied on the Russian “crutch” instead of trying to give their NHL aspirations everything they have.  Vadim Khomitsky is an especially sad case, as the young blue liner has the tools to become a capable NHL-caliber defenseman, but due to family pressure and the ease with which he could return home, he has thus far failed to live to his full potential.  This practice of poaching has not only further soured the relationship between the NHL and Russia, but has also done a disservice to the players themselves, who were unable to fully commit to adjusting to North American hockey and culture. 

Additionally, at this point the only punishment the NHL could levy against these players was to merely suspend them in the NHL and prevent them from playing for the Russian national team in IIHF competition.  While it is likely that the talented young Russians regretted not joining their friends in the gold medal winning campaign at the 2008 World Championships, it is unlikely that they would have traded their millions of tax-free Russian Super League dollars for that honor. 

The new and improved Russian league

Considering the North American firm belief in laws and regulations, these cases of poaching and lawsuits make it very difficult for NHL officials to deal with their Russian counterparts, since there did not appear to be a firm foundation on which to build an agreement.   However, fortunately, with the Russian oil dollars and increased funding also came the wish to create a more competent league that is based on a strong business model and abides by a uniform set of rules. 

Things have not quite been this way in the past, as there have been many incidents of players within the Russian league being poached by other Russian clubs with very little repercussions coming from the arbitration courts that have been fairly ineffective to stop this practice.  With the formation of the new KHL, Russian Sports Minister and former NHL defenseman Vyacheslav Fetisov along with former Soviet goaltending legend and now Russian Hockey Federation Vladislav Tretyak have attempted to put Russian hockey on a path of becoming self sustainable and guided by rules.  The new league in many ways has been modeled after the NHL with the introduction of concepts such as an entry draft, restricted free agency and trades. The latter is especially interesting, since in the past there have been player transfers but they have been few and quite haphazard without any particular definitions of law guiding them. 

Beyond the rules, the creators of the new league have also attempted to implement a new business model that while still lags far behind any Western concept of a self-sustaining business, does make some interesting headways in that direction. This includes creating ticket sale requirements, revenue benchmarks, as well as market capability studies. As a result, new markets within the former Soviet Union have been added to the league, while some of the Russian teams from the old Super League risk losing their spots in the new league, unable to compete in the new market. 

Coming together is for the better

With all these changes and increased funding, the Russian clubs have begun to attract new levels of talented from the NHL, effectively turning a small drip of North American players moving to Russia into a steady stream.  While this is still a relatively new phenomenon, it has made the dynamic between the NHL and Russia two-sided instead of it being previously one sided with only the NHL recruiting young talent out of Russia.  Some of the better known cases of top tier NHL talent moving over to Russia have been those of Jaromir Jagr, Ray Emery and Alexei Yashin. However the list of mid-level talent preferring tax-free Russian salaries is much longer. 

Beyond earning newfound respect for attracting NHL-caliber talent, the Russian league also inadvertently added pressure on itself for finding a way to co-exist with the NHL.  While before Russian club managers could easily take advantage of the lack of an agreement and poach the young Russians out of the NHL farm league system without any repercussions, they now risked to being poached themselves by the NHL if a certain player performs very well in Russia or becomes homesick.  Such was the case of Randy Robitaille last season, who decided to return home midway through the regular season, disregarding the fact that he had a fully legal contract signed with HC Lokomotiv.  Thus, he returned to North America and joined the New York Islanders, leaving his Russian club desperately looking for a gritty center to fill the void.  

The Russians likely made some proper conclusions from this and a few other cases,  and determined that a transfer agreement that respected existing league contracts would be in the favor of both the NHL and the Russian KHL.  The issue stopped being that of receiving proper compensation, for a certain player, but instead became that of respect of contracts by both sides. Interestingly, to adjust to this change in strategy, the Russians implemented some interesting rules in the new league’s code of regulations. The most important one to the NHL officials is that which disallows a particular player from leaving for the NHL until the age of 21.  While it is unclear as to how this rule will be implemented or what its exact language means, it is likely a continuation of the previous Super League requirement that young players sign four year deals with their respective Russian clubs at the age of 17 or 18. The justification for this rule, while a bit restricting, does have merit, as the clubs claimed that they invested a lot of money and time in raising these players from a young age and without such a contract they would be unfairly poached by wealthier Russian clubs….which interestingly sounds very similar to the argument used by the Russian league as a whole against the NHL. 

Why both sides need the Agreement

Does this mean that the young players will be tied at the hip to their hockey clubs until they reach 21? Absolutely not! What it does is provide the Russian clubs an ability to gain full value for the young talented players through a player trade or a cash sale of the player’s rights to another Russian or NHL club.  Similar rules are currently in place in the European football leagues, as well as in the NHL with the concept of entry level contracts and restricted free agency.  However, the big difference for the NHL is that without an agreement between the two sides, the NHL clubs are forced to deal directly with the Russian club without any official regulations guiding the negotiations.  If the Russian club does not want to trade the player, they simply ask for a very high amount, such as the $1.5 million reportedly demanded by the KHL for Nikita Filatov.  This brings us back to square one, highlighting the NHL frustrations and the Russian interests in regards to dealing with young players.  However, beyond a frustration, this finally highlights the importance of of the growing relationship between Russian and North American hockey.  While the KHL clubs would be content keeping all the young players, they also now wish to be assured that their prized North American veterans would not be lured back to the NHL by clubs either looking to make a change midway through the season or gearing up for a long playoff run. 

While it is difficult to outline the details of the needed agreement, the foundation will lie upon first the absolute respect of both NHL and KHL contracts and also upon an agreeable transfer fee NHL and probably Russian clubs would be required to pay to their counterpart if they wished to sign a player with an existing contract from either league.   With both sides now having something to lose, the situation is ripe for an agreement to be reached that while would not necessarily satisfy everyone, would provide a foundation from which the two leagues could continue to grow and co-exist.