Buying Formula One may prove a costly mistake for Qatar

25 June 2015

Gulf state is unlikely to be able to handle the increased scrutiny a deal will bring

  • Qatar is in talks to buy a controlling stake in Formula One
  • It has teamed up with RSE Ventures to try and buy a 35.5 per cent stake from CVC Capital Partners
  • The aquisition of Formula One is likely to bring with it problems that could damage the country’s reputation

On 23 June, UK newspapers broke the news that Qatar was pursuing a controlling interest in the world’s most popular motorsport race series, Formula One (F1).

Backed by Qatar, US sports company RSE Ventures wants to buy the 35.5 per cent stake in F1 that is owned by UK holding company CVC Capital Partners, in a deal worth $7bn-$8bn.

The pursuit of F1 has sent a clear signal that the Gulf nation is sticking with its strategy to play a greater role in global sport.

Pursuing sport

For more than a decade, Qatar has used sports as a way of raising its international profile and increasing its stature as a regional political player.

In 2004, the country hosted the world table tennis championships. This was followed two years later by the 2006 Asian Games, the second-largest multi-sport event after the Olympics, and also taking place every four years.

More recently, Qatar has focused on football.

In December 2010, it won the rights to host the 2022 World Cup Finals. It followed this in 2011 by signing a deal to become the shirt sponsor of Spanish football team FC Barcelona and then bought the struggling French team Paris Saint-Germain in 2012 – giving it access to the funding needed to help become a world-class sporting brand.

In December 2014, the UK’s Goodwood racecourse announced it had signed a historic 10-year sponsorship deal with Qatar, which would see more than $3.14m invested, making it the biggest single deal in British horseracing.

Qatar has also invested heavily in its handball team and hosted the World Men’s Handball Championship in February 2015.

Problematic strategy

Many of these ventures, especially in the 2000s, were successful in increasing Qatar’s global exposure, raising its profile and cultivating an image of a generous nation that is willing to play a beneficial role in the international community.

However, more recently, many of Doha’s ventures into the world of sport have backfired, damaging its reputation.

In March 2015, Qatar attempted to break the world record for the number of participants in a half marathon that was dubbed the “Mega Marathon”, but was criticised in the global press for bussing in workers from labour camps to make up the numbers.

“The worst part…  was a large mass of labourers wearing jeans, flip-flops and no proper running equipment,” one participant told the local daily Doha News.

“Some labourers tried to leave, but were turned back and were yelled at that they need to stay and cross the line”.

Organisers said the event had encouraged workers to take part, but insisted it was voluntary and that proper running kit had been offered to them.

Handball criticism

Qatar has also come under criticism for its tactics in the 2015 Handball World Cup, which took place in February and saw the national team reach the finals, where it lost to France.

A large number of players in the Qatar team had been naturalised in the years leading up to the event and ultimately only four of the 17 players in the squad were native to Qatar.

Speaking after losing to the Qatari team, Austria’s goalkeeper Thomas Bauer said: “It [felt] like playing against a world selection team…. I think it is not the sense of a world championship.”

Doha also came under fire in the international press in late 2014, after it was accused of hiring migrant workers as fake sport fans to cheer at a volleyball tournament to make the large, poorly attended arenas appear full.

Speaking to reporters after the Doha Open international beach volleyball tournament, which was held in November 2014, French player Edouard Rowlandson called the scene “bizarre… but we prefer that to playing in front of nobody”.

Fifa failure

The most high-profile event to cause problems for Qatar has been the Fifa World Cup.

Since being announced as the 2022 host, Doha has floundered under the increased scrutiny that the competition has brought.

A torrent of negative news stories looking at human rights, labour laws, terror financing and allegations of corruption have dealt a significant blow to the country’s reputation.

Amid the allegations and the investigations, Qatar has promised a range of reforms, but has failed to implement them, leading to more criticism and forcing many analysts to conclude that the country’s leadership made a serious mistake by agreeing to host the competition.

Acquiring F1 may well prove to be another high-profile mistake.

Although it would give Doha increased control of one of the world’s biggest sporting brands, it is also likely to ratchet up scrutiny of the country at a time when it is struggling to implement reforms.

On top of the extra scrutiny, taking a stake in F1 would also associate Qatar with a brand that has had problems with accusations of corruption in the past.

Corruption scandal

Like many figures at Fifa, senior figures in F1 have been connected to corruption in the past, along with other activities that Qatar may want to distance itself from, such as the 2008 sex scandal that stemmed from the activities of Max Mosely, who was president of F1’s governing body at the time.

In 2014, Bernie Ecclestone, CEO of F1, paid a German court £60m ($94m) in order to get bribery charges dropped.

Ecclestone had been accused of paying a £27m bribe to banker Gerhard Gribkowsky in 2005 in order to persuade him to sell his bank’s stake in F1 to CVC Equity.

The £60m payment was the largest ever sum to be paid to settle a court case in Germany and prompted an outcry from the country’s former justice minister, Sabine Leutheusser-Schnarrenberger, who was worried the defendant had been allowed to use his wealth to stop a criminal prosecution.

Following the end of the court case, Leutheusser-Schnarrenberger told a German radio station that the deal was “out of step” with the process of law.

“Justice must not be traded off in this manner,” she added.

Reputational challenges

Although hosting sporting events saw significant success in raising the profile of the Gulf state in the late 2000s, as Qatar has become more ambitious and taken on an increasingly active role in global sport, the strategy has become less successful.

Doha’s struggle to deal with the extra pressures that have come with the 2022 World Cup indicate it is probably not in a position to deal with the additional reputational challenges that would come with the acquisition of F1.

If Qatar’s efforts to buy a stake in F1 get beyond their early stages, it may increase concern that the country is extending its reach into the sporting world beyond its capabilities.

Stay informed with the latest in the Middle East
Download the MEED app today, available on Apple and Android devices

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications