Feb 14, 2014

This week, Iran’s minister of sports and youth, Mahmoud Goudarzi, appointed Amir Reza Khadem, former wrestling world champion and member of the Tehran City Council as the ministry’s special representative in the process of privatization of Tehran’s most prestigious soccer clubs, Persepolis and Esteghlal. This appointment was welcomed by leading stakeholders as a positive step in resolving a lasting issue in the country’s soccer scene.

Incidentally, the plan to privatize these two popular soccer clubs has been stalled since 2005. In fact, these two entities were put on the privatization list in accordance with the provisions of the fourth five-year development plan. Mohammad Khatami's government then took the first step and authorized the Iran Privatization Organization (IPO) to prepare the two clubs for privatization. However, after the change of government in 2005, the plan was put on hold indefinitely and without any clear explanation.

Since 2009, various attempts to present the clubs for privatization faced administrative and legal challenges, mainly due to the fact that they were both major loss-making entities. In fact, none of these clubs could survive without massive financial support from the government. Transparent and audited accounts and financial reports are a prerequisite for the initial price offering of any entity that is introduced into the Tehran Stock Exchange, hence making it impossible for the IPO to technically start the process of privatization. However, the fact that these two clubs were not profitable had more to do with other inner-government financial practices, especially the nonpayment of broadcasting rights to sports clubs by the Iranian Broadcasting Company.

The change of government in 2013 raised hopes that a new approach could be adopted to this matter, both in terms of sports clubs being paid a fair share of broadcasting proceeds as well as stadium revenues, but also with regard to privatization plans. However, during his inauguration as minister of sports and youth, Goudarzi stated on Nov. 24, “I don’t believe that the problems of Persepolis and Esteghlal would be solved through privatization. We need to prepare the grounds in cultural and social terms. Our goal is to strengthen these two teams, but with a hasty privatization we may actually lose these clubs.”

While this statement irritated many stakeholders, the government produced another surprise by announcing in its documentation for the annual budget bill that both clubs are considered “profit-making.” This announcement has been in sharp contrast to the fact that both were close to being excluded from the Iranian soccer league due to enormously high debts. In the case of Persepolis, the club’s debts to its players compelled the players to go on strike last week. As an angry reaction to the players’ strike, Persepolis head coach, Ali Daei (himself a soccer legend and a successful businessman) criticized the ministry for failing to provide the allocated funds to the club, and also stated that he could ask “his friends” to come and buy the club and rid it from its financial troubles. This comment confirmed the suspicion that the government was impeding the privatization process.