When Mike James, for a few minutes longer the chairman of the Ospreys, sat down at lunchtime on Tuesday to talk to his Welsh Rugby Union counterpart, Gareth Davies, his mind could have drifted back 20 years, to when the two were allies against the governing body in one of the many bitter battles waged in the country in the professional era.

James was then bankrolling Swansea while Davies was the chief executive of Cardiff, two clubs who that season rebelled against the WRU by arranging friendly matches against England’s leading clubs rather than take part in competitions organised by their governing body. “We want to build a sustainable, vibrant business but the unions have different agendas,” said Davies then.

Ospreys chairman Mike James resigns amid turmoil over Scarlets merger plan Read more

James this week had a number of choice words for his erstwhile comrade, saying the Ospreys would call for a “forensic legal and financial review” of the way the WRU had carried out its Project Reset, an all-embracing plan covering the game in Wales designed to streamline it and cut waste. His region is unhappy that it had been singled out for a merger, in effect a takeover, by the Scarlets while the region owned by the WRU, the Dragons, survived.

The Ospreys have had a couple of lean years but remain the most successful since Wales ditched clubs for regions in 2003. In contrast, the Dragons have, by some way, the least impressive record. Among the questions the Ospreys want answered is why they were told to slash their budget by £900,000 at the start of the season while, they contend, the Dragons were allowed to exceed theirs.

James resigned as the Ospreys chairman a few minutes after the Professional Rugby Board, made up of regional and WRU representatives, met to consider the proposal for the Ospreys to merge with the Scarlets, allowing for a new fourth region to be created in north Wales, an area the WRU has invested in heavily in recent years.

Here it gets murky. The WRU’s contention is that the Scarlets and the Ospreys drew up a heads of terms for a merger last Friday and that it was the initiative of the two regions. The Ospreys maintain that all they agreed to was that nothing would be off the table under Project Reset, unlike their three rivals, who all drew blue lines. They say they scrutinised the merger plan, realised it amounted to a takeover, and rejected it.

The Ospreys know all about mergers. While the Scarlets are Llanelli of old, the Blues are Cardiff and the Dragons – who were originally set up in partnership with Ebbw Vale, an arrangement that lasted as long as it takes Leigh Halfpenny to kick for goal – are Newport, the Ospreys were a successful fusion of Neath and Swansea, absorbing Bridgend when the Celtic Warriors were shut down in 2004.

Quick guide Welsh rugby's regional crisis Show Hide What is happening in Welsh rugby? Leaked plans for an overhaul of the pro game dubbed “Project Reset” have indicated the Ospreys and the Scarlets will merge. The plan would keep four regions, with a new region in north Wales. The regions would be ranked: a super region in west Wales from the merger, the Blues, and in effect two development regions at the Dragons and in north Wales. What are the aims of Project Reset? It’s an unofficial name given to the discussions of the Professional Rugby Board, which runs the professional game, to reboot the game in Wales from top to bottom for the 2020-21 season. The PRB has regional representatives but the overall project has been led by the Welsh Rugby Union. It covers not just structure, but pay and contracts. Why is everyone so upset about it? It merges two established regions. The players are not involved in the PRB and many in the Wales team play for the Ospreys and are out of contract in the summer. They are also not happy with the pay banding. The Ospreys believe the Scarlets are in effect taking them over. What still has to be resolved? Lots. There are no indications over where a merged team would play, in what kit, or the futures of the players and coaches. The PRB could not even vote for the plan to go ahead because the Ospreys chairman, Mike James, resigned before the meeting, meaning not everyone was represented. What is the north Wales setup now? The WRU have invested in a stadium in Colwyn Bay and, since 2008, a development team have been based there. RGC 1404, coached by the former Wales wing Mark Jones, are fourth in the Premiership.

Welsh rugby forged its reputation on tribal rivalries and Swansea and Neath, virtually next door to each other, fought many a fierce battle. The Ospreys seemed unlikely to work but it did and the region was, for years, Wales’s flag-carrier in Europe. If one of the four had to be sacrificed for a new region in north Wales, an area that over the years has proved resistant to rugby union’s blandishments, it should not have been the region that had toiled to make the system work.

Except the other three had club history and Ospreys were tenants at the Liberty Stadium, making it the least disruptive option. With the WRU wanting to fund two regions more than the others, it meant one of the Scarlets, Blues and Ospreys would have been downgraded in status. It was never going to happen to the first two, with their cachet of Llanelli and Cardiff.

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A question is why the rush. CVC, the private equity company that has taken a stake in the English Premiership, is in advanced talks with the Pro14 about investing in the league, which would bring a windfall to the regions. And the WRU would benefit by about £10m a year if World Rugby’s proposed new international format takes off.

Wales is contractually obliged to field four teams in the Pro14 until 2022, after which it could can the team in north Wales if it turns out to be a fiscal drag. And why unsettle the players during the Six Nations and in a World Cup year, with those out of contract at the end of the season in limbo because the regions do not know their budgets?

The WRU is reorganising salary banding. At the top are current internationals, although they exclude Wales’s starting fly-half this season, Gareth Anscombe. He has been classified as the uncapped player he was when he arrived from New Zealand, capping his salary at £300,000 all in, £150,000 less than he has been offered by Bath and Harlequins.

Cardiff and Swansea caved in after one season but Ospreys have vowed to fight for their future, in court if necessary. The latest bout of infighting could be the bloodiest.