World Cup Bribery Scandal: 6 Things Investors Need to Know

Australia, for its part, has also said it doesn’t intend to bid on another World Cup event unless there are big changes at FIFA.

4. World Cup spending, by host country:

Qatar wins here, by a massive margin.

While Germany spent approximately $6.2 billion to host the World Cup in 2006 and South Africa just $3.5 billion in 2010, it cost Brazil $11.2 billion last year. Russia originally planned to spend $20 billion of its own. When it won the bid in 2010 it put the figure at $9.5 billion, not counting what it spent on facilities for last year’s Winter Olympics—some of which could be reused for the World Cup, but that was before sanctions hit and the price of oil plunged.

Now that its economy is floundering, Sports Minister Vitaly Mutko has said that the country will pare spending back by 10% on organizational issues, subsidies and some ceremonies. Transport infrastructure and stadium construction won’t be cut.

Still, when you consider that Qatar is planning to sink $200 billion into its own hosting—building not just stadiums and infrastructure but whole cities—it underscores the credibility of the bribery accusations, and also makes the money spent on bribes look like pretty small potatoes in comparison. In 2013, Qatar’s entire GDP was $203 billion.

5. Likelihood of change: Russia:

Even if FIFA hadn’t already said it wasn’t changing its mind about either bid, Russia is really not all that likely to lose the World Cup, just from a timing standpoint. If the country wasn’t stripped of the event after the MH-17 tragedy and sanctions over Crimea, it’s not likely to lose it now, absent some pretty horrible revelations.

Time’s pretty short for another country to step in and take over, and Russia just spent a $50 billion on those Winter Olympics facilities. Some of those will be reused for the World Cup, putting Russia considerably farther ahead of the competition than it might otherwise be—particularly considering the effects of sanctions on its budget and its ambitious hosting plans.

Bank of America Merrill Lynch’s Vladimir Osakovskiy pointed out in a report that if it did happen, however, it might not be such a bad thing if Russia lost out on the World Cup.

In research, Osakovskiy said, “Overall, we think if WC 2018 in Russia were canceled it would likely have minimal impact on projected GDP dynamics as a large part of the planned public investment spending would still be made. Moreover, we think that apart from the negative sentiment, it could in fact be positive for Russian [bonds in local currency] and [bonds in hard currency] as despite the likely unchanged overall spending the government could be more flexible in any new investments projects, potentially redirecting them towards more profitable ones. This could be increasingly important, given the considerable tightening of fiscal policy in the next 2–3 years.”

6. Likelihood of change: Qatar:

Because 2022 is still so far out, it’s much more likely Qatar could lose the right to host the World Cup. It already has two major strikes against it, in the form of accusations of human rights abuses of the migrant workers brought in to build its infrastructure, and weather too hot in which to play, or even observe, soccer. And while FIFA has said it won’t, or even can’t, change its mind, Domenico Scala, chief of its audit and compliance committee, has said the awards could be canceled if there’s “evidence that the awards to Qatar and Russia came only because of bought votes.”

Sponsors have already quit because of FIFA. Sony, Emirates, Castrol, Continental and Johnson & Johnson have all bowed out, while Visa is considering an exit. Adidas, Coke, Hyundai and Anheuser Busch have said they are “concerned,” and McDonald’s is “monitoring the situation.” The Nobel Peace Center said this month that it will sever ties with FIFA, likely because of the corruption scandal.

Qatar, meanwhile, is air conditioning nine new stadiums, renovating three others, and plowing ahead. And while loss of the World Cup would cut tourism expectations, where it could really hit hard is in land values and property prices, which have seen a strong run up in anticipation of World Cup activities. Developers and builders have been busy, and could stand to lose substantially should the venue be canceled—and Qatari investors could choose to put their money into property elsewhere in the world, rather than investing at home.

However, last August Credit Suisse predicted that the country could lose short term should the event be relocated, but said Qatar’s growth shouldn’t be cut by it. All the projects currently underway might proceed at a slower pace, but would likely continue nonetheless.