What the KHL's Economic Collapse Means for the NHL

The Russian economy is faltering, and one of the victims is the Kontinental Hockey League, which once aspired to compete with the NHL in terms of talent and in recent years has lured away a handful of high-profile stars, like Ilya Kovalchuk.

The league’s problems are symptomatic of larger financial issues. Thanks to a combination of factors, including a sharp decline in the price of oil and foreign sanctions over Russia’s actions in Ukraine, the Russian economy is struggling badly, and the nation’s official currency (the ruble) has seen a sharp decline in value.

At one point in December, the Globe and Mail's James Mirtle and Mark MacKinnon reported that the ruble’s value against the U.S. dollar had fallen to half of what it was earlier in 2014.  

The ruble has rebounded since that low point, and Russia’s government has put up a brave front, but even the government had to admit that tough times were ahead; finance minister Anton Siluanov told Reuters' Darya Korsunskaya and Vladimir Abramov (h/t Yahoo) that the country’s economy was looking at a four percent contraction and that inflation would hit double digits in 2015.

A key official with a major Russian bank quoted in the same piece was even more pessimistic, suggesting that if the price of oil were to fall further, the government would be unable to prevent significant devaluation of the ruble.

Even if further economic damage doesn’t occur, businesses like the KHL are already in significant trouble. League president Dmitry Chernyshenko indicated that several teams were struggling to meet payroll obligations and that the KHL would not allow that to continue, per Yahoo’s Dmitry Chesnokov, who notes that almost certainly means we will see the league shrink before the start of the 2015-16 season.

Additionally, the very survival of Russia’s primary junior league has been called into question:

What does that mean on this side of the Atlantic? For the NHL, the struggles of a rival are likely to be helpful in several areas.

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One less option for mid-range free agents 

Players like the Blues’ Vladimir Sobotka will be less likely to head overseas when they get into contract disputes with their teams, because the NHL’s contracts (guaranteed and paid in U.S. dollars) are going to be increasingly competitive with deals offered by KHL teams and paid out in rubles.

Money used to be the one calling card the KHL had over the NHL for players in this particular position. Until the ruble rebounds, that isn’t going to be the case.

A strengthened AHL

While the American League’s primary purpose is development, there has always been room for a handful of veterans on each team; these players act either as elder statesmen down on the farm or as recall options for the parent NHL team.

A lot of these players end up going overseas to Europe, and in many cases, the KHL has been the top bidder for their services.

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An example of such a player is Gilbert Brule, a veteran of 299 NHL games who most recently played for the Arizona Coyotes’ AHL affiliate in Portland. This year, he’s in the KHL, but he told the National Post's Gabrielle Tetrault-Farber that the contract he signed in May had lost nearly one-third of its value against the Canadian dollar since then, dropping it from just under $1.0 million to roughly $650,000.

Brule told the paper that he hoped to stay in the KHL and that he still saw it as his best option, but for plenty of other players in similar situations, that kind of drop in contract value is going to make the AHL a more appealing option.

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Not much change for top-level Russian players 

While many mid-level and lower NHL players may now have more incentive to stay in North America, the same is not likely to be true of top stars, players like Kovalchuk.

Those top Russian stars are the best draws in the KHL and even at the worst of times will give the league a level of credibility that no league outside the NHL can manage. Star power matters; arguably it matters more now than it did when the economic picture was rosier.

As hockey writer Slava Malamud notes, the KHL is also likely to focus more on its core function of supporting Russian hockey:

It’s a sensible move and one that suggests that the NHL will still have to fight hard to retain its top Russian players.

In short, any pain the KHL suffers is good news for the NHL and will likely result in improved depth from the third line down to the minors as well as better leverage in tough negotiations with restricted free agents. What it isn’t likely to do is result in a dramatic influx of top Russian talent, as those players will still have the option of earning top dollars overseas.

Jonathan Willis covers the NHL for Bleacher Report. Follow him on Twitter for more of his work.