It only looks like a game. Photographer: Jean Catuffe/Getty Images
It only looks like a game. Photographer: Jean Catuffe/Getty Images

(Corrects spelling on Capello and Wilmots.)

To the uninitiated, Russia's World Cup defeat by Belgium may look absurd. Russia is 13 times more populous than Belgium, its soccer league has vastly greater financial resources and it is coached by the most expensive manager in the tournament, Italian Fabio Capello. The reason Russia lost has less to do with soccer than with free-market economics, of which President Vladimir Putin's regime has no concept.

Capello, whom Russian billionaire Alisher Usmanov calls the strongest member of the national team -- "And he can't be on the field," Usmanov adds drily -- earns up to $12.2 million a year. The $700,000 salary of his Belgian counterpart, Marc Wilmots, pales in comparison. Russia's wealthiest club, Zenit St. Petersburg, which is sponsored by the state-controlled natural gas monopoly, Gazprom, is seventh on the global list of teams with the biggest transfer budgets, at $47.6 million this year. Four more Russian clubs spend more than Belgium's most profligate club, Genk, which has a $6.8 million budget.

Money is important in soccer. There is a well-established relationship between club budgets and their sporting performance. Europe's wealthiest clubs -- Bayern Munich, Manchester United, Barcelona, Real Madrid, Juventus Turin, Paris St. Germain -- and leagues have supplied the most players to World Cup teams. The Big Five soccer economies -- England, France, Germany, Italy and Spain -- accounted for half of the 950 players in the provisional squads announced a month before the World Cup. Russia's league came sixth, supplying 34 players for the final squads. In fact, two players on Belgium's World Cup team play in Russia.

How, then, was Belgium able to assemble a higher-ranked international team that beat Russia 1-0 on Sunday? Why did Belgium make a joke of Capello's solid game plan and withstand relentless Russian pressure in the second half? The answer lies in the way Russian soccer works.

According to venerable Russian coach Valery Gazzayev, 56 percent of Russian Premier League teams are financed directly by the state, and another 19 percent are backed by state-controlled companies. The Russian government and its firms pay about $1.1 billion a year to keep the top clubs in business and competing for international talent such as Brazilian star Givanildo Vieira de Souza (known to the world as "Hulk"), who plays for Zenit.

There is a patriotic caveat to Russia's investment in the nation's most popular game. Russian teams are allowed to field up to seven foreign players, or "legionnaires," as they're called in Russian. The remaining four players must be native-born. Starting in 2015, the foreign player limit will go down to six.

Russian players contend the limit should be even lower. "There are more than 200 legionnaires in the Premier League, on average 13 per club," five prominent retired footballers wrote to the Russian Football Union in April. "Given that, Russian players spend less and less time on the field and there isn't among them, for example, a single central defender under the age of 23 who would have regular playing practice in a Premier League team."

Capello, who has a contract to coach the Russian national team through the 2018 World Cup, also says he needs more (and better) Russian players. Right now, he must choose among only 64 Russians in the top clubs. He has called for expanding the league to 18 teams from 16, reducing the number of foreigners allowed to play and encouraging foreign players to accept Russian citizenship so they can play for the national squad.

Russia is one of only six teams in the current World Cup fielding no foreign-born players. Switzerland and the U.S., for example, have five each. A more radical solution, however, would also be somewhat counterintuitive: Cancel the foreign player cap. Belgium doesn't have one.

Because of the cap, Russian teams pay millions a year to middling local footballers whose places on team rosters are assured by nationality -- even if they are not as good as their "legionnaire" clubmates. They have no incentive to play in foreign leagues because they are worth more at home. Capello's World Cup squad is limited to these privileged but relatively lackluster athletes. Russia is one of the few teams in the World Cup fielding only players from local clubs.

In Belgium, by contrast, young players compete fiercely against foreigners for a chance to play for top clubs. Those who break through are soon drafted by Top Five leagues. In fact, most Belgian stars play in England. While home audiences rarely get to see them, they gain experience playing for more competitive clubs, where it's an honor to get in the starting lineup. As a result, Belgium doesn't need a naturalization cure for its World Cup team, which has a combined transfer value of $467.9 million, compared with Russia's $262 million.

The lesson applies off the field, as well. On the World Economic Forum's Global Competitiveness Index, Belgium ranks 17th. Russia is 64th -- because of the same stupid overregulation and wastefulness that plagues Russian soccer. The regulations are justified by ostensibly patriotic goals. But it's the Belgians who were waving their flags more proudly as their tiny nation won.

To contact the writer of this article: Leonid Bershidsky at lbershidsky@bloomberg.net.

To contact the editor responsible for this article: Francis Wilkinson at fwilkinson1@bloomberg.net