Explained: The reasons behind Arsenal's lack of activity in the January transfer window

As another January transfer window beckoned to an end, Arsenal fans desperately waited for the announcements of a few new arrivals. Their expectation on arrivals was no surprise as they had been linked to possibly ten to fifteen different players through the month.

Of course, the hope of any permanent deal was extinguished as manager, Unai Emery revealed in a press conference that the club could only complete loan deals this transfer window, owing to the financial issues the club faced.

This revelation angered fans around the world as they all screamed in unison - "Kroenke out!" and many pundits were quick to target Arsenal's transfer policy and call it 'a joke'. Furthermore, the signing of a midfielder when the club clearly lacked quality defenders led to more criticism. But, in my opinion, the transfer window was largely a success for the Gunners.

Where most fans and pundits go wrong is when they look at the transfer market superficially and compare the spending of one club to another without looking at the financial conditions of a given club which can be drastically different from another club. They see it as a mere window where clubs spend big money and are able to acquire the services of world-class players within days. But I am afraid, it is much more than that.

The financial situation of Arsenal is much more complex than other clubs. While they do comply with the UEFA's FFP (Financial Fair Play) regulations, Arsenal have to still comply with two more regulations made especially for the Premier League clubs. These are the 'Sustainability and Profitability Rules' (SRP) and ' The Short Term Cost Control' (STCC).

The SRP states that no club can go into a loss of more than £105 million over a period of three seasons. Since Arsenal have made a net profit every year except one since 2002, this regulation is no problem.

But where Arsenal do face difficulties is STCC. The Short Term Control Cost basically states that no club can increase their wage bill by a maximum of £7 million per year. However, clubs can exceed this £7m cap if they generate increased revenue from commercial income, player trading and Match Day income.

Arsenal's wage bill in 2015/16 when the cap was increased from £4 million to £7 million

Above is the wage structure of Arsenal in 2015/16. As we can see, even after the addition of the internal revenues and the increased cap, Arsenal still fall £19 million behind any scope of increase. This is the highest for any club at the time. Despite the departure of many high wage players since then such as Sanchez, Cazorla, Mertesacker, and many more, Arsenal have just recycled this money and used it to increase the wages of the players that remained at the club.

Furthermore, the acquisitions of Pierre-Emerick Aubameyang and Henrikh Mkhitaryan in January last year saw a further rise in the wage bills. Also, the big bonus contract that Mesut Ozil was offered at the beginning of the season doesn't improve the situation for Arsenal.

The weekly wages of Mesut Ozil, Aubameyang and Mkhitaryan are £350,000, £200,000 and £180,000 respectively. These high wages clearly mean Arsenal struggle to accomodate the STCC and have to use their internal funds to make up.

To those who are screaming "Kroenke Out", any investment by ownership has practically no use and cannot better the situation, especially in January. But surely, with one of the largest match day revenues, Arsenal should be able to deal with this situation?

No. Arsenal have two sponsors in Emirates and Puma that are long-term deals that come to an end this year, which means the money coming from these sponsors is very less in today's context and is not able to fulfill the demands of the club. Furthermore, the TV revenue has significantly decreased because Arsenal no longer play in the Champions League. Put these two factors together and the enormous wages the club has blindly given to their players; and you will be able to see how big a mess the club has put itself in.

But how does this affect the signings?

The fans are right when it comes to the owner's investment towards the transfer budget. Kroenke has given absolutely no cash towards the annual transfer budget and relies on the internal revenue which is being used up in high wages. Owing to this low transfer budget, the club could only complete loan deals in January.

This makes the entire approach towards players complex. Let's look at what Arsenal needed this transfer window - they needed a winger, a defender and a possible replacement for Aaron Ramsey.

The club has completed the loan of Denis Suarez from Barcelona with an option to buy in the summer which deals with the Aaron Ramsey situation. Next, they needed a defender and mind you, not just any defender. They needed a world-class defender. But, the only two options Arsenal had were to either get Medhi Benatia from Juventus as a part of the Aaron Ramsey deal or to sign Chelsea's Gary Cahill.

Emery insisted on keeping Ramsey till the end of the season and letting him go for free in the summer, so the Benatia deal fell through. I don't think I need to explain why Arsenal didn't opt for Cahill. But Emery did point out that he wanted to sign at least two players this window. Thus, Arsenal started negotiations for a winger.

They approached two wingers - Yannick Carrasco and Ivan Perisic. Ivan Perisic handed in a transfer request to Inter Milan and was keen to join Arsenal. However, Inter Milan added a clause of 'obligation to buy' for Arsenal if they were to loan the 30-year-old Croatian. However, Arsenal could not estimate how much money they will have in the summer since their Champions League future remains uncertain. Therefore, they were not willing to commit to any deal in the summer. So, the Perisic deal broke down.

They also approached Dalian Yifang to loan Carrasco. The Belgian seemed like a more realistic option as he felt a move to Europe benefited his family and his national team. He was also willing to take a lower salary for a return to Europe. But Arsenal could only snap him up on loan.

This meant they would have to pay Carrasco's wages or at least a certain percentage of it on behalf of Dalian Yifang until they could buy him at the end of the season. These wages proved to be too high for a club that already had issues with high wages of current players. So, Arsenal ended up putting a value too low for the Chinese club and the loan didn't work out.

This left Arsenal with the lone signing of Denis Suarez. The fans are furious with this window and believe they need more players to challenge for the top 4. But, buying players in panic over the span of a month can lead to hurried transfers of average players. Therefore, it is better to take bigger long-term decisions on players to bring in during the summer transfer window.

The departures of Cech, Ramsey and possibly Lichsteiner and Ozil significantly clears up the wage bills for Arsenal. This can lead to an extra £50 million pounds for the club to spend in the summer. Assuming Arsenal's budget is already a good £50-70 million, the increase can see Arsenal have a budget of as much as £120 million.

Therefore, Arsenal fans must stay patient and give Emery time to build this club as he sees fit.