Winter Olympics in the Subtropics

Winter Olympics in the Subtropics

An independent expert report by Boris Nemtsov and Leonid Martynyuk. Moscow, 2013.
Translation: Kerkko Paananen.

Contents:

1. Introduction
2. The Olympics of Lawlessness and Corruption
3. Knights of the Olympic Order
3.1. The Champion Troika
3.2. Other Interested Parties
3.3. The Favourites
3.4. Investigations Without Results
4. The Most Expensive Project of the Most Expensive Olympics
4.1. Olympic Stadiums in Imereti Valley
5. Winter Olympics in the Subtropics – What Then?
6. The Risks of the Sochi Olympics
6.1. Energy Risks
6.2. Climate Risks
6.3. Logistical Risks
6.4. Technological Risks
6.5. Terrorist Risks
6.6. Risks of a Boycott
6.7. Risks of “Hospitality”
7. Conclusion
8. Our Actions

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1. Introduction

Russia is a winterly country. On the map, it is hard to find a spot where snow would never fall, and where winter sports would not be popular. Yet Putin has found such a spot and decided to hold the Winter Olympics there: In the city of Sochi.

Prior to the publication of Russia’s bid for the 2014 Winter Olympics, many Russians, including the authors of this report, were certain that the Olympics would be held in the mountaineous areas of Sochi, in the ravines, and on the slopes of Krasnaya Polyana.

Many people thought then that the Olympics would result in an increase of Russia’s international prestige, the development of winter sports, and the establishment of a world-class winter ski resort, the only one in the country.

That is why, immediately after the decision of the International Olympic Committee (IOC) in July 2007 in Guatemala, millions of Russians, including we, rejoiced at the decision.

The joy was short-lived, however. It turned out that the main competitions, as well as the opening and closing ceremonies, would be held in the Imereti Valley, which is a subtropical swampland located on the Black Sea shore in the basin of the River Mzymta — the warmest possible place not only in Russia, but in Sochi as well. The authorities explained that there was little space for the main stadium and the Olympic Village in the mountains.

Vladimir Putin’s personal visit to Guatemala played an important role in helping Russia win the bidding for the Olympic Games. He assured that the Olympic venues would be completed on time, and that enormous sums of money — USD 12 billion — would be spent on the preparations.

It has since transpired that the budget of the Sochi Olympics has beaten all world records and now amounts to more than USD 50 billion.

The Winter Olympics in Sochi are a personal project of Putin’s. He thought (and probably still does) that the Olympic Games would be his triumph, and that the participation of athletes from all over the world would be an indisputable recognition of his leadership both in Russia and in the world.

Subsequent events have demonstrated that instead of a triumph, the preparations for the Olympics have been an utter disgrace. It has become increasingly clear that the Sochi Olympics are an unprecedented scam involving both representatives of Putin’s government and oligarchs close to the establishment.

This is a scam on a scale that outdoes Nikita Khrushchev’s reckless scheme to plant corn in the Russian Arctic or Leonid Brezhnev’s plans to reverse the tide of rivers in Siberia.

In effect, the Sochi Olympics have highlighted the main flaws of Putin’s system in a nutshell: Lawlessness, corruption, high-handedness, cronyism, incompetence, and irresponsibility.

This is what this report is about.

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2. The Olympics of Lawlessness and Corruption

The Sochi Olympics have gone down in history of the Olympic movement without even having been opened yet. These are the most expensive Olympic Games in history, costing more than USD 50 billion.

The Games in Sochi will cost more than the sports facilities of all the 21 Winter Olympics combined! Moreover, the lion’s share of funds will be government expenditure — budget funds, loans from state banks, and state guarantees.

Even the most expensive Olympic Games thus far, those in Beijing in 2008 (note that these were the Summer Games), were cheaper than the Sochi Olympics. According to official figures, the Chinese spent USD 43 billion on the Beijing Olympics.

It is no secret that the preparations for the Olympic Games in Russia have involved unprecedented theft. Below, we will provide estimates on the scale of theft based on two different methods:

Method 1: A comparative analysis of the increased cost of the 2014 Olympics and the costs of previous Olympics.

In summer 2007 in Guatemala, Putin stated during a session of the IOC that the total cost of the Sochi Olympics would amount to USD 12 billion. At the time, this astronomical figure blew the minds of many of those present and other experts. In effect, Putin announced that he was prepared to spend many times more on the Sochi Olympics than competing bidders — the Austrians and South Koreans.

We now know that the final cost – USD 50 billion – exceeded the sum Putin had announced initially by more than four times.

Remember this.

Now compare the rise of costs of the construction of Olympic facilities in Sochi with the same costs at previous Olympic Games.

On the average, the construction cost of Olympic venues has doubled. Note that the cost of Winter Olympics has risen less than that of Summer Olympics.

How many times did the cost of holding Olympic Games rise during construction:

1. Athens (2004)	2.9
2. Turin (2006)	1.8
3. Beijing (2008)	2.7
4. Vancouver (2010)	2.1
5. London (2012)	2.3
6. Average in 1988-2012	2.2
7. Sochi (2014)	4.2

Source: A. Sokolov, «The cost of the Sochi Olympics were record-high in the history of the Olympic Games.»

The total cost of the previous Winter Olympics in Vancouver also increased by about two times: From USD 2.88 billion to USD 6 billion.

Hence, we can draw an important conclusion: The doubling of the cost of the Sochi Olympics is an anomaly and can only be explained by banal thievery, corruption, embezzlement, and the complete lack of professionalism of those in charge.

The cost of the Sochi Olympics, based on the global average, should have been USD 24 billion (i.e., Putin’s USD 12 billion, multiplied by two). The remainder – USD 26 billion – consisisted of embezzlement and kickbacks.

Method 2: A comparative analysis of the cost of the Olympic facilities in Sochi relative to analogous facilities at previous Olympic Games.

The main Olympic stadium, Fisht, is located in the Imereti Valley. It will be the venue for the opening and closing ceremonies of the Olympic Games in February 2014. The stadium’s capacity is 40,000 spectators.

Originally, the cost of building the stadium was estimated at RUR 7.5 billion (USD 230 million). To date, the approved cost has reached RUR 23.5 billion (USD 780 million), which means that the cost has more than tripled. In other words, the cost per one spectator of Sochi’s central stadium amounts to USD 19,500.

Let us compare this with the cost of other Olympic stadiums: The average cost per spectator of the central Olympic stadiums in the world is around USD 6,000. The average price per one spectator of Putin’s stadium in Sochi (USD 19,500) is three times higher.

Construction costs of central Olympic stadiums (USD 1,000 per spectator):

1. Athens Olympic Stadium (2004)	5.7
2. Beijin National Stadium (2008)	5.7
3. Vancouver BC Place Stadium (2010)	10.2
4. London Olympic Stadium (2012)	9.45
5. Average in 1998-2012	6.16
6. Sochi Olympic Stadium (2014)	19.5

Source: A. Sokolov, «The cost of the Sochi Olympics were record-high in the history of the Olympic Games.»
The Bolshoy ice-hockey arena, with a capacity of 12,000 spectators, was also being built in the Imereti Valley. The initial cost was estimated at USD 200 million. By 2012, the cost had risen to USD 300 million. The average cost per spectator was USD 25,000.

The average cost of similar ice-hockey arenas per one spectator at previous Olympics was USD 11,000. Putin’s hockey stadium was thus more than twice as expensive as the average stadium anywhere else in the world.

The Iceberg figure-skating arena in Sochi has a capacity of 12,000 spectators. The arena’s initial cost was USD 100 million. In 2012, the cost had risen to USD 278 million dollars. The average cost per spectator was USD 23,000. The average price of similar arenas elsewhere was USD 10,000. The cost of Putin’s arena was thus 2.3 times the world average.

Finally, we have the Olympic facility for ski jumping, RusSki Gorki. Because of a scandal over the embezzlement of funds during the facility’s construction, Akhmet Bilalov, former member of the Russian Olympic Committee, had to quit his job.

The estimated cost of the design and construction of RusSki Gorki increased from RUR 1.2 billion (USD 37 million) to RUR 8 billion, media reported. The final cost of the facility thus amounted to USD 270 million.

The ski jumping centre’s capacity was 7,500 spectators. The facility’s cost was USD 36,000 per spectator. The global average cost of ski jumping facilities was USD 3,400 per spectator. The cost of Putin’s ski jumping centre was thus more than 10 times the global average!

Three Olympic villages have been promised to be built for the Winter Olympics in Sochi. The main village in the Imereti Valley consists of 1,500 apartments for 3,000 people. The businessman responsible for the construction was Oleg Deripaska.

The average cost of the Olympic Village was USD 363,000 per person. The average cost of Olympic villages at previous Olympic Games was USD 150,000 per person. Putin’s Olympic village was thus more than two times more expensive than the global average.

Construction costs of Olympic ice-hockey stadiums (USD 1,000 per spectator):

1. Torino Palasport Olimpico (2006)	10.8
2. Vancouver Rogers Arena (2010)	13.1
3. Vancouver Winter Sports Center (2010)	6.9
4. Saint-Gervais, France (2018)	8.4
5. Average in 1998-2018	10.8
6. Sochi Bolshoy Ice Arena (2014)	25.2

Source: A. Sokolov, «The cost of the Sochi Olympics were record-high in the history of the Olympic Games.»

Construction costs of Olympic ski jumping centres (USD 1,000 per spectator):

1. Turin Stadio del Trampolino (1006)	3.8
2. Whistler Olympic Park, Canada (2010)	5.6
3. Alpensia Jumping Park, South Korea (2018)	2.9
4. La Clusaz Nordic Center, France (2018)	1.5
5. Average in 1998-2018	3.4
6. Sochi RusSki Gorki (2014)	36

Source: A. Sokolov, «The cost of the Sochi Olympics were record-high in the history of the Olympic Games.»

The general conclusion from all this is that a comparison of the cost of the Olympic facilities in Sochi and other Olympic capitals shows that Putin’s prices are two to three times higher, or even more, than the world average.

To assess the scale of theft, we can take a conservative figure: Putin’s facilities cost 2.5 times more than the world average. Hence, it is easy to calculate that the price tag of the Sochi Olympics without theft would be USD 50 billion divided by 2.5. The cost of the Sochi Olympics without theft would thus amount to USD 20 billion. This means that USD 30 billion was stolen.

Thus, the overall scale of theft was around USD 25-30 billion, or 50-60% of the declared final cost of the Olympics. This corresponds to the normal share of kickbacks in Russia.

Note that this is the minimum. We did not take into account that the Olympic facilities were built using the slave labour of migrant workers. Neither did we take into account that the quality of the works was nothing in comparison with the quality of construction in Vancouver, Turin, and Salt Lake City.

The scale of the embezzlement from the Olympic budget defies the imagination. What is interesting is that not a single criminal case on fraud, embezzlement, bribery, or kickbacks at the Olympics has been brought to trial.

The main reason for the epic thievery at Putin’s Olympics is the closed nature of the Russian government and the impunity of the criminals in Putin’s entourage. This is an indictment of the whole system.

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3. Knights of the Olympic Order

The astronomical sum of RUR 1.5 trillion (USD 47 billion) spent on the Sochi Olympics was mostly absorbed by businessmen and companies close to Putin.

The authorities have tried to promote the myth that the construction of the Olympic facilities was being done through private investments. This is absolutely not the case. The lion’s share of the construction was being done at the expense of the state budget or through companies that were either state-owned or state-controlled. There were only two large private investors: Businessmen Oleg Deripaska and Vladimir Potanin.

The rule on private investments was that 70% of the investment was covered through loans from Vnesheconombank (VEB), which is a state-owned corporation, while private contributions would only cover 30%. However, by the end of 2012, the authorities acknowledged de facto that almost all of the Olympic facilities were running at a loss and would never pay off.

“Investors have taken a more critical look at the market risks entailed with the implementation of the projects. The question of return on investment has arisen,» a VEB representative stated cautiously. The bank then went on to increase the share of its loans for the Olympic projects to 90%.

We can thus see that if you do the necessary calculations, it appears that the total share of public funds invested in the the Olympic Games amounts to 96%! The Sochi Olympics are being built at the taxpayers’ expense.

3.1. The Champion Troika

The biggest investor in the construction of the Olympic facilities in Sochi is the state corporation, Olympstroy. The company has absorbed RUR 303.9 billion (USD 9.4 billion) of state budget funds. Initially, the plan was for around RUR 143 billion (USD 4.4 billion), but in 2011, the government unexpectedly more than doubled the amount of the state contribution to Olympstroy for the implementation of the Olympic projects.

In its explanatory memorandum, the Ministry of Regional Development did not even find it necessary to explain why the increased spending was needed, but indicated that these expenditures had already been provided for through the federal budget.

Olympstroy thus accounts for 20% of the total budget of the Sochi Olympics. The company is responsible for the construction of stadiums in the Imereti Valley, the main Olympic Village, and the infrastructure of other Olympic facilities. In addition, Olympstroy coordinates the overall preparations for the Olympics.

Since its establishment in 2007, Olympstroy has seen as many as four directors: Semyon Vainshtok, Viktor Kolodyazhny, and Taimuraz Bolloyev; now the company is being headed by Sergey Gaplikov. The reshuffling is evidence of the chaos and complete mess within the state-owned corporation responsible for the Olympics.

At the same time, each reshuffle at Olympstroy’s top management has been accompanied by criminal charges of fraud, corruption, and abuse of office. (For instance, 27 criminal cases were launched after the resignation of Bolloyev in 2010.) However, none of the cases have been brought to trial.

Although in 2007, it was announced that parliamentary oversight had been established for the Olympic construction projects, Olympstroy was never included in the list of companies that had to report on their activities to the State Duma. The attempt of some Communist deputies to change the situation in 2011 was unsuccessful, despite the fact that their initiative was supported by three other factions in the parliament. The deputies of the ruling United Russia party voted unanimously against the motion.

Now we know why.

In the second place in terms of the amount of budget funds absorbed are companies affiliated with the business interests of the Rotenberg brothers, Arkady and Boris, who are friends of Vladimir Putin’s since their childhood.

They have built a gas pipeline, roads, an airport, the CHP plant in Adler, a cargo and sea port, and various other infrastructure. The total amount of budget funds and Gazprom’s resources that the companies affiliated with the Rotenbergs have absorbed stands at around RUR 229 billion (USD 6.9 billion), which is 15% of the total budget of the Olympic Games. In other words, every seventh Olympic ruble has gone to the Rotenberg brothers.

Finally, the last company in the top three Olympic contractors is Russian Railways (RZD), which is fully owned by the state.

The head of RZD is one of Putin’s friends from the Ozero dacha cooperative, Vladimir Yakunin. RZD is responsible for the construction of roads and railways, including the most expensive Olympic facility, the road between Adler and Krasnaya Polyana, which cost more than RUR 260 billion (USD 8 billion). Also, RZD was in charge of the reconstruction of the Tuapse-Adler railway, the construction and modernisation of railway stations (Adler, Dagomys, Matsesta, Khosta, and Sochi), and the building of freight yards.

In total, according to the company’s annual reports, the projects that RZD was responsible for cost around RUR 300 billion (USD 9.2 billion), or about 20% of the entire budget of the Sochi Olympics. This money came from the state budget and from raising the rail tariffs. In other words, from the taxpayer’s pocket. In 2008 alone, rail tariffs rose by 1% on all modes of transport throughout Russia due to RZD’s Olympic projects.

Vladimir Yakunin. (Photo: Mitya Aleshkovsky.)

 Vladimir Putin (second from left) and Arkady Rotenberg (first from right) in 1969. (Photo: Nikolay Vashchilin.)

3.2. Other Interested Parties

The other major participants in the Olympic construction projects have absorbed from 4% to 10% of the allocated budget funds.

Gazprom, which is headed by Putin’s friend and subordinate, Alexey Miller, was involved in four construction projects with a total cost of RUR 160 billion (USD 4.9 billion). This money was used to build the Dzhubga-Sochi gas pipeline, the contract on which was awarded to the Rotenberg brothers (see above), the Adler CHP plant (again built by the Rotenbergs), and the tourist and ski-biathlon complex, Laura, with an adjacent Olympic village.

The administration of Krasnodar Region, headed by Alexander Tkachyov (infamous for the massacre at Kushchyovka and the deadly flood in Krymsk), will spend altogether more than RUR 109 billion (USD 3.3 billion) on the facilities for the Olympic Games. As of 1 January 2013, the administration had spent RUR 77.7 billion (USD 2.4 billion) of the total sum. These funds would be invested in the infrastructure of the city of Sochi, including the construction of roads, utilities, and housing.

The Olympic budget of Krasnodar’s electricity transmission system operator, Kubanenergo, and Russia’s power grid operator, Federal Grid Company (FGC), amounts to at least RUR 50 billion (USD 1.5 billion), according to the estimates of analysts. The money will be spent on the development of the electricity network, including in the modernisation of high-voltage transmission lines to transport electricity to ​​Sochi for the duration of the Olympic Games. In addition, under a contract with Olympstroy, FGC will deliver nine mobile gas turbine power stations to provide electricity for the Olympic Games by the end of October 2013.

Finally, we have the state-run savings bank, Sberbank. The bank’s Board Chairman is German Gref, a long-time ally of Putin’s since his days in St Petersburg. Sberbank is building the ski jumping facility and sports tourism resort, Gornaya Karusel. The Olympic media centre, Gorki Gorod, will be located in the centre of the resort. By 2012, total investments in these projects increased from the original RUR 16 billion (USD 500 million) to RUR 75-80 billion (USD 2.3 billion), according to information published by the Vedomosti business daily.

Vladimir Potanin’s Interros and subsidiaries of Oleg Deripaska’s Basic Element (Basel) are among the private investors in the Olympic projects. Potanin has invested RUR 68.6 billion (USD 2.1 billion) in the construction of the ski resort, Roza Khutor. Of the sum, RUR 55.7 billion (USD 1.7 billion) was a loan from VEB.

In 2007, Oleg Deripaska planned to spend around RUR 45 billion (USD 1.3 billion) on the Olympics. To date, his investments amount to an estimated RUR 40 billion (USD 1.2 billion). The facilities that Deripaska has invested in include the Olympic Village in the Imereti Valley, a cargo port, and Sochi International Airport. Deripaska’s companies also participated in the construction of a relief road for Sochi’s main artery, Kurortny Prospekt. The companies received a credit line of RUR 22 billion (USD 680 million) from VEB for these projects.

Given that almost all of the Olympic facilities are unprofitable, private investors have, in fact, fallen victim to the Olympic scam.

In addition to these major customers and contractors of the Sochi Olympics, those taking part in the preparations for the Games include the state energy holding, Inter RAO UES (which has invested in the modernisation of the Sochi CHP plant), state mining company ALROSA, the Office of the President, and other state-run companies and agencies. They account for about 13-15% of the total Olympic budget.

3.3. The Favourites

The status of the various participants in the Olympic projects differs greatly. Potanin and Deripaska have had to invest their own resources and borrowed funds, and run the risk that they will never see a return on their investments. Sberbank’s and Gazprom’s participation in the Olympic construction projects is a burden imposed on them by Putin. RZD is carrying out its construction projects with state budget funds and by raising tariffs for railway transportation. Olympstroy is absorbing billions from the state, while remaining a state-owned corporation.

Only the Rotenberg brothers have earned enormous profits from the projects to build the infrastructure for the Olympic facilities. In fact, their companies have reaped profits, while their risk, in comparison to the state corporations and private investors, has been reduced to zero as the facilities that they are building are being transferred to the state’s balance.

The astronomical earnings of the Rotenberg family, Putin’s childhood friends, can be explained either by the fact that contracts have been awarded without competition or by a lack of competition in the tenders. The brothers received 21 Olympic construction contracts, worth a total of RUR 229 billion, or around USD 7 billion, which is more than the entire expenditure on the Winter Olympics in Vancouver (USD 6 billion).

Facility	Contractor	Contract Price (RUR billion)	Source
Kurortny Prospekt relief road, 2nd & 3rd stage	Mostotrest	59.36	Mostotrest Annual Report 2011, Sochi-24
Section of M-27 Dzhubga-Sochi highway (betw. Adler & Vesyoloye)	Mostotrest	5.78	Mostotrest Annual Report 2010
Kurortny Prospekt relief road, 1st stage	Mostotrest	5.5	Mostotrest Annual Report 2010
Adler Ring traffic junction	Mostotrest	4.9	Mostotrest Annual Report 2010
Golubye Dali traffic junction in Sochi	Mostotrest	2.9	Mostotrest Annual Report 2010
Dzhubga-Sochi gas pipeline	Stroygazmontazh	32.6	Olympstroy Annual Report 2011
Adler CHP plant	TEK Mosenergo	28	Vladimir Putin at VEB supervisory council meeting in July 2010
Alpika-Servis-Roza Khutor highway	Transstroymekhanizatsiya	4.7	Mostotrest Annual Report 2010
Reconstruction of Sochi (Adler) Airport	Transstroymekhanizatsiya	4.5	Mostotrest Annual Report 2010
Alpika-Servis-Roza Khutor highway	Engtransstroy Corporation*	16.4	Mostotrest Annual Report 2011
Sochi Media Centre**	Engtransstroy Corporation*	14	Mostotrest Annual Report 2011, Engtransstroy website
Reconstruction of Sochi passanger seaport	Engtransstroy Corporation*	9.98	Engtransstroy website
Engineering works at Imereti Valley, incl. embankments	Engtransstroy Corporation*	8.3	Mostotrest Annual Reports 2010, 2011
Planning & surveying, construction & installation works of Sochi Media Centre	Engtransstroy Corporation*	8	Mostotrest Annual Report 2010
Malyi Akhun complex in Imereti Valley	Engtransstroy Corporation*	6.25	Mostotrest Annual Report 2011
Formula One race track	Engtransstroy Corporation*	4.8	Mostotrest Annual Report 2011
Sochi port cargo area	Engtransstroy Corporation*	4.7	Mostotrest Annual Report 2010
Traffic junction on Dzhubga-Sochi highway	Engtransstroy Corporation*	2.9	Mostotrest Annual Reports 2010, 2011
Project documentation & construction of Sochi seaport with embankments	Engtransstroy Corporation*	2.59	Mostotrest Annual Report 2010
Road from ski jumping centre to main stands and biathlon track	Engtransstroy Corporation*	2.2	Mostotrest Annual Report 2011
Planning, surveying, construction works on biathlon track	Engtransstroy Corporation*	1.2	Engtransstroy website
TOTAL		229.56

* In the beginning of 2013, Arkady Rotenberg and his son withdrew from Engtransstroy (Inzhtransstroy). This was no accident. As can be seen from the table, Engtransstroy is responsible for the construction of numerous Olympic infrastructure projects, while the timetables for the works have failed.

** The construction of the Olympic Media Centre was mentioned in a Human Rights Watch report in connection with violations of the rights of workers who were not paid salaries for up to six months. We can only guess at the quality of the work.

Next, we will analyse some individual facilities that the Rotenberg brothers have built.

In 2009, Gazprom awarded a no-bid contract for the construction of the Dzhubga-Sochi pipeline, worth RUR 32.6 billion (USD 1 billion), to the Rotenberg family’s company, Stroygazmontazh (SGM). However, a year earlier, Gazprom had announced that the project would cost RUR 8-10 billion (USD 250-310 million). For the Rotenberg brothers, the contract was worth almost four times more than that. This is exactly as many times as the total budget of the Sochi Olympics has increased overall.

The parameters of the gas pipeline are as follows: Diameter 530 millimetres; length 177 kilometres; and cost EUR 4.6 million per kilometre. Most of the gas pipeline lies on the Black Sea floor. Therefore, the Nord Stream pipeline, which rests in the bottom of the Black Sea, is a natural point of comparison. SGM took part in Nord Stream’s construction as well: Two branches of 1,224 kilometres each at a cost of EUR 8.8 billion. Nord Stream’s cost thus stood at EUR 3.6 million per kilometre. Note that the capacity of the Olympic gas pipeline is seven times less than that of Nord Stream’s one branch.

When the price of Nord Stream exceeded the European average, it gave rise to outrage in Russian and Western media. The average price of Nord Stream’s construction was more than three times higher than the European average. Now, it turns out that the Olympic pipeline is even more expensive. Its price exceeds the European average by almost five times. This is the first but not the only Olympic price record that the Rotenberg brothers have set.

The scandalous tenders for contracts on the construction of a relief road for Sochi’s Kurortny Prospekt ended in victory for a few investors. Deripaska won the right to build the first stretch of the relief road, while the contracts for the second and the third stretch were awarded to the road and bridge building company, Mostotrest, in October 2010. This happened just a few days after it became known that Arkady Rotenberg and his son Igor had acquired control of Mostotrest.

The total length of the second and third stretch of Kurortny Prospekt’s relief road is 10 kilometres, and the value of the contract is RUR 59.36 billion (USD 1.9 billion). In other words, one kilometre of the Kurortny Prospekt relief road cost more than RUR 5 billion, or USD 170 million!

A relief road consists of roads, tunnels, and bridges. Even if we assumed that the relief road would be a continuous tunnel (which is the most expensive part of the construction project), and that the average price per kilometre of a tunnel in Europe was USD 126 million, we would see that the cost of the relief road in Sochi exceeded the cost of analogous projects in Europe by nearly one and a half times.

The collapse of the tunnel of the third stretch of the Kurortny Prospekt relief road and the cave-in of the underlying soil and a house above the tunnel was big news in March 2013.

Finally, we have the Adler CHP plant. Gazprom awarded the contract for the plant’s construction, again without competing bids, to TEK Mosenergo, which is controlled by the Rotenberg brothers.

In 2010, Putin announced that the cost of building the Adler CHP plant would amount to RUR 28 billion (USD 875 million), and that the plant would have a capacity of 360 MW. Thus, the plant would cost USD 2,600 per kW, which was two to three times higher than the average price of gas power stations.

3.4. Investigations Without Results

The multi-billion dollar cost of the Sochi Olympics has become a matter of broad public discussion. Russia’s Audit Chamber, which is required by law to monitor state, including budget, spending, draws up reports on a quarterly basis. However, all of the reports are classified “For Official Use Only.”

In February 2013, the Audit Chamber published information that Olympstroy had allowed for the cost of the Olympic facilities to increase by RUR 15.5 billion (USD 484 million). The sum is of course huge, yet it is only 1% of the total budget of the Olympic Games. It is quite impossible to believe that embezzlement only accounted for 1% of the total budget of the Olympic Games.

Even this information, as well as information about specific violations in connection with the Olympic construction projects, are something that the authorities are trying to conceal very carefully. The Audit Chamber refused to publish a report on the use of budget funds for the Olympics, while Duma deputy Dmitry Gudkov received a mere formal reply to his parliamentary inquiry on the matter.

There is no information about criminal cases No. 326956 and No. 326493, which were filed in June 2012 by the Investigation Department of the Department of Internal Affairs for the city of Sochi on the grounds of suspected fraud: Olympstroy and its contractor, NPO Mostovik, had deliberately overstated the cost of construction of Olympic facilities in the amount of RUR 2.52 billion (USD 79 million) and RUR 22.974 billion (USD 718 million). According to media reports citing law enforcement officials, these cases were due to be sent to court, but never did so.

The opaqueness of companies and the failure of law enforcement agencies and the Audit Chamber to perform their duties are major causes of the unprecedented theft of Olympic funds. We can note that one Olympic record has already been broken in Sochi: The record for embezzlement and kickbacks, which, it seems, have reached volumes never before seen in the history of the Olympic movement.

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4. The Most Expensive Project of the Most Expensive Olympics

The most expensive facility of the Sochi Olympics, the total cost of which exceeds the world record and amounts to more than USD 50 billion, is not the central stadium, the ski-jumping centre, or the bobsled track. Those facilities were peanuts compared to a 48-kilometre stretch of the highway between Adler and Krasnaya Polyana.

Due the requirements of the International Olympic Committee regarding Olympic facilities, a relief road had to be built alongside the existing highway in Krasnaya Polyana. The organisers of the Olympic Games decided to build a combined road and railway, consisting of a four-lane motorway and a section of a railway.

The organisers decided to lay the road along the left bank of the mountainous River Mzymta. The construction of the road was environmentally destructive and an extremely difficult engineering project. The road is a set of tunnels and bridges built along the river.

Putin designated state-run Russian Railways (RZD) to be responsible for building the combined highway and railway. RZD’s head is Putin’s friend from the Ozero dacha cooperative, Vladimir Yakunin. (Cf. “Programme for the construction of Olympic venues and development of the city of Sochi as a mountain resort,” approved by the Russian government’s resolution No. 991 on 29 December 2007 and amended by the government resolution No. 1086 of 31 December 2008.)

The general contractors for the projects were SK Most and Transyuzhstroy. These two companies received the first and subsequent contracts on the construction of the highway without any competition, tenders, and other such “nonsense.” Meanwhile, preparatory works cost an astronomical USD 2 billion. This was almost as much as what the Americans spent on the entire Winter Olympics in Salt Lake City in 2002.

The law requiring state-controlled stock companies to hold public tenders only came into effect on 1 January 2012.

Until 2012, the SK Most group of companies, established in 2001, belonged to two businessmen: Yevgeni Sur and Vladimir Kostylev, with 45.2% of shares each. The two entrepreneurs still rank on a modest 131st and 135th place on the Forbes list of billionaires with a capital of USD 750 million each. In 2012, Putin’s friend Gennady Timchenko acquired a 25% stake in SK Most.

The company became famous in 2008, when, without any tender and in flagrant violation of Russian law, President Dmitry Medvedev signed a decree awarding a contract on the construction of a 3-kilometre-long bridge to Russky Island for the APEC summit. The value of the contract was over USD 1 billion. Note that the text of the decree was never published officially.

In the same year, the successful businessmen, Sur and Kostylev, moved closer to Vladimir Yakunin by buying the Millenium bank. Yakunin’s wife Natalia Yakunina is a member of the bank’s Board of Directors. The acquisition enabled SK Most to receive lucrative contracts from RZD.

Organising tenders where the only participants are companies affiliated with each other is considered fraud world-wide. When one of the parties in the tender is a state-owned company, however, it is outright corruption. Nevertheless, no investigation of the tenders mentioned above was carried out.

Regarding the second contractor, Transyuzhstroy, less is known about the company. Perhaps the only key information is that the company’s owners and management are closely linked with the management of RZD. In particular, Transyuzhstroy’s founders include Oleg Toni, RZD’s vice-president for construction. Whether RZD head Yakunin has anything to do with the company remains to be seen. So far, we only know that Transyuzhstroy built the St Alexander Nevsky Cathedral in the Dutch city of Rotterdam as part of Yakunin’s activities in support of the Russian Orthodox Church.

Thus, the largest construction contract in Russian history was awarded without competition to SK Most and Transyuzhstroy. We have no doubt that, sooner or later, the facts surrounding Russia’s most expensive construction project will be the subject of a criminal investigation.

The initial cost of construction of the Adler-Krasnaya Polyana highway and railway amounted to RUR 91 billion (USD 2.85 billion), according to 2006 estimates (cf. Russian government resolution No. 357 of 8 June 2006). Yet as soon as 2009, the highway’s construction costs had risen to RUR 266.4 billion (USD 9.404 billion in 2012 prices). The increase was 2.5-fold.

In other words, one kilometre of the highway cost nearly USD 200 million in 2012 prices. The road cost USD 200,000 per linear metre and around USD 10,000 per square metre. This is equal to the price of elite housing in Moscow!

For this amount of money, based on the national average housing price of USD 1,600 per square metre (Rosstat data for 2012), one could build 5.5 million square metres of housing for 275,000 people (the norm for housing in Russia is 20 square metres per person). That is more than the population of such major cities as Kostroma, Petrozavodsk, or Komsomolsk-on-Amur.

Let us make another comparison: The U.S. programme for the delivery and operation of the new generation of Mars rovers, Curiosity, cost three and a half times less than the construction of the Adler-Krasnaya Polyana highway.

Furthermore, RUR 266 billion would suffice to build 940 kilometres of high-quality four-lane highways in Russia, which would be significantly more than the total annual commission of roads in the country. In actuality, however, the money was used to build just 48 kilometres of road.

Let us then compare the cost of the road in Sochi with average world prices. The length of the road was 48.2 kilometres, including 12 tunnels and 45 bridges. This complex project consisted of the following elements:

* Highway: 23 road bridges with a length of 9 kilometres, plus three 6.9-kilometre car tunnels and more than 35 kilometres of normal roads.

* Railway: 22 railway bridges with a total length of 11.4 kilometres, plus 6 railway tunnels with a total length of 11.1 kilometres, approximately 25.7 kilometres of conventional railway, 3 new railway stations, and reconstruction of the railway stations in Sochi, Adler, and Vesyoloye.

To estimate the cost of a 35-kilometre stretch of a four-lane highway, we will take the average European price of USD 10 million per kilometre. The cost of the road without bridges and tunnels would thus amount to USD 350 million.

One kilometre of a high-speed railway would, according to the average European standards, cost USD 45 million. A 25.7-kilometre section of an ordinary railway would thus cost USD 1.156 billion.

To estimate the cost of one kilometre of a car tunnel, we will take the world average price of USD 126.2 million per kilometre. This would mean that the construction of all tunnels along the Sochi highway would amount to USD 2.271 billion.

The world average price of building a girder bridge (which is what are being built in Sochi, with one exception) amounts to USD 115.5 million per kilometre. The cost of all the bridges along the road between Adler and Krasnaya Polyana should thus be around USD 2.356 billion.

Consequently, the price of the Adler-Krasnaya Polyana highway, based on global average prices, should be around USD 6.133 billion. Yet, as you recall, the price announced in 2009, which was already 2.5 times higher than the initial estimate, was RUR 266.4 billion, or USD 9.404 billion.

Why did the estimate immediately include an additional USD 3 billion? Did they find permafrost in Sochi? Or are we talking about the rent of corruption, as it is known in political science, or “kickbacks,” as we know it in common parlance?

The feasibility of building such an expensive and environmentally destructive highway is a topic for a separate discussion.

It would have been possible to reduce the highway’s cost radically by abandoning the idea of building the railway lines. In that case, the total cost of the relief road from Adler to Krasnaya Polyana, excluding corruption rents, would have amounted to USD 2.272 billion, which would have been four times less than the current cost.

Then, however, it would not have been necessary to involve RZD and affiliated companies, which received no-bid contracts worth billions and billions of dollars, in the project.

When the project for the construction of the relief road was subjected to mandatory public discussion, an alternative ecologically viable option was proposed to connect Adler with Krasnaya Polyana with cable cars able to carry 180 people at a time as in some Alpine countries like Germany, Switzerland, and Austria. The price of such a connection would have been a hundred times cheaper.

We made this proposal during the election campaign for the mayor of Sochi in 2009. However, all cheaper and environmentally friendly alternatives were categorically rejected by the authorities.

Now we understand why.

Environmental regulations were violated flagrantly during the construction of the highway. According to a number of environmental and other non-governmental organisations, the River Mzymta was subjected to serious pollution, and vegetation on the surrounding slopes was destroyed massively during the construction project.

The organisations noted that the river’s rapid flow or the frequent landslides and karstic effects in the River Mzymta valley were not taken into account in the construction project. Environmentalists drew attention to the fact that construction works were carried out without permits, and that the builders erected an illegal fence using gravel from the riverbed.

On 29 December 2009, after heavy rains in the foothills of Krasnaya Polyana, the water level of the River Mzymta rose, which resulted in the destruction of buildings at the mouth of the river. Also, construction equipment was washed away.

In summer 2011, poisonous mud ended up in the river. As a result, the river, which is located in a national park, was polluted over a length of 30 kilometres.

The situation repeated itself on 18 November 2011. This time the source of pollution was the northern mouth of the complex of tunnels of the Adler-Krasnaya Polyana highway. In spite of the obvious reasons for the pollution, no one was punished.

The repeated contamination of the River Mzymta indicates that RZD continued to ignore Russia’s environmental legislation and international environmental standards during the construction of the Adler-Krasnaya Polyana highway.

Russia’s Minister of Natural Resources, Yuri Trutnev, was forced to admit that the River Mzymta suffered considerable damage as a result of the highway’s construction. The damage was done not only to the river, but also to the national park through which it flows. The River Mzymta is Russia’s longest river that flows to the Black Sea.

We regard the construction of the Adler-Krasnaya Polyana highway as an affair involving unprecedented fraud and environmental destruction. Responsibility for this lies with Putin and Yakunin. The only beneficiaries of all this are SK Most, Transyuzhstroy, and their patrons in the management of Russian Railways. We will soon have the pleasure of finding their names in the list of dollar billionaires.

Part of the Adler-Krasnaya Polyana Highway. (Photo: ITAR-TASS.)

Vladimir Kostylev. (Photo: SK Most.)

Yevgeni Sur. (Photo: SK Most.)

Equipment inundated in the floodplain of the River Mzymta on 29 December 2009. (Photo: Oleg Smerechinsky.)

***

5. Winter Olympics in the Subtropics – What Then?

The 2014 Olympics will be held in the mountainous region of Sochi (Krasnaya Polyana), but most of the competitions, as well as the opening and closing ceremonies, will be held in the subtropical region of the Imereti Valley, the warmest place in Russia and Greater Sochi.

The authorities are very reluctant to discuss what will happen to the Olympic venues after February 2014. After all, no one in Sochi plays ice hockey, nor do they skate or do figure skating. You cannot find a single biathlete, skier, or skater born in Sochi.

Moreover, Greater Sochi is a city with a population of half a million. The number of seats at the Olympic venues is around 200,000. It is obvious that the stadiums, except for the few days that the Olympic Games last, will remain empty. The only major football stadium built earlier in Sochi, the Zhemchuzhina Stadium, which has a capacity of 10,000 spectators, was filled just once — at its opening ceremony.

It is not hard to guess that the sports facilities in Sochi will remain empty and will, in the end, fall apart. The authorities are trying to mislead people by promising that the sports facilities will be transferred to other cities. The reality is quite different, however. All the facilities in Krasnaya Polyana and the stadiums in Sochi will remain right there. Take a look at the table.

 

Stadium	Sport	Capacity	After Olympics	Construction Cost, USD million
Fisht Olympic  Stadium	Opening & closing ceremonies	40,000	Football stadium for 2018 World Cup, Russian Championships	778.7
Bolshoy Ice Arena	Ice hockey	12,000	Ice arena, entertainment centre	302.9
Olympic Oval speed skating centre	Speed skating	8,000	Exhibition centre	197.3
Iceberg Winter Sports Centre	Figure skating	12,000	Velodrome	277.7
Ice Club curling centre	Curling	3,000	Undecided	50
Shaiba Ice Arena	Ice hockey	7,000	Children’s sports centre	35.5
Total		82,000		1,642.1

4.1 Olympic Stadiums in Imereti Valley

The capacity of all these stadiums is 82,000 people. If even a stadium for just 10,000 people was never filled to capacity, one should not expect that the remaining facilities would be more popular. Rather, they will become monuments to tyranny, mismanagement, and voluntarism. Operating the stadiums is, obviously, unprofitable, which is why investors who built the facilities refuse to take part in their operation. All of the facilities will be transferred to state ownership.

The energy supply and maintenance of the multibillion-dollar facilities both during and after the Olympics is yet another separate question. Based on the declared electricity need of 650 MW, the cost of electricity alone (without heating) consumed during the Olympics will amount to USD 1 million per day.

Moreover, maintaining the facilities after the Olympics will require a sufficient supply of electricity. Even if we assumed that the consumption of energy would be halved, it would cost RUR 15 million (USD 470,000) per day. Counting the heating costs, maintaining the Olympic facilities would cost RUR 10 billion (USD 312 million) per year, which would amount to half the budget of the city of Sochi!

Who will pay for all this? Will the money come from the Sochi city budget, or maybe from the federal budget? All this is quite unclear. Most likely, the Olympic stadiums will, slowly but surely, come into disrepair. This despite the huge deficit of winter sports facilities throughout Russia.

***

6. The Risks of the Sochi Olympics

The closer the Olympics, the louder the voices of those who doubt its success. The pre-Olympic Biathlon World Cup held in early March 2013 revealed only part of the serious problems that the athletes, fans, and the city’s residents would encounter. We found seven risks related to the forthcoming Olympics.

6.1. Energy Risks

Sochi is a city with an energy deficit. The consumption of electricity in the city amounts to 450-550 MW. The Olympic facilities have extremely high energy consumption. Ensuring the smooth functioning of the Games requires more than 650 MW of power, which means that the Olympics will consume more electricity than the city of half a million people.

In March 2013, there were two powerful thermal power plants in the city: The 160 MW Sochi CHP plant and the 360 MW Adler CHP plant. In addition, there are low-power sources of energy, such as the 30 MW Krasnopolyanskaya hydro power plant. In other words, Sochi’s own power capacity (550 MW) only covers the city’s own needs. During the Olympic Games, the total power consumption in Sochi will be more than 1,200 MW.

The original plan included the construction of a 367 MW CHP plant in Kudepsta and the transfer of power across the Tuapse district from the Tuapse CHP plant and Dzhubginskaya CHP plant with a total capacity of 380 MW. In addition, the plan was to purchase energy from Kubanenergo.

As of March 2013, the construction of the thermal power plant in Kudepsta has been halted due to the protests of local residents who strongly oppose the installation of an environmentally hazardous facility next to residential buildings and in the resort zone in general. It is impossible to believe that the power plant would be put into operation before the beginning of the Olympic Games, because the standard time for building thermoelectric stations is more than two years. For example, the Adler CHP plant took two and a half years to build.

Thus, the key issue is the transmission of electricity from Dzhubga to Sochi.

Over 2012, there were more than a thousand power outages recorded in Sochi due to breakages of power lines and the deplorable condition of network management in the city. That is to say, the supply of electricity shut off an average of three times a day in different parts of Sochi.

Currently, the city is actively working on upgrading its power networks and building new high-voltage power transmission lines.

However, many years of observation have indicated that in the month of February, the most adverse weather conditions lead to icing and the breakage of even the most modern power lines. So we cannot rely on an uninterrupted transfer of power from the Kuban.

The most realistic situation is for electricity to be generated using the city’s internal sources. Obviously, given the energy deficit, priority will be given to the Olympic venues. Therefore the risk that the city will find itself in the dark during the Olympics is very high indeed.

The proposal to deploy nine mobile power plants with a total capacity of 200 MW in the Imereti Valley would solve the problem of power supply for the Olympics, but it would be unlikely to help the city of Sochi.

Residents of the village of Kudepsta stage a rally at the proposed site of the planned thermal power plant. September 2012. (Photo: Olga Noskovets.)

6.2. Climate Risks

The Sochi-Krasnaya Polyana mountain cluster is the planned location for the cross-country skiing, biathlon, ski jumping, downhill skiing, and other open-air winter sports competitions. In February 2013, the weather in Krasnaya Polyana was characterised by higher temperatures than in previous years.

Thus, on 7 February 2013 (the same day that the Olympic Games are supposed to begin in 2014), the daily temperature in Krasnaya Polyana was +13 Celsius, rising to +15 Celsius on 11 February 2013. The average daytime air temperature in Krasnaya Polyana in 7-23 February 2013 (the duration of the Games in 2014) was +8 Celsius. This was two to four times higher than in the previous five years.

There is a hypothesis that the dramatic warming in Krasnaya Polyana was the result of predatory deforestation and the construction of tunnels and bridges for the Adler-Krasnaya Polyana highway. In fact, the road has turned into a pipe through which warm air from the Black Sea is pumped to the Krasnaya Polyana gorge.

Naturally, this hypothesis needs to be confirmed by synoptic observations over a number of years. The situation is made more complex by the fact that there has yet been no full investigation of the impact of the Olympic construction projects on the ecological and climatic situation in Krasnaya Polyana and the Imereti Valley.

If our hypothesis is confirmed by time, it means that Krasnaya Polyana will cease to be a winter resort, and all the investments made in the Games will be gone with the wind.

We have no doubt that the authorities will spare no effort to ensure that the Olympic Games will be held whatever the weather may be, including by deploying snow, using snow guns, and so on. However, Krasnaya Polyana is unlikely to become a major winter resort of European importance. What was the need, then, to spend billions to host the Winter Olympics in the subtropics?

RusSki Gorki ski jumping complex. (Photo: Michael Dalder/Reuters.)

6.3. Logistical Risks

Foreign athletes who have taken part in competitions at the Olympic venues have noticed the extremely low level of organisation of sports events in Sochi. The French Olympic medalist and biathlon world champion, Marie Dorin-Habert, said this after arriving in Sochi for the pre-Olympic Biathlon World Cup:

“Sochi is a ghost town. Expensive houses built like mushrooms in the mud; excavation works and tired workers everywhere. Everything is just so empty, and all this makes me feel very uncomfortable.

After a difficult journey here, we waited several hours at the airport. We had to show our passports many times. They took many photographs of us and our rifles, and we had to wait until they entered them into the registry.

Patience, please help us! We now live in small wooden houses not far the stadium. I do not know what is going to change here in a year, but for now I think that Sochi is just a waste of money, and there is no feel of the Olympic spirit here.”

The lack of world-class specialists on the resort business and event organisers leaves no doubt that organisational turmoil and just a classic mess will be the hallmark of the Sochi Olympics.

6.4. Technological Risks

Several accidents have taken place during the preparations for the Olympics. In December 2009, a grade-seven storm washed away a cargo port that was under construction.

During the construction of the Adler-Krasnaya Polyana highway, flooding of the River Mzymta washed away and flooded a large number of road equipment.

During the construction of the Kurortny Prospekt relief road, a tunnel along the road’s third section collapsed, and as a result, a residential house sank.

The shore reinforcements built by the Rotenberg brothers’ construction company, Engtransstroy, began to break down immediately after they were put into use.

During 2012, there were altogether 40 accidents and 25 people were killed at the Olympic construction sites.

The poor quality of construction and violations of technological rules and regulations are related to the use of cheap and unskilled labour. A paradoxical situation arose: Despite the astronomical budget of RUR 1.5 trillion (USD 47 billion), the building workers often did not receive their hard-earned pay. The money ended up in the pockets of the main clients, general contractors, subcontractors, and subsubcontractors.

As a result, thousands of migrant workers brought in to the Olympic construction sites were paid miserable wages, and even then with delays.

According to the human rights organisation, Human Rights Watch (HRW), which published a 67-page report, «Race to the Bottom: Exploitation of Migrant Workers Ahead of Russia’s 2014 Winter Olympic Games in Sochi,» more than 16,000 migrants from former Soviet republics toiled in Sochi. Officials of Russia’s Federal Migration Service estimated that nearly 14,500 people came from Uzbekistan alone to Sochi in just 2012.

We can only speculate what the quality of the facilities built will be.

Moreover, many facilities were not completed on schedule. As of the beginning of 2013, around 200 developers had failed to meet the timetable for putting their facilities into operation. This was the case, for example, with the Kudepsta power plant and the Fisht Olympic Stadium. This means that the last stage of preparation for the Olympics is being carried out in an emergency mode, and no one cares about the quality and technology used.

It should be noted also that the stadiums in the Imereti Valley were built in a swampy area where there was no solid ground down to a depth of 170 metres. The lack of quality project development, high seismicity, and irreversible changes in the course of the River Mzymta leave no doubt that the main Olympic venues will bring us quite a few more surprises.

The diving boat, Nord, sunk on 14 December 2009 during a storm in the port of Imereti. (Photo: Oleg Smerechinsky.)

Inundation of equipment in the floodplain of the River Mzymta on 29 December 2009. (Photo: Oleg Smerechinsky.)

During the construction of the Kurortny Prospekt relief road, a tunnel collapsed and a house sank. (Photo: Nina Zotina/Yuga.ru.)

Embankments constructed by the Rotenbergs’ Engtransstroy were destroyed. (Photo: Oleg Smerechinsky.)

6.5. Terrorist Risks

The Olympics will be held in the North Caucasus, which is a region with a traditionally high risk of terrorism. It is possible that some of the terrorist groups will try to carry out an attack against the participants and guests at the Olympics.

We hope that Putin, by virtue of his professional affiliation [with the KGB], has understood these risks sufficiently and will try to minimise them.

The lack of information about the real state of affairs in the North Caucasus does not allow us to make a realistic assessment of the terrorist threat, however.

6.6. Risks of a Boycott

There have been two political boycotts in the history of the Olympic movement: The first time was in 1980, when 65 countries refused to participate in the Moscow Olympics in protest against the Soviet invasion of Afghanistan, while the second boycott was in 1984, when the Soviet Union and Soviet-bloc countries retaliated by boycotting the Olympics in Los Angeles.

The attempts to boycott the Olympics in Nazi Germany in 1936 were unsuccessful. Only some athletes in the U.S. and the UK refused to take part in the Games.

Recent statements by U.S. officials and even Georgia indicate that these countries do intend to participate in the Olympic Games in 2014.

After the boycotts in 1980 and 1984, the International Olympic Committee announced that the refusal of national olympic committees to participate in the Olympics for political reasons could lead to the expulsion of their national teams from the Olympic movement. This is one of the reasons why the Beijing Olympics in 2008 proceeded without any boycotts, despite the mass protests of human rights organisations.

Russia’s bid for the Olympic Games in Sochi, filed in Guatemala in 2007, stated:

“The authorities in the Russian Federation will ensure stable political and economic conditions for improving the quality of life of the population. The country’s government is based on free elections, freedom of expression, and the balance of power as guaranteed by the Constitution of the Russian Federation. The Russian political system is wonderfully suited for the success of the Olympic and Paralympic Winter Games in 2014.”

This statement was a lie then and all the more so now. However, the governments of the overwhelming majority of countries fail to pay attention to this, much less the International Olympic Committee. (The IOC’s absolute support for the Olympic project of Putin and his friends can be explained by the fact that IOC President Jacques Rogge was elected to serve until October 2013, and he has every opportunity to absolve himself of responsibility for the Sochi Olympics by refraining from running for the next term.)

So, a political boycott of the Olympic Games in Sochi is extremely unlikely. Yet a civil boycott is a possibility.

People disgusted by the unprecedented cost, thievery, and destruction of the environment during the Olympic construction projects as well as the political repression in Russia have begun calling actively for a civil boycott of the Games.

This would mean refusal to attend Olympic events, refusal to purchase goods with the Olympic logo, and refusal to watch the Olympic competitions. Many residents in Sochi, members of the opposition, and ecological and human rights organisations support a civil boycott.

The problem is that due to political censorship, very few people will ever learn about such a civil boycott.

6.7. Risks of “Hospitality”

If you think that when you buy a ticket to the Olympic contests, you will then get to see them, you are mistaken. Thanks to the efforts of Russia’s Federal Security Service (FSB), you have to obtain something called a “supporter passport” as well. The FSB has given no word on how long you will have to stand in line for the passport, and how many scandals and cock-ups this requirement will lead to. We can only guess.

There is a high risk that the Olympics will be held with near-empty stands, which will not add to the optimism of the athletes.

The situation on the roads in Sochi even before the Olympics is characterised by the incredible traffic jams, compared with which the Moscow traffic jams seem quite tolerable. Due to the influx of high-ranking officials of Putin’s government and official delegations, who are used to having the traffic halted to allow them speed by, the situation on the roads of Sochi will become a real nightmare.

The comments of sportsmen who visited Sochi before the start of the Olympic Games are illustrative: “We went to a restaurant and got into a terrible traffic jam. The road was closed ahead of the arrival of Prime Minister Dmitry Medvedev,” the American skier, Noah Hoffman, wrote in perplexment.

Sochi was never distinguished by a European quality of service. This is what the Belarusian biathlete, Nadezhda Skardino, had to say (it is hard to suspect her of being capricious or spoiled):

“Over the course of two days, in three out of three stores, clerks tried to cheat us. When we complained, they replied, “Did you think you had landed in a fairy tale?” The prices of goods are unreal, and cash machines often break down suddenly, and then we find out that the total on the receipt was ten times higher than the price of the item purchased. Well, at least we know how to sort things out, but the poor foreigners will probably not even notice that they have been deceived.”

This is roughly the same what awaits fans and athletes in hotels and cafés in Sochi. For the city residents, however, the Olympics will hardly be a holiday. Because of the transport problems, the influx of official delegations and security officers, most prefer to stay at home.

PHOTO: Bridge for cars on a street in Sochi. (Photo: Noah Hoffman.)

***

7. Conclusion

The Winter Olympics in Sochi have turned into one of the most outrageous swindles in the history of modern Russia.

1. The venue for the Winter Olympics was an extremely unfortunate and capricious choice. Sochi is a subtropical resort area, and it was never developed for winter sports.

2. The scale of the cost of the Olympics is unprecedented, amounting to more than USD 50 billion, out of which USD 25-30 billion (50-60%) have been embezzled. The money stolen could have paid for 3,000 kilometres of high-speed roads, housing for 800,000 people, or thousands of ice rinks and soccer fields in every Russian city. None of that has happened, however. The Olympics have merely enriched oligarchs and companies close to Putin.

3. The construction of Olympic stadiums in the subtropical swampland without a thorough study of the project is extremely dangerous. The high seismicity of the area of the Imereti Valley and the changing flow of the River Mzymta as a result of the barbaric interference during the construction of the Olympic infrastructure threaten the destruction of the multibillion-dollar facilities.

4. We have yet to appreciate the true scale of the environmental damage of Russia’s only subtropical areas. However, it is already clear that the unique flora and fauna of the Imereti Valley have been lost, the River Mzymta has been disfigured, protected forests have been chopped down, and predatory construction of roads, bridges, and tunnels has lead to irreversible damage to the gorges in the area.

5. The Olympic construction projects were entrusted to people close to Putin. The lack of fair competition, the cronyism, and the draconian censorship on everything linked with the Olympics have led to a sharp increase in the cost and contributed to the poor quality of work in preparing for the Games.

6. Despite the monstrous facts about the excessive costs of the construction of the Olympic venues, not a single investigation of the theft, corruption, and violations of building regulations has reached trial. This has inevitably led to irresponsibility and impunity.

7. After the Games, the majority of the Olympic venues will remain unused. This at a time when there is a huge shortage of stadiums for winter sports in Russia. Because of the extremely high cost of maintaining the Olympic infrastructure, several sports facilities will gradually dilapidate. Billions of rubles of public funds invested in the Olympics will simply be wasted.

The Sochi Olympics have exposed all the flaws of the socio-economic model that Putin has created:

* Cronyism: The Olympics were built by people and companies close to Putin

* Opacity: Lack of proper information about budgets, problems during construction, heavy censorship in the media on the preparations

* Unnatural monopolisation of the economy: Caused multiple price increases on building materials and construction

* Voluntarism: The decision on the location of the Olympic Games was made behind the scenes, without public discussion

* Irresponsibility: Not a single actual investigation, especially one that would have been brought to trial

* Lack of public oversight: Even institutions that are subordinate to Putin, such as the Audit Chamber and the Duma, were not able to properly oversee the preparations for the Olympic Games

***

8. Our Actions

Comprehensively, all of the above flaws can only be fixed by changing the political system in the country. Specifically, we need to change Putin’s system of crony bandit capitalism and move to a system with a fully functional democracy and a competitive economy.

Yet even now, we need to demand for an investigation of the crimes that were committed during the course of the preparations for the Olympics.

To do this, we consider it necessary to establish a Public Committee of Inquiry on Olympic Crimes. The Committee would consist of lawyers, economists, social activists, environmentalists, and human rights defenders. The Committee’s activities should be as public as possible.

Objectives:

1. To force the Audit Chamber to remove all stamps of secrecy, including those marked “For Official Use Only,” from the results of audits on the spending of public funds on Olympic construction projects.

2. Have those dozen criminal cases that have already been opened on fraud, abuse of office, and embezzlement be brought to trial.

3. Ensure that the facts cited in this report are investigated, notably the awarding of no-bid contracts worth billions of dollars to the Rotenberg brothers, and the manyfold increases in the construction costs of almost all of the Olympic facilities.

We believe that the outcome of the Public Committee’s work should be the punishment of criminals and the confiscation of their property stolen during the preparations of the Olympic Games. The Audit Chamber, the Federal Antimonopoly Service, the Investigative Committee, the Prosecutor’s Office, and the Ministry of Internal Affairs are required to do all of this. It is their job. However, it is clear that without public pressure, Putin’s subordinates will not do anything. On the contrary, they will simply try to hide their tracks.

We are looking ahead to the 2018 FIFA World Cup that is to be held in Russia. The initial budget for the games is astronomical: RUR 1.39 trillion (USD 43 billion). If we do not want that the budget increases to RUR 5.5 trillion (USD 172 billion) — that is, to quadruple as happened with the Sochi Olympics — by robbing Russia and all of us, we need to carry the investigation of the crimes at the Olympics to the very end.

Translation: Kerkko Paananen.

Original report in Russian: http://www.putin-itogi.ru/zimnyaya-olimpiada-v-subtropikax/