News / Europe

    Money Spent on Sochi Games Raises Questions

    An aerial view from a helicopter shows the Olympic Park in the Adler district of the Black Sea resort city of Sochi.
    An aerial view from a helicopter shows the Olympic Park in the Adler district of the Black Sea resort city of Sochi.
    The flame will be lit later this week to open the 2014 Winter Olympics being staged at the Russian Black Sea resort city of Sochi.
     
    But behind the pomp are many questions as to why this is the most expensive winter games ever held, whether the spending is justified and who is personally benefiting.
     
    Take a warm place with palm trees with mountains nearby and pour the astounding sum of more than $50 billion into it. And there, on the Russian shore of the Black Sea, the venues and infrastructure for the 2014 Sochi Winter Olympics are ready to open this week.
     
    Olympic Games are often linked to the will of political leaders of the host nation. And under the watch of President Vladimir Putin, Russia poured massive amounts of capital into Sochi.
     
    Russian scholar Leon Aron wrote recently on the American website Politico, “In putting his Winter Olympiad near a beach resort, Putin seems to be possessed of what might be called the ‘Peter the Great’ complex: emulating the Tsar who built his capital, from scratch, from a swamp.”
     
    No other Winter Olympics has ever cost this much. The 2010 games in Vancouver, Canada totaled roughly $7 billion. That’s less than one seventh what Sochi has cost.
     
    Most of Sochi’s infrastructure to support the games had to be built from scratch. Not just the main stadium and other sports venues but also the Olympic athlete’s housing and new hotels for spectators.
     
    Roads, electrical infrastructure and sewage treatment facilities were enlarged.
     
    There is also an advanced technological infrastructure to handle the massive demands imposed by presenting – and covering - the games in this digital age.
     
    Costs questioned
     
    The costs have raised many questions from activists demanding accountability and justification.
     
    Putin said that a review in 2012 by the Russian government’s Audit Chamber found some $500 million in cost overruns that reflected what he termed the honest mistakes of investors who underestimated the costs of construction.
     
     
    In the wake of that audit, three criminal investigations were launched against employees of Olympsrtroy, the state company responsible for the creation of Sochi 2014. But no court actions have reportedly been taken.
     
    Critics allege corruption.
     
    In a 2013 report, titled “Winter Olympics in the Subtropics: Corruption and Abuse in Sochi,” Russian opposition politician Boris Nemtsov slammed the massive spending.
     
    He alleged that out of the more than $50 billion spent on Sochi, “the total scale of the embezzlement is about $25-30 billion or about 50-60 percent of the stated final cost of the Russian Olympics.” 
     
    Putin dismissed the report, saying “If anybody has got this information, please show this to us. But so far, we haven’t seen anything except speculation.”
     
    Another critic is Alexy Navalny. The anti-corruption activist has created a website – sochi.fbk.info – that spotlights not just the costs but also benefactors of the spending.
     
    The examples cited include the main 40,000-seat Fisht Olympic Stadium.
     
    First projected to cost about $49 million, Navalny said the real final cost could well exceed $520 million and may total more than $700 million. He said the stadium’s main contractor, Ingeokom, has a history of massive cost overruns and completion delays.
     
    Ingeokom was also the contractor that completed the Iceberg Skating Palace at the games at a total cost that Navalny’s website said came to over $272 million – two and a half times what the activist claims it should cost.
     
    Navalny also alleged cost overruns with the construction of the railway and highway linking the resort of Adler in the coastal area to the mountains of the Krasnaya Polyana region, where skiing events will be held.
     
    Navalny’s site says the total cost of the transportation link came to $8.7 billion, nearly twice what was anticipated, and exceeding the total cost of the 2010 Vancouver Winter Olympics.
     
    Another new highway in Kurortnyi that is 17 kilometers long and built to get people to and from Olympic event came in well over projections at $2.5 billion, Navalny said.
    The Olympic hockey rink will have seats for 7,000 spectators.  The cost of building it, $104 million, is said by Navalny to equal the cost of 3,400 regular Russian hockey facilities.
     
    Links to Putin alleged
     
    Media reports have questioned the links of the construction projects to prominent Putin loyalists.
     
    That Shayba hockey rink was built by contractor Igor Nayvalt, who is reported to be well connected to the Ozero cooperative society. One of the significant shareholders of Ozero is Putin.
     
    Also connected to Shayba, according to the publication Forbes Russia, is Ural Mining and Metallurgical Company President Iskander Makhmudov, and his junior partner - billionaire Andrei Bokarev.
     
    Forbes Russia also reported that billionaire Arkady Rotenberg, the Chairman of SMP bank and a friend of Putin since childhood, landed $7.36 billion in state contracts connected to the Sochi games. 
     
    A group called the “Anti-Corruption Foundation,” led by former bank manager Vladimur Ashurkov, said three close Putin associates including Rotenberg benefited from the construction of a rail line. It named Gennady Timchenko, a partner in SK Most Construction Company and the head of Russian Railways, Vladimir Yakunin.
     
    Despite the questions about the construction, the Russian government has had little response. Said opposition politician Nemtsov: “Not a single criminal case of fraud, embezzlement, bribe-taking, or kickbacks has reached the courts.” 

    Maria Kovalskaya contributed to this report.

    Sochi's Olympic venues:

    • The Bolshoy Ice Dome illuminated at night in Sochi.
    • An aerial view from a helicopter shows the Olympic Park in the Adler district of the Black Sea resort city of Sochi.
    • The Iceberg skating arena and Fisht Olympic stadium in Sochi.
    • An inside view of the Adler arena speed skating venue in Sochi.
    • The RusSki Gorki Jumping Center in Sochi.
    • The Rosa Khutor ski resort, of Sochi.
    • An aerial view from a helicopter shows hotels and residential houses constructed for the 2014 Winter Olympics in the Adler district of Sochi.
    • The Bolshoy Ice Dome, Iceberg skating arena and the Fisht Olympic Stadium, Sochi.
    • The Sanki Sliding Center, east of Sochi.

    Jeffrey Young

    Jeffrey Young is a Senior Analyst in VOA’s Global English TV.  He has spent years covering global strategic issues, corruption, the Middle East, and Africa. During most of 2013, he was on special assignment in Baghdad and elsewhere with the Special Inspector General for Iraq Reconstruction (SIGIR).  Previous VOA activities include video journalism and the “Focus” news analysis unit. He also does journalist training overseas for VOA.

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    Comment Sorting
    Comments
         
    by: Geoffrey from: kenya
    February 03, 2014 1:49 PM
    corruption is widespread across the EU in procurement esp among constructors(162billions) Russia is no saint.just politics.admit Putin is doing a good job.trillions lost in Iraq or that was Bush the Great,eh!this warped world!

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