Russia’s $50 Billion Olympics

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website
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For President Vladimir Putin, an accomplished athlete, winning Russia’s bid for the 2014 Winter Olympics was a matter of personal as well as national prestige. As the date approaches, the event is also becoming a symbol of Russian officialdom’s capacity for profligacy, procrastination and intrigue.

Back in 2007, when Russia won the right to host the games in the Black Sea resort town of Sochi, the projected bill was 313.9 billion rubles ($12.2 billion at the July 2007 exchange rate). In 2010, Russia’s ministry of regional development estimated the cost at 950 billion rubles ($30.6 billion at the time). This month, when Putin inspected the huge construction site in Sochi, the official estimate had already passed the 1.5 trillion ruble mark (about $50 billion), making next year’s extravaganza the most expensive Olympics ever.

“So when is this supposed to be finished?” Putin asked, gazing down at a new ski jumping hill. His questioning led him to the conclusion that the deadline had shifted to July 2013 from June 2011, that the budget had been exceeded by a factor of nearly seven, and that the person responsible was Akhmed Bilalov, deputy head of Russia’s Olympic Committee and until recently head of the company charged with building the jumping hill.

Bilalov, an influential businessman from the neighboring region of Dagestan, was immediately fired from the Olympic Committee -- a development that quickly became the subject of political speculation. Some noted that Bilalov’s involvement with the Sochi project had been sanctioned by former president and current Prime Minister Dmitri Medvedev, who, it is rumored, has fallen into disfavor with his old friend and mentor, Putin. Others focused on the complicated relationships within the pool of companies with access to Olympic construction contracts.

“A whole crowd of Olympic contractors of the same kind was standing behind Putin’s back as he chewed out Bilalov,” journalist Andrei Malosolov pointed out on “Have they done any better? Have they saved an extra cent for the government?”

Bilalov took his dismissal in stride, responding on Facebook that he was proud of the jumping hill project and posting a link to a TV skit about Sochi organizing committee members divvying up government cash.

Putin, for his part, contented himself with just one scapegoat. “On the whole, the work progresses in a satisfactory manner,” he declared. “There are problems, missed deadlines and questions concerning the cost of certain venues. I hope this can all be resolved in a timely manner.” He promised to return for further inspections in September 2013 and January 2014.

Bloggers calculated that, since the three quarters of the 1.5-trillion-ruble budget is already spent, each remaining day until the opening ceremony will cost Russia a further 1.05 billion rubles, or $35 million. “This number is grand,” marveled journalist Alexander Kiyatkin on “It stands alone.”

The consensus among bloggers and journalists covering the Olympic spend-fest is that most of the money is being misappropriated. “The scale on which funds disappear is directly proportional to the scale of the project,” Kirill Rogov wrote in the newspaper Novaya Gazeta. “If for smaller projects one can still count on the ’golden standard’ of 30 percent theft, for large ones it is likely to be 60 to 70 percent.”

“The machine appropriating government funds earmarked for mega-projects has reached incredible maturity and gained colossal political influence,” Rogov wrote. “It cares nothing for all-powerful Putin’s ire, and the ire itself is somewhat cautious and less than confident.”

There is no definitive proof of illegal activity. It does, however, defy comprehension that the Sochi winter games can cost 2.5 times as much as the 2012 summer Olympics in London. Anti-Putin opposition leader Alexei Navalny pointed out that the amount overspent on the jumping hill alone would be enough to finance free attendance for every guest of the Olympics.

It is hard to resist the temptation to calculate what else could be done with the money. Blogger Yegor Bychkov, for example, figured that each of Russia’s 1,100 cities and towns could get a new public swimming pool, an ice hockey arena and a soccer stadium. And there would still be money left over to buy every Russian male aged 5 to 25 a soccer ball, a basketball and other sports-related goodies.

Instead, Russia will continue shelling out funds to hold a winter sports competition in one of its warmest corners. And Putin will see to it that, as he put it, “this difficult task facing the nation is carried out in the best possible way.”

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