Whose Idea Was It to Build a Winter Resort in the Warmest Part of Russia?

Putin's biggest critic talks about the troubles facing the Sochi Winter Olympics.

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Reuters

Boris Nemtsov has occupied many roles in post-Soviet Russia, both in government and in the parallel polis that is oppositional politics. He was first elected governor of Nizhny Novgorod, whose successful economic reforms in that region carved a political pathway that would ultimately take him into the deputy premiership under the Yeltsin government. Nemtsov has also been a dogged opponent of Vladimir Putin for the better part of a decade, warning as early as 2004 of a creeping dictatorship. He's perhaps best recognized by the series of reports or white papers that he has co-authored on the state of Russia's economy, the corruption at the heart of Gazprom, and Putin's rumored multi-billion dollar personal fortune, a subject of endless fascination for journalists. Most recently, Nemtsov and Leonid Martynyuk produced a large study of waste and graft that has become the 2014 Sochi Winter Olympics. My colleague Olga Khvostunova and I had a chance to interview Nemtsov about his report, " Winter Olympics in the Sub-Tropics: Corruption and Abuse in Sochi ." (An English-language version of the report was put out last week by The Interpreter, an online translation journal I edit under the auspices of the Institute of Modern Russia. Both the report and the following interview were translated by Catherine A. Fitzpatrick.)

You published a large report about the preparations of the Olympics in Sochi, but despite the active discussion of the amounts spent, the question remains open: whose idea was it to hold the Winter Games in Sochi, of all places? That's the warmest climate, and the most popular summer resort, in Russia.

That's a rather interesting story. Back in early 2000, I happened to be at a certain meeting with Putin in Europe, which took place in a mountain ski resort. And [Vladimir] Potanin, who was also there, proposed building the same kind of modern resort in Russia -- for example, in Krasnaya Polyana. Putin himself loves skiing, and at the time he really liked the idea. To be honest, I was also happy with this idea because I myself was born in Sochi and I know this area. But the idea of putting together the Olympics deal in connection with Sochi was something somebody else told him later -- perhaps it was [Krasnodar Territory Governor Aleksandr] Tkachev or someone else. But Putin was really fired up with this idea.

You write in your report that so far, $50 billion has been spent on the Olympics, whereas originally, the application for Sochi had a figure of $12 billion. In your estimates, the expenditures have quadrupled because half of them went to corrupt pay-offs and kick-backs. But perhaps it's because from the outset, not all the climactic conditions were taken into account in the cost?

It's actually about another issue. Back at the stage of preparing the application and planning, it became clear that it would not be possible to build all the infrastructure in Krasnaya Polyana -- the gorge is too narrow, and therefore it was decided to bring everything down to the Imeret Lowlands. In fact, this is a huge swamp in which is located the flood lands of the Mzymta River. There is a well-known fact that even back in the times of Stalin, they tried to measure the bottom of this swamp. It turned out that even at a depth of 170 meters, there were still no firm layers. That is, to construct some sort of buildings on this soil is simply madness, they will all slide. That's the first point.

As for the appraisal of the costs, we saw how the expenditures in the Winter Olympics in other countries grew; everywhere the final total is approximately double the original stated sum. Let us suppose this is a universal principle, then the cost of the Olympics should be $24 billion [twice the originally cited amount of $12 billion], but in Russia it is $50 billion. That means it is logical to suppose that $26 billion are bribes and embezzlement. In order to confirm this supposition, we decided to calculate how much was spent on average per fan. That is a more objective indicator because stadiums are different everywhere, infrastructure as well, but expenses per fan are everywhere approximately at the same level. What happened in Russia? The average "price" per fan at an Olympics stadium throughout the world is $6,000, but at the Fisht Olympics Stadium in Sochi, it is $19,500 dollars, that is triple the cost!

So why wasn't there an investigation of the facts of corruption in Sochi? If that project is so important for Putin, and if he is waging war against corruption, even if in word only, a sensational exposure of corruptions at the Olympics construction site would fit well into his PR campaign.

It's all very simple. Putin is part of a mafia; they do not turn in their own. He gave his friends an opportunity "to earn some cash," and now he is forced to deal with things as they are. He tried to remove someone, but no matter where he turned, the interests of friends were always quickly discovered.

But there have been four directors of [Olympics company] Olimpstroy in the last few years; Putin cannot completely close his eyes to what is happening, can he?

Yes, because there is such a mess there that he has nothing left to do. But keep in mind that in 2010, there were 27 criminal cases opened up on grounds of fraud at Olimpstroy, and not a single one of them reached the courts.

You also exposed the myth that the Olympics is being built at the expense of private investors, since according to your figures, 96 percent of the capital investments are passing through the state budget. What is the role of [aluminum billionaire] Oleg Deripaska and Vladimir Potanin in this process? And why in general did they have to get dragged into this escapade and risk their own money?

Have you seen The Godfather? To paraphrase a famous quotation from that film, I will answer: Putin made them an offer they couldn't refuse. For example, Deripaska undertook construction of the airport, cargo port, and Olympic Village. The total investment was to have been 45 billion rubles. He has already spent 40 billion on it to date. But since almost all the Olympics projects are a loss, all the private investors have become victims of this affair. Deripaska suffered doubly. The cargo port which he had built especially for the Olympics was not only washed away by a hurricane; Putin then announced that the port wasn't needed because it was too far away. But on the whole, it is really the case: the Olympics are being built almost entirely at the taxpayers' expense. Moreover, at the end of last year, the authorities officially announced that almost all the Olympic facilities without exception have been built at a loss and will never pay for themselves.

But wasn't it stated in the application that some of the stadiums will be able to be dismantled and moved?

They've now rejected that idea because they realized it would be too expensive. It's easier to build and abandon them then dismantle them and haul them somewhere.

You have paid particular attention to the participation in the Olympic construction of the Rotenberg brothers, about whom little is known in the West. What is their relationship with Putin?

Boris and Arkady Rotenberg are childhood friends of Vladimir Putin. The Rotenberg brothers' company obtained 15 percent of all the funds allocated for the Olympics. And they have skillfully expended these funds. For example, they built the Dzhugba-Sochi gas pipeline for 32.6 billion rubles, although another company was prepared to build it for 8 billion rubles. Or their company built the Kurortny Avenue bypass in Sochi -- an important transportation hub for the city. Each kilometer of that highway has cost them $170 million. It has turned out to be a golden highway. Moreover, they were handed no-bid construction contracts, without any of the most elementary rules of competition. If you look at the photograph of 1969 where Vladimir Putin and Arkady Rotenberg are standing in a group of friends (it was published in our brochure devoted to the Olympics), then the question arises: who in that duet is really the most important?

What do you think, will the Russian authorities manage to build everything in time?

According to our estimates, there are about 200 unfinished projects in Sochi. But I think Putin will manage to get it all done. It will be done in slipshod fashion and will begin to fall apart after the Olympics are over, but most likely everything will be ready on February 7, 2014, when the Games begin. First, Putin himself nowadays doesn't budge from Sochi and personally directs the construction. Second, thousands of guest workers have been sent to Sochi and they are toiling there night and day. Plus, for Putin, this is a moment of truth: he is prepared to throw any money at it, just to get it done. That is, the cost of this Olympics could grow even more.

Some experts say that during the Olympics in Sochi, there might be a blackout, since there isn't enough power generating in the region. Is this realistic, in your view?

Such a possibility exists, but I think the authorities will try to do everything possible so that it all goes normally. If necessary, they will turn the electricity off in Sochi. I'm joking, of course, but this problem is really very acute. The Olympics requires about 650 MWe whereas the city itself needs about 550 MWe. The authorities were planning to build the Kudepsta Thermal Power Station in addition, but due to protests by local residents, the construction has been continually delayed, and now the deadlines won't permit it anyway. Today, the main problem remains the transfer of energy from other power stations. Taking into account the habitual outages in this region, the risks that the city (not the Olympics, of course, but the city) will remain without electricity are fairly high.

Another problem being cited is the proximity of the Sochi region to the Chechen Republic. What do you know about security measures being taken?

We tried to find out what is going on, but the FSB has kept secret any information related to that topic, and therefore we haven't managed to find out anything. There exists another problem. In order to strengthen control, the government has put into effect the so-called "Olympics fan passport," without which you will not be able to attend any event at the Olympic Games. It will be a badge that will contain a bar code with all the information about a person, including his passport data. Fans will have to apply online and then pick up their badge at special registration centers. The problem related to the "fan passports" will be the lines. Recently, they tried to test this system at the World Youth Hockey Championship, which also took place in Sochi. The final game between Canada and the U.S.A took place in an empty stadium.

The Olympics is already provoking so much criticism already, what do you think, why does Putin need this at all?

Putin believes that the Winter Games are his personal project and his personal triumph. It doesn't matter what funds are spent; he wants to demonstrate his power to the whole world. And what happens later is not so important for him.

This post originally appeared on The Atlantic.

About the Authors

  • Michael Weiss is the editor of The Interpreter, a journal sponsored by the Institute of Modern Russia.
  • Olga Khvostunova is a Russian journalist, expert in political linguistics, and an analyst at the Institute of Modern Russia.