Tag Archives: putin

2010_Olympic_Winter_Games_Opening_Ceremony_-_Russia_entering

Putin sets new record for Olympic spending

Sochi may be expecting to set new Olympic records at the 2014 Games this winter, but it has already set its own record, and it’s all about the money.

It begins with a train. The new road and railway to the mountain resort that will host the Sochi 2014 Winter Olympics, houses a newly opened, glass-fronted train station - the largest in Russia - overseeing 52,000 miles of rail track, the third-largest network in the world. Employing nearly a million people, the 31-mile Adler-to-Krasnaya Polyana project, a route which connects the arenas and Olympic Village along the Black Sea, is certainly ambitious, with a tunnel requiring engineering work so challenging that in 2011 it was named Major Tunnelling Project of the Year at an international awards ceremony.

But it comes at a cost. It is no surprise that the state agency that oversaw the infrastructure project is Russian Railways (RZhD), whose head is Vladimir Yakunin, a close associate of Vladimir Putin. The latter sees the Sochi Games as a key to the economic and geopolitical revival of Russia, holding back nothing when it came to the budget of the Games. But while RZhD’s construction project is something for the company to be proud of - given the region’s difficult and mountainous terrain as well the rushed time frame for finishing construction -Russians are not so proud of its hefty price tag. At $8.7 billion, this train extravaganza eclipses the total cost for preparations for the last Winter Olympics in Vancouver in 2010. And that is just the railway route.

At $51 billion, the Sochi Games are the costliest ever, surpassing the $40 billion spent by China on the 2008 Summer Olympics. How the Sochi Games grew so expensive is a tale of Putin-era Russia…but is this necessity or indulgence? Some argue that only $6 billion of it is directly Olympics-related, with the rest going to infrastructure and regional development which the state would have carried out anyway. That may be true, but it is hard to imagine the Russian government building an $8.7 billion road and railway up to the mountains if there were no Olympic Games.

When in 2007 Russia was bidding to host these 2014 Winter Olympics, the superfluous amounts it was willing to spend were all about pride and winning over the International Olympic Committee. Putin’s pledge to spend $12 billion in Sochi overshadowed the bids of the other finalists from South Korea and Austria. But since then, as costs have increased, Russian officials have grown less eager to boast about the size of the final bill.

Political opposition has claimed that the Russian state spent three times more on the road than NASA did for the delivery and operation of a new generation of Mars rovers! To top that off, an article in Russian Esquire estimated that for the sum the government spent on the road, it could have been paved entirely with a centimetre-thick coating of beluga caviar!

Down the hillside at the train’s final stop, stands a giant banner: “Sochi is preparing for Olympic records!” As it stands, the only record that Sochi is hitting at the moment is that of expenditure.

EU-Ukraine

Ukraine falls out of EU hands and into Putin’s

Ukraine doesn’t mind the fact that the European Union is stricken by financial troubles and rising nationalism; they still want in. Unfortunately, their leadership doesn’t, much to the dismay of the people who protested in tens of thousands in central Kiev. Braving icy weather and tear gas to demonstrate against their leaders’ sudden decision to scuttle an EU trade deal, police estimated the crowd at 25,000, but participants and aerial photographs suggest the number was closer to 100,000.

The pact which was on track to be signed at a Nov. 29 summit in Vilnius seemed to be going ahead as planned, with Ukrainian President Viktor Yanukovych pushing through the required legislation. However, Russia’s efforts to keep Ukraine out of the EU seems to have finally made progress, as Yanukovych is deemed to have made two semi-secret trips to Russia for talks with President Putin, who must have put something on the table more attractive than what the EU was willing to put up.

As Prime Minister Mykola Azarov put it on national television, modernising Ukrainian industry to EU standards will cost at least 150 billion to 165 billion euros. According to Azarov, the Russian leader promised to renegotiate Ukraine’s contracts with Gazprom, the Russian state-controlled natural gas supplier; a price cut could help Ukraine patch its budget deficit without reducing gas subsidies to households. Gazprom denies a price reduction has been agreed.

Whatever the motivation, Ukrainian government announced on Nov. 21 that it was suspending EU association talks, and the parliament threw out the Tymoshenko bill. For many Ukrainians, this is heartbreaking news: to them, the EU agreement was a cultural, rather than an economic one. The nation’s middle class, and a majority of people living in the western part of the country, saw it as a statement of values and identity.

It seems that the cynical Ukrainian government will go with whoever offers to bail it out. Distasteful as it may be for the EU, bailing out the government could bring into united Europe millions of enthusiastic citizens, who may be poor, but determined and idealistic, perhaps even able to replace the government in the near future with a less corrupt one. Europe, however, does not seem prepared to take on such a big project. Putin is a more determined player, so victory falls in his hands – for now.

morning-coffee

Putin’s Pet Project: The 2014 Winter Olympics

The 2014 Winter Olympics are coming up in the Black Sea resort of Sochi, where Russia is spending a record $48 billion on the event. It will be a mad rush to the opening ceremony on February 7th, while headlines are being dominated lately by concerns about terrorist attacks, lack of snow and anti-gay laws. Yet another, potentially longer-lasting battle is playing out behind the scenes, involving Putin’s government, some of Russia’s wealthiest industrialists and a state-owned bank. The government is demanding that the country’s biggest companies stand firm on commitments to bankroll the games.

State-owned Vnesheconombank, known as VEB, lent $7.4 billion to a who’s who of Russia’s elite, in order to finance venues and apartments in the Caucasus Mountains and along Sochi’s seacoast. The moguls say skyrocketing costs and restrictions on commercial activities mean they risk losses on their investments unless the government helps. They want extended tax breaks and subsidies on the interest payments they owe VEB for Sochi assets.

Sochi 2014 might as well be renamed Putin 2014, says Scott Antel, a partner at DLA Piper LLC in Moscow, who has worked on hotel projects in the region. Antel says Putin twisted billionaires’ arms to get the Olympics off the ground in return for letting their companies run their quasi-monopolies. “This was a deal with the devil,” Antel says. “You will do your civic duty and build facilities in Sochi so we can have this coming-out party for the new Russian state. This is your indirect taxation to be allowed to continue with your main business activity.”

As Putin flies to Sochi today for three days of meetings to check on construction projects, the question remains: could Putin be staking his legacy, and Russia’s image, on his pet Olympics project?