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Putin’s Downhill Race

Zimnyaya Olimpiada v Subtropikakh. Nezavisimyi Ekspertnyi Doklad [Winter Olympics in the Subtropics: An Independent Expert Report]

by Boris Nemstov and Leonid Martynyuk
Moscow, 41 pp., May 2013
Konrad R. Müller/Agentur Focus/Contact Press Images
Vladimir Putin at Novo-Ogaryovo, the presidential residence outside Moscow, June 2002

When the Russian city of Sochi, on the Black Sea, was chosen as the site of the 2014 Winter Olympics in 2007, Vladimir Putin had every reason to be pleased. Russia was given a chance to show the world the accomplishments of his regime. Now that he is again Russia’s president, after a four-year hiatus as prime minister from 2008 to 2012, Putin himself will be at the center of the events. But the Olympics might not turn out as he and his Kremlin colleagues have envisioned.

According to two of Putin’s critics from the democratic opposition, Boris Nemtsov and Leonid Martynyuk, the Olympics, to be held in February 2014, are a disaster waiting to happen. Nemtsov and Martynyuk have published a booklet, Winter Olympics in the Subtropics: An Independent Expert Report, describing the folly of the choice of Sochi, the unprecedented amount of government money being spent to prepare for the games, and the vast corruption that is part of the process.1 The Sochi Olympics, for these writers, are a microcosmic example of what is wrong with Russia today. And far from presenting Putin’s Russia in a favorable light, the Olympics could be devastating to the country’s image, as well as Putin’s. The authors begin:

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.

Sochi, which Nemtsov knows well—he is a native of the city who ran unsuccessfully for mayor there in 2009—is indeed an unfortunate choice. According to Nemtsov and Martynyuk, the temperature at Krasnaya Polyana, the mountain cluster outside of Sochi where many of the winter sports will take place, reached 55 degrees Fahrenheit this year on February 7, the date when the games will open next year. Four days later the temperature reached close to 60 degrees.

Equally disturbing are the enormous costs involved in construction for the games and the lucrative contracts that have been awarded to members of Putin’s inner circle. Nemtsov and Martynyuk have estimated that the Sochi Olympics will cost more than $50 billion, despite the fact that Putin initially told the Olympic organizers that Russia would be spending $12 billion on them. It is not unusual for a country’s actual expenses on the games to be double what was originally projected, but in Russia’s case the increase from the original estimates is more than fourfold. As the authors write:

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

The Rotenberg brothers, Arkady and Boris, friends of Putin since their childhood in St. Petersburg, are a case in point. They were judo partners of Putin at the Yavara- Neva Judo Club in St. Petersburg, and continue, along with him, to be benefactors of the club. In 2008 the brothers, now billionaires, began buying up subsidiaries of Russia’s national energy company, Gazprom; their construction company, SGM Group, is now a major supplier of pipelines to Gazprom. They also have large investments in Mostotrest, a road construction company that won the concession to build the controversial toll road from Moscow to St. Petersburg and is now the contractor for several road projects in connection with the Olympics.

In total, the Rotenbergs have received twenty-one Olympic construction contracts, worth around $7 billion, more than the entire cost of the Olympics in Vancouver in 2010. According to Nemtsov and Martynyuk, the Rotenbergs have reaped enormous profits from the projects because the contracts were awarded without competition.

Another old Putin friend, Vladimir Yakunin, a former neighbor of his at the exclusive Ozero dacha compound outside St. Petersburg, is also a major beneficiary of the Sochi Olympics. Yakunin is the head of Russian Railways (RZD), which was designated to oversee the building of a combined highway and railway from the city of Sochi to the area for downhill skiing at Krasnaya Polyana. As Nemtsov and Martynyuk note:

The most expensive facility of the Sochi Olympics…is not the central stadium, the ski-jumping center, or the bobsled track. Those facilities were peanuts compared to a 48-kilometer stretch of highway….

As in the case of the Rotenbergs, the builders of the road and railway, which have caused unprecedented environmental damage, received their contracts through Russian Railways without competitive bidding.

Yakunin has recently been in the spotlight because of revelations by anticorruption blogger Aleksei Navalny about his questionably acquired luxurious dacha outside Moscow. Navalny’s Fund to Fight Corruption also uncovered a network of offshore companies that Yakunin and his family use to fund real estate ventures abroad. In June it was widely reported that Yakunin had lost his job. But the Kremlin quickly dismissed the reports as unfounded.

Yet another Putin crony, Gennady Timchenko, is a large stakeholder in SK Most, one of the companies contracted by Yakunin to build the road and train to Krasnaya Polyana. He also happens to be a sponsor of the Yavara-Neva Judo Club and reportedly plays ice hockey with Putin and Arkady Rotenberg and some other close friends of the president. Timchenko runs Gunvor, the third-largest oil-trading company in the world. Gunvor rose from a little-known business to become a major force in the oil industry after the takeover by state-run Rosneft of the oil giant Yukos—and the arrest of its owner, Mikhail Khodorkovsky—in 2003. Rosneft now sells a significant amount of its oil through Gunvor.

According to Nemtsov and Martynyuk’s report, the cost of the highway to Krasnaya Polyana would have been radically reduced if the project had not included railway lines. But this would have meant leaving RZD management out of the vast profits, along with the affiliated companies with which it makes contracts.

In addition to the unfavorable climate, Nemtsov and Martynyuk go on to point out other risks of having the Olympics in Sochi. A major problem is the enormously large amount of energy that will be required. Sochi, a city of only a half-million people, is woefully inadequate for this task. In 2012, more than a thousand power outages—an average of three a day in various parts of the city—occurred there because of the poor condition of the electricity network.

The construction of facilities for the Olympics is being carried out by more than 16,000 migrant workers from the former Soviet republics. According to the report’s authors, in 2012 alone forty construction accidents and twenty-five deaths occurred in the preparations for the games:

The poor quality of construction and violations of technological rules and regulations are related to the use of cheap and unskilled labor. A paradoxical situation arose: despite the astronomical budget,…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…. We can only speculate what the quality of the facilities built will be.2

The authors observe that many of the contractors have not met the deadlines for completion: “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.”

Moreover, the authors predict, visitors to the Olympics in Sochi, which is known for its road congestion, will encounter traffic jams that could make Moscow streets seem tranquil in comparison:

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 to speed by, the situation on the roads of Sochi will become a real nightmare.

Adding to the concerns about the Kremlin’s planning for the Olympics is the controversy over the draconian anti-gay legislation, including a ban on “homosexual propaganda,” signed by Putin in June. The Interior Ministry, which controls the police, has said that this law will be enforced during the Olympics. Gay activists are calling for a boycott by participants in the games.3

Nemtsov and Martynyuk make only passing reference to the possibility of terrorism at the Olympics, noting that Sochi is part of the notoriously volatile North Caucasus. In fact, Sochi is located just 250 miles from the republics of Chechnya and Dagestan, where Islamist rebels have their base. In early July, Doku Umarov, the leader of the rebel movement, who is believed to be hiding in the mountains between Dagestan and Chechnya, threatened in a video that his followers would use “maximum force” to ensure that the games do not take place. Umarov has claimed responsibility for several terrorist attacks in Russia, including that on the Moscow metro in 2010, which killed forty people, and the 2011 bombing at Domodedovo airport, which resulted in thirty-seven deaths.

According to Ben Judah, a British journalist and the author of Fragile Empire, the North Caucasus regime is likely to become more and more troubled and violent.4 Moscow is spending vast amounts of money there but crime and ethnic conflict are rife and living standards abysmal. In Grozny, the capital of Chechnya, half the population is officially unemployed, while in the capital of neighboring Dagestan, Makhachkala, 90 percent of young people are without jobs. As Judah observes: “Stability in the North Caucasus is an illusion. Russians realize this, with only 5 percent thinking that the government fully controls the situation there.”

For Judah, the North Caucasus is only one of many problems plaguing the Kremlin. His excellent book provides a wide-ranging and highly critical account of the current state of Russia, based on travels throughout the country and other states of the former Soviet Union and interviews with people ranging from high-level officials to ordinary shopkeepers. He also gives an insightful historical perspective on the rise of Putin, describing how an unimpressive, former low-level KGB officer who was in the right place at the right time became extremely popular. These insights help us to understand why Russia has evolved since 2000 into a “fragile empire,” beset, as Nemtsov and Martynyuk express it, by “lawlessness, corruption, high-handedness, cronyism, incompetence, and irresponsibility.”

Judah makes a good case for the fact that Putin emerged from the shadows in large part because of the sophisticated use of the Russian media, controlled by the Kremlin, to package him: “The Kremlin seized the airwaves by creating a TV tsar, through telepopulism.” Putin, in Judah’s account, was to a considerable extent a product of his media advisers, who successfully presented him to the public as a man of action, a master of a variety of different skills. Judah quotes the respected Russian journalist Leonid Parfyonov:

The success of Putin was that…he understood that he had to be multiple Putins—Putin diving into the sea to rescue amphorae, Putin driving a yellow car through Siberia, Putin racing a sports car. It was about not being Brezhnev, not being Yeltsin. Not having the image stuck.
  1. 1

    An English translation, by Kerkko Paananen, appears on Nemtsov’s website: www.nemtsov.ru. For my review in these pages of an earlier, highly critical report by Nemtsov and Vladimir Milov, Putin: The Results (2008), see “ The Truth About Putin and Medvedev,” The New York Review, May 15, 2008. 

  2. 2

    See also the sixty-seven-page report by Human Rights Watch: “Race to the Bottom: Exploitation of Migrant Workers Ahead of Russia’s 2014 Winter Olympic Games in Sochi” (2013). 

  3. 3

    See the eloquent article by Masha Gessen: “As a Gay Parent I Must Flee Russia or Lose My Children,” The Guardian, August 10, 2013. 

  4. 4

    More on Sochi, the Olympics, and the situation in the North Caucasus is provided by The Sochi Project: Atlas of War and Tourism in the North Caucasus, by Arnold van Bruggen and Rob Hornstra, to be published by Aperture in November. 

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