Gaming the Sochi Olympics

Gaming the Sochi Olympics

Why you should care

Because all those feel-good moments we’re going to enjoy in February are far from cheap.

The Olympics are always about numbers: which country has the most medals, who had the fastest time, who jumped the furthest. Today, we’re looking at another big number: $50,000,000,000.

This is the current estimated price tag for the 2014 Sochi Winter Olympics, a figure that will make these the most expensive Games ever. Remember when everyone thought we’d hit peak-Olympic-spending with Beijing? The total price tag for those was $42 billion. The most recent Winter Olympics in Vancouver came at what now looks like the bargain price of $7 billion Canadian dollars, or $6.57 billion US dollars.

It wasn’t supposed to be this way. When Sochi was awarded the games in 2007, Russian president Vladimir Putin estimated that the price tag would be closer to $12 billion. Which begs the question…where has all the money gone?

Some of the price tag can be explained by the cost of transforming a relatively quiet seaside resort town into a complex capable of literally hosting the world. This requires a good deal of infrastructure — infrastructure that didn’t exist in Sochi before:

400

Venues to be constructed

230

Separate construction projects, including not just venues but also hotels, roads, energy plants and other transportation infrastructure

18

Miles of road connecting the seaside Olympic cluster of venues and facilities to the mountain cluster

That 18-mile road, with its $8.6 billion price tag, has become a particular target of Sochi critics. At a cost of $478 million per mile, that makes even the most expensive high-speed rail outlays look like pigeon feed. Russian Railways CEO Vladimir Yakunin, a close associate of Putin, says that the government ordered him to build the road — even after the Ministry of Transport concluded the project was too difficult. According to Yakunin, “They decided we were a sacrificial goat.”

Such infrastructure outlays are the result of Russia’s decision to host a Winter Games in a mid-sized summer resort town where the average temperature in February is a relatively balmy 40 degrees Fahrenheit. (Authorities have hedged against the risk of no snow by stockpiling 400 snow machines.)

More sinister though, and more concerning for those who would like to continue to do business in Russia, are seeping-out reports of the proportion of that money representing bribes to public officials. A new documentary by Simone Baumann (who was offered most $1 million by Russian officials to not show her film) features construction magnate Valery Morozov sharing a detailed breakdown of how money changed hands, and how kickbacks from public officials escalated from 3 percent of a project’s cost to as much as 50 percent.

Morozov fled to London with his family after testifying against officials who had attempted to extort $6.5 million from him. Kickbacks may represent as much as $30 billion of the Games’ total cost, according to a report from opposition leader Boris Nemtsov. However, the benefits are not being spread evenly around Russia’s super-elite: Bloomberg reports that some billionaires have been expected to make billions of dollars in investments that they might not be able to recoup.

The price of putting on two weeks of events in a country where the median income (after taxes) is $9,945 a year is disturbing enough. But when it’s considered as the latest in a line of blown budgets and extravagant expenditures, it’s time to ensure that the Games involve fair play — long before the torch is lit and starting whistles are blown.

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