2014 Sochi Winter Games = 1936 Berlin + Oligarchs?

♠ Posted by Emmanuel in at 2/21/2013 02:47:00 PM
A vainglorious leader with an authoritarian streak; a country with a chip on its shoulder against Anglophone powers; and massive Olympic spending to burnish a national reputation--where did we see all these things before? The parallels are not exactly edifying, but they're there nonetheless.

Reuters has a very interesting take on this latest Olympic boondoggle. Despite what the article mentions, I honestly doubt whether the Russians are pouring an unprecedented $50 billion into the 2014 Sochi Winter Olympics. Still, even if they spent even half that much it would be an astounding amount given that (a) it isn't the Summer Olympics which is a far more watched event and (b) Sochi isn't even a second-tier Russian city with a population of under 350,000.

There is a twist to this story, however: The Russian government, likely being ever-so-wise as to the financial calamities that have befallen any number of previous Olympic hosts, is making the Russian oligarchs foot the bill in a big way. As far as Russian politics go, we have a perverted if still comprehensible form of justice here. For, the guy who handpicked Vladimir Putin from obscurity, Boris Yeltsin, also oversaw the fire sale of various Soviet-era natural resource empires (that still dominate Russian industry) at a time when the West was foisting then-fashionable privatization of the commanding heights. It's only "fair" that the Yeltsin's main political benefactor be able to, ah, extract privileges from Yeltsin's economic benefactors.

In other words, part of the quid pro pro from all those years ago when the oligarchs were made very wealthy men out of a select few is footing the Sochi Olympics bill. It's not easy falling politically afoul of Putin as some oligarchs have found. That said, do not think the oligarchs are opening their pocketbooks willingly to the extent Putin expects them to for his pet project:
Above the Black Sea city of Sochi, one of Russia's richest men is spending billions of roubles to turn a patch of mountainside into a global showpiece. Metals magnate Vladimir Potanin has paid for new buildings, new lifts and hundreds of snow canons in the hope of transforming slopes not far from sub-tropical Sochi into a world-class ski resort. Like most of the plans to host the Winter Olympic Games next year, Russia's ambitions for the ski village and other venues are outsized in scale and ambition. Total investment to make the sleepy region fit to welcome thousands of competitors and the world's media is expected to exceed $50 billion, according to Russia's international news agency RIA Novosti. That would make it the most expensive games, summer or winter, ever staged. The 2010 Winter Olympics in Vancouver, Canada, cost a mere $3.6 billion, according to an estimate by PricewaterhouseCoopers, though others put the bill closer to $6 billion.
While Russia's President Vladimir Putin has not flinched at Sochi's eye-popping expense, some private investors and wealthy oligarchs, recruited by Putin to help foot the bill, are chafing at how much they are expected to do. In a rare challenge to the Kremlin they are demanding that the state help with the rising costs. Though precise figures on who is paying for what in Sochi are hard to obtain, RIA Novosti says private investors have spent nearly $25 billion. Federal and regional budgets have accounted for some $13 billion of the costs incurred to date, according to Deputy Prime Minister Dmitry Kozak.
The amounts we are talking about here are staggering. Q: When does a guy reportedly worth $14.5 billion complain about money? A: When the task he is asked to help complete will supposedly total $50 billion...
Potanin, whose estimated fortune of $14.5 billion makes him Russia's fourth richest man, according to Forbes, is complaining of at least $530 million of extra work his company was required to do. Now he wants the government to boost its contribution to his projects by cutting interest rates on his debt, which includes money borrowed through a line of credit with state bank Vnesheconombank of up to $750 million. "We are carrying out talks with the government on the compensation of a part of these expenditures through interest rate subsidies," said Potanin, speaking to Reuters. "Many see this as a form of government support. But actually it is only compensation for expenditures, which are not characteristic of ... commercial projects."

Oleg Deripaska, another billionaire oligarch [his boat is pretty nice I gather], has similar complaints, reflecting the complex, symbiotic relationship Putin has with Russia's rich elite. "The bargaining power is with the oligarchs until 2014, because they can come to the state for money or threaten that the construction won't get done in time," said Bruce Bower, a partner at the investment firm Verno Capital, who has lived in Russia since 2005. Putin wants the Games to project a positive image of Russia to the world and may endure the rising bills with a fixed smile, said Bower. The Russian president may hope to recoup a return on the investment later. Whether the oligarchs will as well is far from clear.
I honestly cannot see any of the participants gaining financially from this spectacle of trying to make a Potemkin Village of Sochi for international consumption. Not that many of us should be duped so easily.