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The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
January 9, 2017

Publication: Polygraph
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The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Russian Sports Minister Claims Sochi Olympics Was Social and Economic Boon,

Headline:  Russian Sports Minister Claims Sochi Olympics Was Social and Economic Boon, But Huge Debts, Unused Facilities, and Environmental Damage Tell a Different Story

Name: Pavel Kolobkov, Russian Minister of Sports

Statement on left: “We can say today with confidence that in Russia, a project with the most successful utilization of the Olympic heritage has been implemented. The Games brought positive social and economic changes….”

Source: TASS

Conclusion (Background color =red) FALSE

Date: January 9, 2017

Condensed Version: At a meeting on the use of the facilities built for the Sochi Olympics, Sports Minister Pavel Kolobkov wanted to impress Prime Minister Dmitry Medvedev by claiming the Games in Russia – produced for $50 billion at a massive cost overrun amid allegations of corruption and mismanagement – was actually a boon for Russia. The Russian opposition exposed the huge waste and graft in the Games and even officials provided conflicting reports of costs and conceded overexpenditure. Most of the funding came from state coffers and guarantee of state bank loans which have still not been repaid –and have now been generously restructured. Russia has had some use of the Sochi venue with other international sports events but this has come at a further cost of maintenance and expense to meet world standards. And Sochi still struggles to bring in tourists, even with cut rates and new gimmicks like casinos. fact-check:

At a conference on January 5 in Sochi attended by Prime Minister Dmitry Medvedev to discuss the use of the Sochi sports facilities built for the 2014 Olympics, Sports Minister Pavel Kolobkov certainly overstated the "positive social and economic changes" brought from the Sochi Olympics.

Yet according to a report published in 2013 before the Olympics researched by Boris Nemtsov the opposition leader assassinated in February 2015 (Winter Olympics in the Sub-Tropics), the Olympics was the most expensive in history, with nearly $50 billion spent on constructing the Olympic village, the sports facilities and local infrastructure.

Using open sources such as records of bids and corporate financial reports, Nemtsov and his colleagues determined that while the Kremlin said that the Games were financed mainly from private investment, in fact, much of the funds came from state coffers and companies obtained favorable state loans. The Kremlin awarded President Vladimir Putin's close cronies such as Vladimir Potanin and the Rotenburg Brothers the most lucrative contracts. Actual costs exceeded estimates many times over, indicating kickbacks were made. The construction was performed poorly, repeatedly delayed, and came at a great human and environmental cost; in the end the builders said it was achieved at a loss. Sochi blogger Aleksandr Valov, repeatedly called out the damage to the environment from changing water flows and hasty construction, which was believed to contribute later to floods.

After the Olympics, Dmitry Kozak, vice premier of Russian, claimed the Games had "put 1.5 billion rubles" into state coffers, mainly due to the high prices of food and lodging. But experts such as Dmitry Abzalov, president of the Center for Strategic Communications, told Kommersant in March 2014 that return on investment was doubtful and that only long-term financial models might yield such a return.

Bloomberg calculated that the Russian government would have to spend another $7b billion to maintain all the infrastructure created for another three years.

Other western media reported that a year after the Olympics, the site was a ghost town, with managers struggling to attract visitors amid an economic downturn, and tourists attracted by patriotic campaigns to vacation at home rather than abroad, and deeply-discounted hotel rates.

Official sources vary widely in reporting on the cost of the games but all agree it was overspent, in part due to differences in counting direct expenses of the Olympic facilities and program as distinct from the costs of roads, trains and other infrastructure needed.

In an interview with TV Rain in February 2016, Mikhail Zadornov, chairman of the board of Vneshekonbank (VTB), admitted that the Games' funding, which he described as "quasi-budget," cost more than the officially declared 230 billion rubles (US $3.86 billion), but said the cost was in fact 1.5 trillion rubles ($25 billion).

Meanwhile, Vice Premier Dmitry Kozak said the cost was 215 billion rubles, even as the Russian Accounts Chamber said the cost was 325 billion rubles ($5.56), with about 103.3 billion ($1.73 billion) received from the federal budget and 221.6 billion from private investors ($3.72 billion).

Every facet of construction had a cost overrun. The Fisht stadium for example, built at a cost of $779 million, now requires a $46 million upgrade to remove the elaborate roof and bring it into compliance with FIFA standards for the 2018 World Cup which Russia is slated to host. Construction is behind schedule as with all Olympic projects.

The Games can hardly be declared an economic success for Russia given that state loans have not been repaid. Reuters reported in June that Vneshekonbank (VEB), which is under Western sanctions, would extend Olympics loans and lower the interest rate, estimating it may need up to $18.7 billion in state support. Bloomberg reported that originally 241 billion rubles in loans were taken out (at least $7.5 billion at the rate of the dollar in 2013).

State-run Russian Railways, which built the roughly $8.4 billion high-speed rail and highway to Krasnaya Polyana, is in a dispute with the regional government over the costs of running the expensive train, given the low number of customers.

Even immediately after the Olympics, Vedomosti reported that Colliers International had cautioned that hotels could not be kept full without ongoing investment and events.

Lenta has reported a rise in tourists to Sochi, but this figure is dwarfed by those attracted at the time of the Games, which reached a million in one two-day period. Recently, Sochi has resorted to opening casinos to bring cash into the region. To be sure, Russia has managed to stage other sports events to get the use out of Sochi, such as the Formula 1 Grand Prix. But other factors such as the discovery of rampant, systematic doping by Russian athletes which has disqualified them from other sports competitions could put Russia’s hosting of the 2018 World Cup in jeopardy.