Boris Nemtsov’s latest investigative report
[The following is a translation of excerpts of a report written by opposition leader Boris Nemtsov and Solidarity activist Leonid Martynyuk, detailing allegations of rampant corruption in the preparations for the 2014 Sochi Winter Olympics--Ed.]
Russia is a winter country. It’s hard to find a place on the map of Russia where there hasn’t been snow and where winter sports are not developed. But Putin found such a spot and decided to hold the winter Olympics there. It’s the city of Sochi.
Before the announcement of the Russian application for the Olympics, many citizens, including the authors of this report, were certain that the Olympics would be held in the mountainous regions of Sochi, in the gorges and on the slopes of Krasnaya Polyana. Many people thought then that the Olympics would result in increased prestige for Russia in the world, the development of winter sports and the creation of a world-class ski resort, the only one in our country.
That is why, immediately after the decision of the International Olympics Committee in July 2007 in Guatemala, millions of Russian citizens—ourselves include— rejoiced at the decision. However, the joy was short-lived. It turned out that the main competitions, both the opening and closing ceremonies of the Games, would take place at the Imeret Lowlands, a sub-tropical swamp located on the shore of the Black Sea in the basin of the Mzymta River— the warmest place not only in Sochi, but in Russia. The authorities explained this as due to the fact that there was little space for the stadiums and main Olympic Village in the mountains.
Putin’s personal trip to Guatemala and his assurances that the Olympic facilities would be completed on time, and that enormous suns – $12 billion – would be spent on preparation played a large role in the success of the Russian application.
As it has become known now, the Olympics budget for Russia beat all the world records and now consists of more than $50 billion.
The Winter Olympics in Sochi is Putin’s personal project. He believed (and likely still believes to this day) that the Olympic Games will be his triumph, and that the participation of athletes from all over the world will be a recognition of his indisputable leadership, both in Russia and the world.
Subsequent events have demonstrated that the preparation for the Olympics has become a disgrace rather than a triumph. It has become increasingly clear that the Sochi Olympics are an unprecedented thieves’ caper in which representatives of Putin’s government are mixed up along with the oligarchs close to the government. This caper is not even comparable to Nikita Khrushchev’s reckless scheme to plant corn in the Russian Arctic, or the Communist plans to turn the course of the northern rivers.
Essentially, the Olympics have exposed in concentrated form the main flaws of the system: abuse, corruption, petty tyranny, cronyism, non-professionalism, and irresponsibility.
This is what we will address in this report.
Abuse and Corruption: 2014 Olympics
The Sochi Olympics has gone down in history before it has opened: it is the most expensive Olympics in the history of humankind. With over $50 billion already spent, it is more expensive than the sports buildings of all the other winter Olympics combined, and there have already been 21 of them. Furthermore, the lion’s share of the funds are government expenditures (from the state budget, loans from state banks and state guarantees).
Even the most costly Olympics in Beijing in 2008 (we will note that these were the Summer Games) was cheaper than the Sochi Olympics and cost the Chinese $43 billion, according to official figures.
It is no secret that the preparation for the Olympics in Russia has been accompanied by unprecedented corruption. Below, we provide calculations for the scale of the embezzlements made through two different methods:
Method 1: A comparative analysis of the growing expense of the 2014 Olympics relative to the increase in cost of the previous Olympics.
In the summer of 2007 in Guatemala, Putin announced during a meeting of the International Olympics Committee that the overall expenses for the Sochi Olympics would be $12 billion. At the time, this astronomical figure shocked the imagination of many of those present, as well as specialists. Essentially, Putin was openly announcing that he was prepared to spend twice as much on the Olympics than his competitors, the Austrians and South Koreans, had proposed.
As we now know, the final figure for the expenditures – $50 billion – is four times the sum originally cited by Putin.
Let us remember that.
And now let us compare the rise in prices of Olympic buildings compared to construction at previous Games.
Olympic facilities have generally doubled in price as they have been built. Winter Olympics have increased less in expense than Summer Olympics.
The total expenditures on the last Winter Olympics in Vancouver approximately doubled: from $2.88 billion to $6 billion. From this we can take away an important conclusion: the more than doubling in costs for the Winter Olympics which we see in Sochi is an anomaly, and can be explained by banal thievery, corruption, embezzlement and compute lack of professionalism of the contractors.
The cost of the Olympics in Sochi, given the average world parameters for the increase in costs, should have been $24 billion (the $12 billion announced by Putin, multiplied by two). The remainder — $26 billion – consists of embezzlement and kickbacks.
Method 2: A comparative analysis of the cost of the Olympic facilities in Sochi relative to their analogues in previous Olympics.
Fisht, the chief Olympic stadium, is located in the Imperet Lowlands. The opening and closing ceremonies for the Olympic Games will take place there in February 2014. The stadium holds 40,000 fans. Originally, the cost of construction of the stadium was estimated at 7.5 billion rubles ($230 million). The cost is now claimed to be 23.5 billion ($780 million), that is, it has tripled. Thus, the cost per fan at the central stadium in Sochi is $19,500.
Let us compare this figure with the expenditures per fan at other Olympic stadiums: the average cost per fan for the Central Stadium of Olympics is about $6,000, and the average cost per fan at Putin’s stadium is $19,500— that is, triple the amount.
The Bolshoi Ice Palace (for hockey) holds 12,000 people and is also being built on the Imeret Lowlands. The original cost was estimated at $200 million. By 2012, it had risen to $300 million. The average cost per fan was $25,000. The average cost of an analogous ice rink per fan in previous Olympics was $11,000. Thus, Putin’s hockey stadium is more than twice as expensive as the average stadium anywhere else in the world.
Putin’s Iceberg figure-skating palace is also 2.3 times the world average at $23,000 per fan; the Russian Hills trampoline was $36,000 per fan, although the world average was $3,400, i.e. nearly 10 times more. The Olympic Village built by Deripaska costs $363,000 per person; the average for other countries was $150,000, making Putin’s Olympics more than twice the world standard. On the whole, for all the buildings, Putin’s cost has been double or triple the world average; thus, by dividing the total cost of $50 billion by 2.5, the figure of $20 billion for the actual cost is yielded, with approximately $30 billion estimated for the amount of stolen funds.
Thus the total scale of the embezzlements is about $25-30 billion, or about 50-60 per cent of the stated final cost of the Russian Olympics. This is the minimum amount of inflation one can expect from a system blighted by kickbacks. We have not taken into account, after all, that the slave labor of migrant workers was exploited in the Olympics. We haven’t factored in that the quality of the work has not been comparable at all with construction in Vancouver, Turin or Salt Lake City.
The scale of graft in the Olympic budgets defies the imagination. But here is what is interesting: not a single criminal case of fraud, embezzlement, bribe-taking or kickbacks has reached the courts. The main reason for the epic thievery in Putin’s Olympics is the closed nature of the government and the impunity of the criminals close to Putin. That is an indictment of the system.
The Kings of Olympic Contracts
The astronomical sum of 1.5 trillion rubles spent on the Olympics has been controlled largely by business people and companies close to Putin.
The government has tried to promote the myth that the construction of the Olympic facilities is being done through private investment. This is absolutely not the case. The lion’s share of the construction is being done either at the expense of the state budget, through state corporations, or through shareholder associations which are either state property or under state control. There are only two large private investors: businessmen Oleg Deripaska and Vladimir Potanin. The rule operating with regard to private investments has been that 70 per cent of the investments are covered by loans from the Vneshekonombank (a state corporation!) and 30 per cent by private contributions. However, by the end of 2012, the government admitted that practically all the Olympic buildings, without exception, were running at a loss and would never pay for themselves. As Vneshekonombank cautiously put it, “The investors began to view more critically the market risks for realization of the projects. The question of return on investment arose.” And they increased the bank loans to 90%.
Thus, if you make the necessary calculations, it turns out that the overall amount of the state capital investment in the program for preparation of the Games is 96 per cent! The Olympics are being built at the taxpayers’ expense.
Troika of Champions
The largest investor in the construction of the Olympic facilities is the state corporation Olimpstroy, which controls 303.9 billion rubles ($9.4 billion) of state budget funds. Originally, the talk was of 143 billion ($4.4 billion), but in 2011 the government unexpectedly more than doubled the amount of the contribution to Olimpstroy to prepare the Olympics. In an explanatory note, the Ministry of Regions then did not even consider it necessary to account for why it was demanding an increase in expenses, but indicated that these expenditures had already been provided for through the federal budget.
Thus, 20% of the budget for the Olympics goes to Olimpstroy. The company is responsible for the building of the stadiums in the Imeret Lowlands, the main Olympic Village and the infrastructure of other buildings, and also to coordinate the general preparations for the Olympics. Four managers have followed in succession since Olimpstroy was created in 2007: Semyon Vaynshtok, Viktor Kolodyazhny, Taymuraz Bolloyev and now Serge Gaplikov. This personnel shuffle indicates the chaos and disruption in the state corporation responsible for the Olympics. Each change in the leadership of Olimpstroy was accompanied by the opening of criminal cases on evidence of embezzlement, corruption and exceeding of official authority (after Bolloyev resigned in 2010, 27 criminal cases were filed against him). Yet not a single one of these cases has reached trial.
Although in 2007 it was announced that parliamentary oversight would be established over the Olympics construction, Olimpstroy was never put on the list of companies that had to report on their activity to the State Duma. The attempt by the Communist deputies to change that in 2011 failed, despite the fact that their initiative was supported by three other factions. The deputies from United Russia all voted against it. Now we can understand why.
In second place in commanding budget funds are the companies affiliated with the businesses of the Rotenberg brothers, Arkady and Boris, childhood friends of Vladimir Putin.
The Rotenberg brothers built the gas pipeline, roads, airport, Adler Thermal Electrical Station (TES), the cargo and sea ports and other infrastructure. The total amount of the budget funds and Gazprom funds which their companies received was of the order of 229 billion rubles ($6.9 billion) – 15 per cent of the entire Olympics budget. That is, every seventh Olympic ruble has been taken by the Rotenbergs.
Finally, the last company in the troika of leaders is the Russian Railroads (RR), which is a 100 per cent state-owned company.
The head of RR is Vladimir Yakunin, Putin’s friend from the Ozero Cooperative. RR is responsible for building automobile and railroads, including the most expensive item of the Olympics – the Adler-Krasnaya Polyana Highway, which cost over 260 billion rubles ($8 billion). Yakunin is also responsible for the reconstruction of part of the Tuaps-Adler rail line; the construction and modernization of train stations (at Adler, Dagomy, Matsest, Khost, and Sochi); and the creation of freight yards. In total, according to the companies’ annual reports, the amount commissioned is approximately 300 billion rubles ($9.2 billion) — approximately 20 per cent of the Olympic funds from the state budget and from the raising of rail tariffs. That means it is at the taxpayers’ expense. In 2008 alone, the Olympics tariff hike was 1 per cent on all forms of shipping throughout the country.
Other Interested Parties
The other major participants in the Olympics construction have received between 4-to-10 per cent of the allocated budget funds.
Gazprom— headed by Putin’s friend and subordinate, Alexei Miller— has been involved in four construction projects costing 160 billion rubles ($4.9 billion); the administration of Governor Alexander Tkachev, famous for Kushchyovka [a mass murder case] and Krymsk [a flood in 2011 in which 153 people died], has a budget of 109 billion rubles ($3.3 billion), of which 77.7 billion ($2.4 billion) are spent. Local and federal electric companies are also expected to spend 50 billion rubles ($1.5 billion). German Gref, chairman of the board of Sberbank and a friend of Putin’s since his St. Petersburg days, is building the trampolines, Mountain Carousel resort and the Hills City with the Olympics media village at a cost of between 75-to-80 billion rubles ($2.3 billion), which has grown from the 16 billion rubles ($500 million) originally projected in 2012.
Vladimir Potanin’s Interros and its affiliate, Oleg Deripaska’s Bazel, are the private investors. Potanin has put in 68.6 billion rubles ($2.1 billion) for the Roza Khutor resort, of which 55.7 billion ($1.7 billion) is a Vneshekonombank loan.
In 2007, Oleg Deripaska planned to spend about 45 billion rubles ($1.3 billion). Today, his investment is about 40 billion ($1.2 billion) in the Olympic Village in the Imeret Lowlands, comprising the freight port and the Sochi airport. Deripaska’s companies also took part in the Kurortny Avenue bypass and received a loan from Vneshekonombank for 22 billion rubles ($680 million). Since virtually all of these Olympics projects are not profitable, private investors have essentially become victims of the Olympics deal.
In addition, InterRAO has been involved (via the modernization of the Sochi TES), as well as Alros, the presidential administration, and other state companies and agencies, taking approximately 13-15 per cent of the Olympics budget.
The status of various participants in the construction of the Olympics differs radically. Potanin and Deripaska have been forced to invest their funds and take loans, running the risk that they will never see a return on their investments. Sberbank and Gazprom perceive participation in the Olympics construction as a burden imposed on them by Putin. RR is building at the expense of the budget and raising tariffs on rail freight, and Olimpstroy is taking billions from the state, and remaining a state corporation. Only the Rotenbergs have earned fantastic profits on building the Olympics infrastructure; in fact, their private companies have gained this profit while having their risk reduced to zero by contrast with the state corporations and other private investors, because the facilities they are building will be turned over to the government.
The astronomical earnings of the Rotenberg family, Putin’s childhood friends, is explained either by the handing over of no-bid contracts or the lack of proper competition during the tenders. They have received 21 contracts for Olympics constructions at a cost of 229 billion rubles ($7 billion). This is more than the entire expenditure on the Olympics in Vancouver ($6 billion).
The closer the Olympics come, the louder grow the voices of those doubting that it will be held successfully. The World Biathlon Cup Stage, which took place in early March 2013, exposed only a portion of the serious problems which athletes, fans and residents of the city will encounter. We have found seven risks in the forthcoming Olympics.
1. Energy Risks
Sochi is a city of energy shortages. The usage of electrical energy by the city amounts to 450-550 megawatts. The Olympics buildings have extremely high energy consumption. In order to secure the normal functioning of the Games, a capacity of more than 650 MWe is required; that is, the Olympics will require more energy than a city of half a million people. By March 2013, two powerful thermal stations were operating within the city – Sochi with a capacity of 160 MWe and Adler with 360 MWe. Thus, the city’s own capacity (550 MWe) covers only part of the needs of the city.
With the Olympics, the overall demand for power will be more than 12000 MWe.
The original plan included the construction of the Kudepsta Thermoelectric Power Station (TPS—367 MWe) and the transfer of electrical energy across the Tuaps district from the Tuaps TPS and the Dzhubga TPS with a combined capacity of 380 MWe. It was also proposed to buy energy from Kubanenergo.
By March 2013, the construction of the Kudepsta TPS could not begin because of protests by local residents who were categorically against the installation of an environmentally-dangerous facility next to residential homes and in a resort zone in general. And it is also impossible to believe that the station will be finished by the opening of the Olympics, since the standard time for building a thermoelectric station is more than two years. The Adler TPS, for example, took 2.5 years to build.
Thus, a key issue is the transfer of power across the Dzhubga-Sochi sector.
Throughout 2012, more than a thousand power outages were recorded due to breaks in the power lines and the deplorable condition of network management in the city. That is, on average the electricity will shut off three times a day in various districts of Sochi.
At the present time, active work is underway in the city to modernize the network and build high-voltage power transfer lines.
Many years of observation have indicated, however, that in February the more favorable weather conditions lead to icing and breakages of even the most modern power lines. So we cannot rely on an uninterrupted transfer of power from Kuban. The most realistic situation is that the power supply will be realized by the city’s own internal resources. Obviously, with the energy shortage, priority will be given to the Olympic buildings. So the risk that the city will live in the dark during the Olympics is very high.
There is a proposal to deploy nine mobile power stations in the Imeret Lowlands with a combined capacity of 200 MWe in order to resolve the problem of supplying power to the Olympics, but that won’t help the city.
2. Climate Risks
In the mountain cluster of Sochi-Krasnaya Polyana, competitions are planned for ski races, biathlon, trampoline jumping, downhill skiing and other open-air winter sports. The weather in February 2013 in Krasnaya Polyana was characterized by high temperatures in comparison to previous years. Thus, on February 7 (the proposed opening day for 2014), the daytime temperature was +13 C, and on 11 February is rose to +15 C. The average daytime air temperature in Krasnaya Polyana from 7- 23 February (the days of the Games) was +8 C of warmth. This was two to four times greater than in the previous five years.
There is a hypothesis that the sharp warming of Krasnaya Polyana was caused by the predatory actions of chopping down forests and building tunnels and bridges during the course of construction the Adler-Krasnaya Polyana Highway. Essentially, the road has become a pipe through which warm air from the Black Sea is pumped through the gorge of Krasnaya Polyana. Undoubtedly, this hypothesis needs confirmation through weather observations for a number of years. The situation is made more complex by the fact that there is not a single full-fledged study of the influence of the Olympic construction on the environmental and climate situation in Krasnaya Polyana and Imeret Lowlands.
If our hypothesis is confirmed, that will mean that Krasnaya Polyana will cease to be a winter resort and all the investments in the Games will have been thrown to the wind.
We have no doubt that in the course of conducting the Olympic Games, the authorities will make every effort to hold them whatever the weather may be, including by delivering snow, using snow canons and so on. But turning Krasnaya Polyana into a winter resort at a European level is hardly likely to take place. So then why did billions have to be spent to hold the Winter Olympics in the sub-tropics?!
3. Logistical Risks
Foreign athletes who have taken part in competitions at the Olympic facilities note the extremely low level of organization of the athletic events. Here is what Marie Doren Aber, the French Olympic prize winner and world champion in the biathlon, wrote after coming to Sochi for the pre-Olympic phase of the World Cup in the biathlon:
“Sochi is a ghost town. Wealthy homes built like mushrooms in the mud, excavating everywhere, tired workers all around. Everything is empty, everything makes me feel uncomfortable. After the difficult journey here, we waited several hours in the airport. We showed our passports many times, photographed ourselves and photographed the rifle, and waited until it was put in the registry. Patience – help us! Now we are living in little wooden homes not far from the stadium. I don’t know what will change here in a year, but for now I think that Sochi is a waste of money, and it doesn’t feel like the Olympic spirit.”
The lack of world-class resort business specialists and mass event organizers leaves no doubt that the organizational messes and chaos will be the hallmark of the Sochi Olympics.
4. Technical Risks
During the preparation for the Olympics, several accidents occurred. In December 2009, a grade seven storm washed away the cargo port under construction.
During the construction of the Adler-Krasnaya Polyana Highway, as a result of flooding on the Mzymta River, a large quantity of road construction vehicles were washed away and drowned.
During the construction of the Kurortny Avenue bypass, the tunnel collapsed on one of the third-line parcels, and a residential home sunk.
The shore reinforcements built by the Rotenbergs’ company Inzhtransstroy began to fall soon after they were put into use.
In 2012, there were 40 accidents at Olympics construction sites and 25 people were killed.
The poor quality of the construction, the violation of technical standards and rules are connected with the use of cheap and poorly-qualified labor. A paradoxical development has taken place – despite the astronomical budget of 1.5 trillion rubles ($46 billion), wages earned often do not reach the workers. Instead, they end up in the pockets of general contractors, sub-contractors, and sub-sub contractors. As a result, thousands of migrants were brought to the Olympics construction sites are paid miserable wages—and even these are delayed. According to the human rights organization Human Rights Watch, which published a 67-page report, “Olympic Anti-Records: Exploitation of Labor Migrants During Preparation for the 2014 Winter Olympics Games in Sochi,” more than 16,000 migrants from the former Soviet republics have worked in Sochi. According to officials of the Federal Migration Service, nearly 14,500 people came from Uzbekistan alone.
We can only guess at the quality of the facilities built.
Moreover, many buildings have not been completed on schedule. In early 2013, about 200 developers disrupted the schedule for the opening of the facilities, including the Kudepsta TPS and the Fisht Central Olympics Stadium. That means that in the last stage of the preparation for the Olympics, work is underway in an emergency regimen when no one is thinking about quality and techniques. It must be noted that the construction of the stadiums in the Imeret Lowlands is being done in a swamp, with hard foundations absent to a depth of 170 meters. The lack of high-quality finished projects, the high seismicity and irreversible changes to the course of the Mzymta River connected to changes in its bed leave no doubt that the main Olympic buildings are still to bring us quite a few surprises.
5. Terrorist Risks
The Olympics will take place in the North Caucasus, in a region with a traditionally high terrorist threat level. It cannot be ruled out that some of the terrorist groups may try to carry out an attack on participants and guests of the Olympics. We hope that Putin, by virtue of his professional affiliation [with the KGB], understands these risks sufficiently and will try to minimize them.
The lack of information on the real state of affairs in the North Caucasus does not enable us to realistically evaluate the level of the terrorist threat.
6. Boycott Risks
Political boycotts of the Olympics have taken place twice –first, in 1980 when 65 countries boycotted Moscow Olympics to protest the Soviet invasion of Afghanistan; and a second boycott in 1984, when the USSR and countries of the Soviet bloc boycotted the Los Angeles Olympics in retaliation. The attempts to boycott the Olympics in Nazi Germany in 1936 were not successful – only a number of individual athletes from the US and UK refused to take part in the games.
The latest statements from US officials and even Georgia indicate that these countries intend to take part in the Olympic Games of 2014.
After the boycotts of 1980 and 1984, the International Olympics Committee announced that the refusal of National Olympic Committees to take part in the Olympics for political reasons threatens the expulsion of the national teams from the Olympic movement. This is one of the reasons why the Beijing Olympics of 2008 proceeded without any boycotts, despite mass protests by human rights organizations.
The Olympics application for Sochi submitted in Guatemala in 2007 stated:
“The government of the Russian Federation will provide stable political and economic conditions for the improvement of the quality of life of the population in the country. The governing of the country is based on free elections, free expression and the balance of power guaranteed by the Russian Federation Constitution. The Russian political system is wonderfully suited for the successful conduct of the Winter Olympics and the Para-Olympic Games of 2014.”
These statements were lies then, and all the more so now. However, the governments of the overwhelming majority of countries of the world do not pay attention to this, much less the International Olympics Committee. (The absolute support of the IOC for the Olympics activities of Putin and his friends can be explained by the fact that Jacques Rogge was elected before October 2013, and he has every opportunity to remove responsibility for the Sochi Olympics from himself by refraining from running for the next term.)
Thus, a political boycott of the Sochi Olympics is extremely unlikely. But a civic boycott is possible. People are outraged by the unprecedented expenditures and thievery at the construction of the Olympic Games, as well as the destruction of the environment which took place during construction, and the political persecution in Russia, and are actively calling for a citizens’ boycott. This would entail a refusal to visit the Olympic events, a refusal to buy goods with the Olympic logos, and a refusal to watch the Olympic competitions. Many residents of Sochi, representatives of the opposition and environmental and human rights groups support the civic boycott.
The problem is that under the conditions of political censorship, few people, few people know about the citizens’ boycott.
7. Risk of “Hospitality”
If you think that if you have bought a ticket to the Olympic competitions you will see them, you are mistaken. Due to the efforts of the Russian Federal Security Service (FSB), you must still obtain a “fan passport.” The FSB is not telling us what waiting lines might be involved in this, and what sort of scandals and mess-ups are likely to occur. We can only guess.
There is a high risk that the Olympics will take place with half-empty stadiums, which does not add to the athletes’ optimism.
The conditions of the Sochi roads, even before the Olympics, has been characterized by incredible traffic jams, by comparison with which Moscow crawls seem completely tolerable. With the influx of high-ranking Putin bureaucrats and official delegations, used to regular halting of traffic to let them speed by, the situation on the roads will be a real nightmare. The comments of athletes who have visited Sochi before the start of the Olympic Games are illustrative: “We went to a restaurant and landed in a terrible traffic jam. The road was closed before the arrival of Prime Minister Dmitry Medvedev,” Noah Hoffman, an American skier said in surprise.
Sochi was never distinguished by its European level of service. Here is what Belarusian biathlonist Nadezhda Skardino had to say (and it is hard to suspect her of being capricious or spoiled):
“For two days, in three out of three stores, clerks tried to deceive us. When we complained they replied, ‘And what do you think, you have landed in a fairy-tale?’ The prices on goods are not real, and the receipt mechanism suddenly broke down and then it turned out that the total on the receipt was ten times higher than the price of the item purchased. Alright, we know how to get to the bottom of this, but poor foreigners likely will not notice that they are being deceived.”
The same conditions are likely to await fans and athletes in the hotels and cafes in the city of Sochi.
But for the residents of the city, the Olympics will hardly be a holiday. Due to the transportation problems, the flood of official delegations and the Chekists [KGB], the majority of potential spectators may prefer to stay home.
The Winter Olympics in Sochi has become one of the most monstrous scandals in the history of modern Russia.
1. The site of the Winter Olympics is extremely unfortunate and was selected capriciously. Sochi is a sub-tropical resort area, and winter sports were never developed here.
2. The scale of expenses is unprecedented – more than $50 billion, out of which $25-30 billion (50-60 per cent) have been embezzled. The money stolen could have paid for 3,000 high-quality roads, housing for 800,000 people or thousands of ice palaces and soccer fields all over Russia. None of that has happened. Only those oligarchs and companies close to Putin have enriched themselves.
3. The construction of the Olympic stadiums on a sub-tropical swamp without a thorough development of the project is extremely dangerous. The high seismicity of the region of the Imeret Lowlands, the change in the bed of the Mzymta River as a result of the barbaric interference in the course of the construction of the Olympics infrastructure threatens the destruction of multi-billion dollar complexes.
4. The damage to the environment of the only sub-tropical zone in Russia must be evaluated. It is already clear, however, that the unique flora and fauna of the Imeret Lowlands are lost, the Mzymta River is disfigured, the forest preserves have been chopped down, and the predatory construction of roads, bridges and tunnels has led to irreversible consequences for the gorges of this region.
5. The construction of the Olympic facilities was assigned to those close to Putin. The lack of honest competition, cronyism, and harsh censorship with everything connected to the Olympics has led to a sharp increase in the cost and low quality of work in preparing for the Games.
6. Despite the monstrous fact of the growing cost of the Olympic buildings, not a single investigation of the evidence of theft, corruption and violation of building standards and rules has reached trial. This has led to irresponsibility and impunity.
7. After the Games, a large number of the Olympics facilities will not be used. And this is at a time when there is a huge shortage of stadiums for winter sports in Russia. Due to the extremely high cost of maintaining Olympics infrastructure, many sports buildings will gradually deteriorate. Billions of government funds invested in the Olympics have essentially been thrown to the wind.
The Sochi Olympics have exposed all the flaws of the socio-economic model created by Putin:
- Cronyism (the Olympics have been built by companies and persons close to Putin)
- Secrecy (the lack of proper information about budgets, problems in the course of construction, and harsh censorship of the media regarding all issues of preparation)
- Unnatural monopolization of the economy (which has become the reason for the multiple increases in prices for construction material and building)
- Voluntarism (the decision on the selection of the place to hold the Olympics was made in secret without public discussion)
- Lack of public oversight (even the agencies under Putin such as the Accounts Chamber and the Duma have not have the opportunity to properly oversee the preparation of the Olympics).
The above-mentioned flaws can be fixed only by changing the political system, and that means changing the crony bandit capitalism of Putin and moving to a full-fledged democracy and competitive economy.
For this to happen, we consider it necessary to create a Public Committee to Investigate Olympics Crimes. Lawyers, economics, public figures, ecologists and human rights advocates should join the Committee. The work of the Committee should be as public as possible.
- Force the Accounts Chamber to remove all classified designations, including “for internal use only” on the results of the inspections of the expenditures of state funds on Olympics construction sites.
- Bring the dozens of already opened criminal cases to trial on evidence of fraud, abuse of official position and theft.
- Seek the opening of investigations of the facts cited in this report, notably: the receiving of no-bid contracts worth billions by the Rotenberg companies, and the multiple increases in the cost of constructing virtually all the Olympics buildings.
We believe that the result of the work of the Public Committee should be the punishment of criminals and confiscation of their property stolen during the preparation of the Olympics Games. The Accounts Chamber, the Federal Anti-Monopoly Service, the Investigative Committee, the Prosecutor’s Office, and the Interior Ministry are obliged to become involved in all this. That is their job. However, without public pressure, Putin’s subordinates will not do anything. On the contrary, they will hide their tracks.
Ahead is the World Soccer Championship in 2018. The start-up amount of financing is astronomical – 1.39 trillion rubles ($43 billion). If we want to see that budget increase to 5.5 trillion at the expense of robbing Russia and all of us (that is, to quadruple as happened with the Olympics), then the investigation of the crimes at the Olympics must be brought to completion.