Olympics 2014: Investigators Find Massive Corruption in Sochi Olympics

By Gary Feuerberg
Gary Feuerberg
Gary Feuerberg
February 3, 2014 Updated: February 4, 2014

WASHINGTON—The 22nd Winter Olympics that begins Feb. 7 in Sochi, Russia, is the most expensive Olympics ever at an estimated $50 billion—more than the combined costs of all previous Winter Olympics. Summer has typically been the more expensive Olympics, but even Beijing’s Summer Games in 2008 was cheaper ($43 billion).

The total price tag, including the sharp increase in the costs of construction of the stadiums, a 30-mile road, and other facilities, indicate something has gone awry. The costs are exorbitant: no-bid contracts, contractors who are close friends and allies of Putin, harsh censorship, and the lack of transparency in government oversight, and law enforcement point to an Olympics riddled with corruption and cronyism.

This is the conclusion of the Institute of Modern Russia (IMR), a think tank, nonprofit, and nonpartisan public policy organization with offices in New York and Washington, D.C. At a press conference on Jan. 30 at the National Press Club, IMR accused Vladimir Putin, his friends, and associates of orchestrating massive fraud, featuring abuses of power, corruption, and irresponsibility for the planning and preparation of the Sochi Games.

“Apart from financial abuse, Olympics have [also] been marred by mistreatment of construction workers, mistreatment and forced eviction of local residents, and severe environmental and architectural damage to the area,” said Vladimir Kara-Murza, senior policy adviser at IMR.

Kara-Murza said the mission of the IMR is to support civil society, respect for human rights, and the rule of law in the Russian Federation.

Based on Russian investigative journalists in Sochi, whose names cannot be divulged for fear of harm, IMR has uncovered a consistent storyline of system corruption, cronyism, and petty tyranny. On the day of the news conference, IMR provided an interactive website in English and Russian, for details on cost overruns.

IMR also published a booklet, “Winter Olympics in the Sub-tropics: Corruption and Abuse in Sochi” by Boris Nemtsov and Leonid Martynyuk, who are members of the opposition and spoke at the news conference.

Tickets for the Sochi Olympics are exclusive, and Putin’s tight control is evident. A spectator pass is required (tickets.sochi2014.com), which for Russians means approval by three government agencies: Federal Security Service (formerly, the KGB), the Counter-Extremism Center of the Russian Interior Ministry, and the Russian Federal Migration Service. Opposition activists Nikolai Levshits and Alexander Baturin, and human rights campaigner Semyon Simonov were denied permits to attend the Sochi Olympics, states Kara-Murza in an email to the Epoch Times.

Warmest Place in Russia

It’s a mystery why Putin chose the city of Sochi to hold the Winter Olympics, said Nemtsov, who was the former deputy prime minister of the Russian Federation, current leader of the Russian democratic opposition, and co-chairman of the Republican Party of Russia—People’s Freedom Party, which is the main democratic opposition party in Russia.

“Russia is very cold and hard to find a place without snow, but Putin found such a spot and decided to hold the Winter Olympics there,” said Nemtsov, who attributed the choice to Putin’s reluctance toward reasonable alternatives. The decision was made in secret without public discussion.

The Sochi Olympics is Putin’s personal project, a dream he had when he was deputy mayor of St. Petersburg in 1994 and tried to lure the 2004 Summer Games there, according to Bloomberg News. Observers said that the Sochi Olympics serves to showcase Russia’s achievements during Putin’s 14-year rule and prevent terrorist attacks.

Sochi is Putin’s summer residence. The average high temperature during Feb. 7–23, 2013—the same days of the upcoming Olympics one year ago—was 46 degrees Fahrenheit, according to Martynyuk, a journalist and opposition activist from the Krasnodar Region where Sochi is located.

Martynyuk is a member of the federal council of the same party as Nemtsov. He is known for his online video, “The Lies of Putin’s Regime,” which has topped 10 million viewers.

In 2007, Putin went before the International Olympic Committee in Guatemala and gave a speech delivered in English pledging $12 billion—twice what his main competitors were offering—in preparation to hold the Winter Olympics in Sochi. Putin promised a safe and memorable experience for everyone involved, according to Bloomberg News.

The problem is that the majority of the competitions and the opening and closing ceremonies can’t take place in the mountainous regions of Sochi, where it would make sense but in the Imereti Lowlands—a subtropical swamp on the Black Sea, which is the warmest place in Russia. The reason was that there is too little space for the facilities in the mountains.

However, constructing the Olympic stadiums on a subtropical swamp is extremely dangerous, said Martynyuk.

Nemtsov likened the Winter Olympics in Sochi to the folly of Nikita Khrushchev’s idea to grow corn in the Arctic.

Out-of-Control Costs

Nemtsov and Martynyuk looked at the costs of construction of the various facilities, for instance, the Sochi Olympic Stadium, The Bolshoi Ice Palace, Iceberg Figure-Skating Palace, the RusSki Gorki Jumping Center, and the Olympic Village and found that the costs have been double or triple the world average.

For example, the stadium, which will hold 40,000 fans, was budgeted to cost $230 million. Now the cost has tripled and is going to be $780 million.

The most expensive construction project is the 30-mile Adler-Krasnaya Polyana Highway, connecting the Black Sea coastal town Adler, where the arenas and the Olympic Village are located, with the Krasnaya Ployana, where the mountain sports competitions will take place. It is a combined automobile road and railroad, consisting of 12 tunnels, 50 bridges, and three new train stations. The cost estimate in 2006 of $3.8 billion has risen to $9.4 billion in 2012.

Nemtsov and Martynyuk point out that the amount is equal to 0.62 miles (1 km) of road costing nearly $200 million. This would make it the most expensive road in the world. For the same amount of money, 13, 590 acres (5.5 million square m) of housing could be built, providing for 275,000 people.

The state agency overseeing the project was Russian Railways, which is headed by Vladimir Yakunin, a friend of Putin’s. The general contractors who did the initial work received the job without any competition or tenders. In addition, the road was environmentally damaging, said Martynyuk.

In total, Nemtsov and Martynyuk estimate the embezzlement at about $25 billion–30 billion. The Accounts Chamber, which oversees budget expenditures for the government, refuses to publish the expenditures for the Olympic funds contained in its report. The report is classified because it contains “trade secrets.”

“The scale of graft in the Olympics’ budget defies the imagination.” Yet, there has “not been a single criminal case of fraud, embezzlement, bribe-taking, or kick-backs,” state Nemtsov and Martynyuk.

Human Rights Abuses

Also present at this news conference was David J. Kramer, president of Freedom House, a well-respected human rights organization based in Washington. Kramer previously served as U.S. assistant secretary of state for Democracy, Human Rights, and Labor.

“The Sochi Winter Olympics will take place in Russia amid the most severe crackdown against human rights since the collapse of the Soviet Union,” said Kramer, quoting from Freedom House’s website, “Russia on the Eve of Sochi.”

“I would have to go back to the Andropov period to find something comparable,” Kramer added. Yuri Andropov was general secretary of the Communist Party of the Soviet Union, 1982–84.

The Freedom House website asks that journalists covering the Olympic Games discuss the human rights abuses perpetrated by the host government and “not legitimize President Putin’s efforts to paint an idealistic picture of the country.”

In what is widely viewed as a ploy to soften his image before the games, Putin pardoned Russia’s most renowned political prisoner, Mikhail Khodorkovsky, in December after he served more than 10 years. His former partner, Platon Lebedev, who also served more than a decade, was released in January. While these releases were welcomed by the human rights community, Russia’s Memorial Human Rights Center still lists 40 other political prisoners languishing in jail.

Gary Feuerberg
Gary Feuerberg