Top Kremlin critic takes aim at Sochi Olympics corruption

Alexei Navalny, the perpetual thorn in the Kremlin side, wants to know exactly what happened to the $50 billion that Vladimir Putin dropped on Sochi.

Less than two weeks before the Sochi Winter Games are slated to open, Russia's irrepressible anti-corruption crusader Alexei Navalny has published an explosive report claiming that huge cost overruns, built into Olympic construction contracts by venal officials, have enriched a small circle of businessmen close to President Vladimir Putin and stuck the Russian taxpayer with the most expensive Olympic Games in history.

It's a delicate topic in Russia, and one that again puts Mr. Navalny on a political collision course with the Kremlin. Barely a week ago, in an interview with international media, Mr. Putin flatly denied the widely cited figure, $50 billion, that Russia is thought to have spent on Olympics and claimed that the Games had cost just "214 billion rubles" (about $6.5 billion), less than half of which came from the state treasury.

As for widespread allegations of corruption, including suggestions that as much as one-third of expenditures have been embezzled, Putin was even more emphatic: "If anyone has concrete data on instances of corruption in implementing the Sochi Olympics Project, we ask to furnish us with objective data.... We have not seen any big, large-scale instances of corruption in connection with the Sochi Olympics Project implementation," he said.

But the distinction between Putin's $6.5 billion figure and the widely cited $50 billion turns out to be largely semantics. As Navalny points out in his report, Putin's figure covers just a few expenses directly related to holding the Olympics, but does not include vast expenditures on local infrastructure, some of which will have little use after the Games. These were handed out through non-transparent bids to companies owned by cliques of Kremlin-connected businessmen whom Navalny describes as "friends of Putin."

Navalny's report is accompanied by an interactive map showing each major item constructed around Sochi, its price tag, and comparative costs of building similar objects in other parts of the world. The map and report have been translated into English by The Interpreter, an online journal that publishes high-quality translations of selected articles from the Russian media and blogosphere.

In an interview with the online sports journal Sports.ru on Monday, Navalny explained his methodology and defended his conclusions. "We have two figures," he said. "Ours is 1.5 trillion rubles [about $50 billion]. Then there is Putin's estimate of 214 billion rubles. We can now state plainly that Putin's is a blatant lie."

Navalny says that no official figures are available, and the budget of the state Olympstroy corporation, which oversees all Olympic construction, is actually classified. "No information could be obtained, even at the request of a [Duma] deputy," he said. But by piecing together snippets of public information from various sources, including state corporations such as Gazprom and Russian Railways, the budgets of federal ministries and expenditures by local governments, loans extended by the state Vneshekonombank, among others, he arrived at the $50 billion figure, he says.

The official line is that Navalny is a fantasist, who has made up these figures from thin air. "There are always certain forces that resist everything, even the Olympic project. I don't know why – perhaps it's their specialization or their personal proclivity, maybe they got offended by someone in life," Putin said last week, answering a journalist's question about corruption and cost overruns in Sochi.

In a similarly scathing study last year, also translated by The Interpreter, Sochi native and former Deputy Prime Minister Boris Nemtsov made similar calculations and detailed the process by which closed contracts were divvied up among Kremlin insiders.

But it may be worth noting that even Kremlin-owned news agencies frequently employ the same figure of $50 billion. For example, a glossy report about Sochi produced by Russia Beyond the Headlines, an English-language project funded by the Russian-government newspaper Rossiskaya Gazeta, provided its own charts and tables to arrive at much the same total.

"Putin didn't actually say that $50 billion wasn't spent. He just means that most of this money was invested into infrastructure," and not directly into conducting the Olympic Games, says Dmitry Oreshkin, head of the Mercator Group, a Moscow media consultancy. "But much of this infrastructure will never be profitable after the Games are over," he adds.

For example, Russian engineers built a new road and high-speed rail link capable of carrying up to 20,000 people per hour from the seaside Olympic center of Adler to the winter sports complex at Krasnaya Polyana, a distance of about 25 miles. According to Navalny's calculations, these transport links cost nearly $9 billion, or 15 percent of the total Olympic spending. Yet Krasnaya Polyana is a ski resort that has no snow for much of the year, and sometimes not even in winter.

"Of course, the road and railroad to Krasnaya Polyana will continue to be used, but nowhere near enough to justify the expense," says Mr. Oreshkin.

Navalny's more serious charge, that artificially inflated contracts were given without oversight to Putin cronies, remains largely unanswered.

For example, Navalny says, Putin's childhood friend, Arkady Rotenberg, managed to acquire almost all the road-building contracts in Sochi for the Mostotrest company, of which he owns 40 percent, through means that are totally opaque to public scrutiny.

"Not long ago, Rotenberg was a judo trainer. Now he's a successful construction magnate," Navalny notes.