Arkady Rotenberg, the boyhood friend and former judo partner of black-belt President Vladimir Putin, already is collecting his winnings from what promises to be the most expensive winter Olympics ever next year.
Rotenberg’s companies have been awarded at least 227 billion rubles ($7.4 billion) of contracts for the 2014 Sochi Games, according to figures compiled from corporate and government filings. That’s more than the entire budget for the 2010 Vancouver Olympics, though it represents just 15 percent of Russia’s latest estimate for the Sochi event.
Those contracts, which number at least 21, include a share of an $8.3 billion transport link between Sochi and ski resorts in the neighboring Caucasus Mountains, a $2.1 billion highway along Sochi’s Black Sea coast, a $387 million media center, and a $133 million stretch of venue-linking tarmac that will double as Russia’s first Formula One track.
“This is a monumental waste of public money,” Stefan Szymanski, a sports economist at the University of Michigan who tracks Olympic spending, said by phone from Ann Arbor. “A small number of people at the top have control of resources and there is no accountability.”
Rotenberg, 61, is among a handful of men Putin has known since childhood or from his days in the KGB or St. Petersburg government who’ve amassed riches and power during his 13-year rule. Their fortunes have come at times at the expense of men who flourished under his predecessor, Boris Yeltsin, and the consequences of the differing wealth pedigrees are on display in Putin’s $50 billion push to prepare Russia for its first Winter Games. The country is considered the most corrupt of the Group of 20 economies by Berlin-based Transparency International.
While Rotenberg and longtime Putin associates such as Gennady Timchenko, co-founder of oil trader Gunvor, and OAO Russian Railways Chief Executive Officer Vladimir Yakunin, stand to gain from Russia’s Olympian largess, Yeltsin-era tycoons led by Vladimir Potanin and Oleg Deripaska say they’re getting squeezed.
Potanin and Deripaska, the CEOs and largest owners of OAO GMK Norilsk Nickel and United Co. Rusal, respectively the world’s largest producers of nickel and aluminum, have been handed projects that may not turn a profit for years, if ever. Potanin is spending $2.2 billion on the resort where most of the skiing events will take place, while Deripaska is putting $1.5 billion into revamping the local airport and constructing a port and one of two Olympic Villages to house athletes and officials.
Rosa Khutor, Potanin’s facility, has missed 14 billion rubles of interest payments on loans from state development bank VEB because it’s been closed to tourists for parts of three peak seasons for test competitions, Sergei Bachin, the head of the project, said in an interview in Moscow on March 12.
The resort, serviced by state-of-the-art ski lifts from Doppelmayr of Austria, was all but deserted on a sunny March 7 because the slopes were cleared for a para-alpine World Cup championship. Rosa Khutor will need to spend another $130 million after the Olympics to convert the facility into a fully commercial operation, Bachin said.
“A lot has been built for the Olympics that is commercially useless before the games and after,” Potanin said last month during a tour of his project with Putin and Jacques Rogge, president of the International Olympic Committee. “The money has been spent and interest is accumulating.”
The $200 million port Deripaska’s Basic Element constructed to dispatch Olympic building materials is handling as little as one-fifth of the planned volumes because freight traffic has been redirected to railways and roads, making the venture unprofitable, according to the company.
“If investors don’t get any return or government support and in effect lose a large part of the funds they’ve invested in the Olympics, it won’t have a positive impact on our investment climate,” Basic Element Deputy General Director Andrey Elinson said during a March 12 interview in Moscow.
Olympstroy, the state company overseeing Sochi’s transformation, declined to detail the costs of its individual projects. Olympstroy has had four general directors in six years.