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Putin's power plays around the Sochi 2014 Winter Olympics

In 2014, the Russian resort of Sochi will host the Winter Olympics. But already this mega-event looks set to cost Russian taxpayers more money than the combined costs of the last three Winter Olympics, and up to 4,000 local residents face evictions with compensation far below current market values.

The area of Sochi on the coast of the Black Sea is ill-prepared for the privilege of hosting the Olympic Games. Some 200 facilities, including roads and electricity lines, need to be built and most of the construction work will have to start from scratch.

The Russian government originally set aside the equivalent of £4.3bn for Olympic constructions but that has turned out to be not nearly enough. In March this year, Semyon Vainshtok, the head of the Olimpstroi state corporation responsible for preparing the Olympics, told members of the Russian Duma that the games would cost taxpayers three times the original estimates.

According to the Moscow Times, Vainshtok said that building transportation infrastructure alone could cost £6.8bn, and the purchase of land could cost another £1.8bn. On top of that are the costs of building Olympic facilities.

“A lot was missing in the estimates, and most of what was included was not confirmed by state experts,” Vainshtok told deputies.

The new estimates put the price of hosting the 2014 Olympics well above the combined costs of the three last three Olympic Winter Games in Nagano, Salt Lake City and Turin. And the price might yet rise. The Moscow Times also reports that Audit Chamber chief Sergei Sepashin has warned the Duma that the Olympic Games could end up costing £12.1bn.

In April, Vainshtok abruptly resigned from his post as head of Olimpstroi and was replaced by Viktor Kolodyazhny the mayor of Sochi.

4,000 people may lose their homes

Landowners and citizens in Sochi and nearby villages and towns are also likely to pay a high price for the Olympic Games. A Russian news agency, Sobkor@ru reported in March that more than 4.000 people in Sochi will lose their homes in order to make way for an Olympic Park. Residents claim that the compensation offered for their property is minimal, and that many families will receive no compensation at all.

VOA News has interviewed Valeriy Suchkov, head of the Sochi Property Owners Association, who says that authorities are cutting deals directly with investors and arbitrarily forcing people out of homes in prime locations. He says that Russian courts dismiss lawsuits against such sales, and that several homeowners therefore have filed complaints with the European Court of Human Rights in Strasbourg.

From: Taxpayers and residents will pay dearly for Sochi Winter Games, Kirsten Sparre, Play the Game, 26 May 2008

More at: Play the Game

See also: Sochi Citizens Protest Against Olympic Objects Construction

Olimpstroi vice president Sergei Grigoryev, a lieutenant of Vainshtok's who followed him from Transneft, said Thursday that Kolodyazhny's appointment had been "quite unexpected."

Chris Weafer, chief strategist at UralSib, said Vainshtok's departure had not come as a big surprise, as "a lot of changes across the government structure" were to be expected during the presidential handover period between Vladimir Putin and Dmitry Medvedev.

Vainshtok's move to Olimpstroi in September had more to do with moving him out of Transneft, where he was blocking a deal between the state and the Caspian Pipeline Consortium, than with him being involved long-term with the Olympic preparations, Weafer said.

From: Vainshtok Resigns as Olympics Chief, The Moscow Times

More at: Neftegaz Press

"This is only the beginning of yet another massive shift of Russian assets from public to private hands – this time under the cover of the Olympic rings." Gary Kasparov

The first phase of the Gazprom’s construction project in Sochi is to be finished in 2008. The construction of the Olympic ski stadium and a services complex is planned to be finished by 2010. The company will invest £60m in the construction of a 1000-room hotel, while two Olympic units: 20 000 places biathlon complex (£5.5m) and 16 000 places ski complex (£3.7m) will be invested by the government. Besides, Gazprom as a builder and investor, and, consequently, interested party, suggested converting the motor transport of Sochi to the ecologically clean compressed natural gas, what will reduce pollution and in the same time bring extra income to the companies.

From: Gazprom's Olympia, Alexandra Belyaeva, Neftegaz.RU Magazine, 24 April 2008.

More at: Neftegaz Magazine

As much as anything else, Medvedev is expected to preside over the "rebranding" of Russia on the global stage and of its energy sector. This inevitably means a major rebranding of Gazprom as well. This will play a key role in reaching the Kremlin's goal of increasing the market capitalization of Gazprom to £500bn by 2014, which would make it the largest company in the world based on market value -- roughly twice the size of ExxonMobil. This can be best accomplished not by hoping for some valuation expansion with a secondary Asian listing, but by developing major real energy projects, by expanding into higher margin business in Europe, and by being at the forefront of the development of liquefied natural gas.

From: Rebranding Gazprom, Moscow Times, Chris Weafer, 6 May 2008

More at: Moscow Times

Speaking at the end of the [IOC] visit, Chairman Killy said, “The Sochi 2014 project is an ambitious and exceptional one, which will leave a tremendous legacy to the Krasnodar region and its people, and to sport in Russia. Such a venture, however, cannot be completed successfully unless there is complete unity behind it, and the Commission was delighted to see that Sochi 2014 continues to have the support of all levels of Russian society. Indeed, the presence of Prime Minister Zubkov, Speaker of the Duma Gryzlov, Deputy Prime Minister Zhukov and a number of other high ranking Russian government ministers during our meetings underlined the importance that Russia places on these Olympic and Paralympic Winter Games.”

From: Sochi 2014: Strong Foundations Laid, 23 April, Official website of the Olympic Movement.

More at: Olympic