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Sunday, February 16, 2014

Sochi The $50 Billion Olympics

   We hardly seem to gear about these games without the $50 bn pricetag being mentioned. Usually with the implication or outright claim that it is all going into Putin and his friend's pockets. So is it:

 Although few stories mention it, the source of that estimate was Dmitry Kozak, a deputy prime minister who headed Russia’s Olympic preparatory commission, which was charged with supervising the work in Sochi. Last February, Kozak told reporters in Moscow that Russia was prepared to invest 1.5 trillion rubles in Sochi, which was the equivalent of $50 billion.

But like most large round numbers, this one needs a few caveats and asterisks.....estimating the cost of the Games depends on how, and what, is counted.

Kozak said that the Russian government would spend $6.7 billion on Olympic facilities. He said Russia would invest another $16.7 billion in upgrading rails, roads and other infrastructure surrounding Sochi. That comes to $23.4 billion in 2013 money — massive, but not even halfway to $50 billion.

The rest of his projection included private, speculative investment by Olympic sponsors, including billionaire friends of Russian President Vladi­mir Putin. Russia hopes the Olympic stimulus will turn the Sochi area into a year-round tourist magnet long after the Olympics are over, and it encouraged investment in hotels and other facilities in the region.

But not all of this spending was directly related to the Olympics, such as the construction of a Formula One racetrack in Sochi that reportedly cost $350 million. And as Kozak noted, some of this money would have been spent by public and private sources without the Olympics.

     So $6.7bn - just over £4bn - for the actual facilities. Hardly extortionate compared to our £2bn £9bn £14bn £20bn. The rest looks like sensible commercial spending on not just building a new town but a spectacular on designed to be a one of the world's big holiday resorts. I don't know how much it would cost to build Benidorm in one go but I suspect it would be of that order.

    It certainly seems unlikely that the billionaires are investing $26.6 bn in the expectation it will disappear into fraud - that is not how you become a billionaire.

    If you are going to invest in building a holiday centre can you think of a better way of getting it the publicity that distinguishes good from world class than hanging it round an Olympics.

    But mentioning that doesn't fit the agenda of our state owned censoring media who want to ramp up fear and hatred of the Russians for having an undemocratic government (much more democratic support than ours) with a state owned censoring media (mostly less state owned than us and with legal rights for small parties to get coverage*).

* Granted we also have a legal right, as part of the BBC Charter, that our state owned broadcasters must get "balanced" coverage proportional to their support - its just that the law is worthless if those in charge ignore it.   

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