The Sochi Fiasco
Our sidebar carries a banner inviting readers to sign a petition to divest Russia of the 2014 Olympic games, which it proposes to hold in Sochi. Even before the Georgia invasion, the reasons for doing so were obvious: There is horrific danger posed to the athletes, both from terrorism in the region and from the everyday risks of Russian society (Russia is among the most dangerous places in the world in terms of murder, fire fatality and airline fatalities). There is the tacit recognition of the KGB regime of Vladimir Putin, which has brutally repressed every aspect of civil society. And there is the abhorrent misallocation of resources in a country where the average male doesn’t live to see his sixtieth year. Add Russia’s barbaric behavior in Georgia, condemned by the entire civilized world, and the question of whether Russia should be rewarded by being allowed to host the games is a absolute no-brainer.
But in truth, just as was the case in the Cold War, it really isn’t that necessary to take action against Russia — since in all probability Russians will simply destroy themselves if left to their own devices. Events last week made this particularly plain.
The Kremlin announced that it was creating a cabinet post with “deputy prime minister” authority for Dmitry Kozak to oversee the construction of the Sochi facilities. The International Herald Tribune refers to Kozak as someone with “a track record for crisis management” and quoted Nikolai Petrov of the Carnegie Center stating: “Not only are there very serious problems faced by the whole project now, which needs a very effective manager with good connections, but the region where Sochi is located is familiar to Kozak and he is well respected by the political elite there.”
It seems that the Kremlin’s efforts to have the Olympiad funded with private money — critical to the Kremlin’s absurd pretense that it would not draw vital resources from Russia’s feeble population — has come a cropper. The IHT reports:
Some of Russia’s biggest corporations – headed by loyal businessmen – are involved in the Sochi construction, including Oleg Deripaska’s Basic Element and Vladimir Potanin’s Interros. State-controlled gas monopoly Gazprom is building part of the ski area. Basic Element, which is building Sochi’s new airport and the main Olympic Village, has been rocked in recent weeks over reports of financial difficulties.
Russia’s bid for the Olympics was based on the heady atmosphere of $150/barrel crude oil. Suddenly, oil has fallen to half that price and the Russian stock market has imploded, devastating the nation’s already weak credit economy and slashing billions from the coffers of the oligarchs. The cost estimates the Kremlin gave at the outset were widely acknowledged to be ludicrously low on their face, and yet the Kremlin still felt the need to claim them despite its apparently “booming” economy at that time. And the reason is clear: Sochi is totally lacking in the basic infrastructure necessary to host the games. Had the true and astronomical costs of building all that infrastructure from the ground up been stated honestly, no thinking person could have imagined that even “booming” Russia could afford the cost, even if it was only private money being diverted.
Now, Russia’s emaciated economy means that the Kremlin itself will have to pay the full cost of the games, whatever it turns out to be, even as it is also forced to devote untold billions in saving the Russian stock market and banking system from extinction. On Tuesday, the Global Insight ratings agency downgraded Russia’s banks to a classification as “very unstable” and the Kremlin announced that the nation’s #2 bank, VTB, needed a $2.4 billion bailout package to save it from oblivion. And how is the brilliant Putin administration moving to increase stability? Get this: it’s decreasing the reserve requirement for banks, letting them operate on even more of a shoestring than before. That’ Russia in a nutshell! And we do mean nut.
As has always been the case, the worst enemy of the Russian people, by far, is their own government. What foreign enemy, for instance, could have hatched a plot so devious that by 2012 it would purge the Russian military of one-third its officer corps? None need to, for Russia has already been forced to take that measure itself.
So the fact is that if the international community were to divest Russia of the Sochi olympiad, it would be doing Russia a gargantuan favor. Should Russia press on heedless of reality to devote a massive portion of its budget on a smoke-and-mirrors display that will pay no practical dividends for the national economy and will only occur in the far distant future, the people of Russia will be the ultimate losers. And that’s the best-case scenario. In the worst case, countless billions will be squandered only to see the whole sad affair collapse in the predictable Russian manner — just like the USSR, just like the stock market, just like the Yeltsin government, just like the Tsar.
And so it goes in Russia.