Crimea Invasion Diverted Attention From Sochi Corruption Scandal

Crimea scandal

In an interview on NPR’s Fresh Air with Terry Gross, Kimberly Marten, a political scientist from Barnard College, expressed grave concerns about Moscow’s turn away from the world community. Putin’s invasion in the Crimea was a power grab and a war to divert attention from massive scandal about the financing of the Sochi Olympics, which would have weakened his hold on power. Financing, estimated to be $46 billion by Alexei Navalny in the Anti-Corruption Foundation’s report on the Sochi Winter Olympics, included huge loans from the government that likely could not have been paid back.  

Overall $22 billion of the total was controlled by seven of Putin’s associates. Of that sum, between one third and one half was embezzled by Putin cronies. Fifteen percent of the total contracts went to companies owned by Arkady and Boris Rotenberg. Vnesheconombank, owned by the state, gave $7.6 billion in loans for Olympic construction, of which 76% has been declared bad debt, requiring repayment from the national budget. Together, Olympstroy and Russian Railways (RZD), both state owned, handled half of the total funds. They managed construction of overpriced and unnecessary infrastructure, and Olympic facilities whose costs exceeded original budgets by an average of 400 percent. The  Nordic ski complex initially budgeted at $500 million cost $2.7 billion.

The Anti-Corruption Foundation monitored procurements by state agencies on a government web portal. However, the details of Olympic procurement contracts were not made available. Based on the limited information available the Anti-Corruption Foundation filed reports to enforcement authorities on violations worth $183 million. Navalny has been under house arrest since Feb. 28, unable to have outside contact or to use the internet.

Boris Nemtsov and Leonid Martynunk suggested in May 2013 that the Olympics would be a national disgrace rather than a triumph. Without the Crimea invasion diverting attention, a Sochi corruption scandal seemed likely to Putin. The details of the Olympic procurement boondoggle would have enabled informal political networks within the Kremlin to draw attention to the impacts of corrupt practices on the national economy which has been in stagnation for years. Economic internationalists have long represented the necessity of privatization and diversification in addition to transparency to improve the weakened Russian economy.  

The Olympics as one of Putin’s central projects played to the Russian desire for prestige and triumphant visibility in world affairs. Martens suggested that Russian experts predicted privately in 2013 that a reckoning with Olympic corruption would come, thereby calling attention to the mismanagement of the Russian economy in general.  Before the Olympics, exposure of details was unlikely given the appeal to national pride of the event. The political unrest in Ukraine served Putin as he searched for an opportunity to preempt this reckoning. 

Ultimately the Crimea invasion diverted attention from a Sochi corruption scandal. Even with its billions in improvements Sochi remains dicey as a tourist destination, with significant environmental degradation and on the edge of areas of ethnic unrest. Without Crimea, the revelation of details of Sochi financial boondoggle would certainly have weakened his position and could potentially have brought about his fall from power.

By Lawrence M. Shapiro


Washington Post
Business Week
The Interpreter
The Anti-Corruption Foundation

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