The Sochi Olympics are right around the corner and the opening ceremony scheduled for February 7th.
With last minute preparations in full swing, the full cost of the Sochi Olympics is being realized. The final price tag is now expected to approach $51 billion and many are scratching their heads asking, “How could it be so expensive?!”
There are the obvious reasons why a country would need to spend so much money to host the Winter Olympics.
For starters, massive event facilities are required to host the Olympic Games. An entire village for Olympic athletes and officials is also required. Huge improvements to infrastructure were made to accommodate the influx of people to Sochi, a small resort town on the Black Sea. These upgrades include a high-speed rail line connecting the town of Sochi to the mountains that will play host to many of the Olympic events.
Massive building projects like those associated with Olympic games and World Cup Soccer events typically run approximately 179% over budget. So to go over budget isn’t all that unexpected.
But compared to Russia’s estimates to the International Olympic Committee that the games would cost $12 billion, the cost of the Sochi Olympics has ballooned to over 4X the original promise!
Here are the three reasons why these Sochi Olympics will be the most expensive ever:
Russia’s Low-Ball Bid
When Russia submitted its original bid in 2007 to host the 2014 Winter Olympics, it estimated that these Sochi Olympics would cost the country approximately $12 billion. This estimate is so far off of the actual price that it seems obvious that Russia low-balled its numbers.
Why might a country lie to or mislead the IOC during the Olympic bid process?
For starters, if Russian citizens knew how much money its country was planning to spend on the Olympics popular support for the games might have dried up entirely.
Most importantly, Russia probably low-balled its estimates so that the International Olympic Committee wouldn’t worry about whether or not Russia could even afford to host the Winter Olympics.
When Greece’s economy spiraled towards disaster a few years ago, the infrastructure and facility upgrades made for the 2004 Athens Olympics were cited as a primary cause. Regardless of whether or not this is true, causing financial ruin is not something that the International Olympic Committee wishes to be associated with.
Russia likely low-balled its estimates so that it would be selected to host these 2014 Winter Olympics over competing bids from around the world.
We have long heard of corruption at all levels of Russian politics: politicians taking bribes, the Russian mafia running whole regions of the country, and a general lack of control in how corrupt officials conduct business.
While some of this can be written off as rumor, it has been well documented that corruption is a major problem in Russia.
A report released last year by a former deputy prime minister of Russia and vocal critic of Russian President Vladimir Putin alleged that up to 60% of the cost of the Olympic games has been embezzled.
If true, that would be up to $30 billion that went to corrupt officials and business owners in Russia rather than towards the building projects themselves.
That amount alone comes close to the $40 billion spent by China on the 2008 Olympics held in Beijing, the most expensive Olympic games until these Sochi Olympics.
Russian President Putin has outright denied allegations of corruption ballooning the cost of the games. But experts who have scrutinized the individual contracts awarded to companies and tried to account for all $51 billion seem certain of widespread corruption.
Security concerns are nothing new for Olympic organizers. But this time things are a bit different.
Russia has long been a hotbed for terrorist activity, with the primary source of violence stemming from Russia’s ongoing conflict with Chechen rebels.
Suicide bombings in Volgograd, Russia on December 29th and 30th have fueled serious concerns over the security of the Olympic games. Already, event organizers are warning hotels in Sochi that a female terrorist may have slipped past security and into the city.
What we know is that there will be significant counter-terrorism resources present at the games and that Russian security forces are keeping a close watch on who is coming and going from Sochi. This kind of security comes with a large price tag and has contributed to the exploding cost of hosting these Sochi Olympics.
The Bottom Line
It would be difficult to say that corruption or security costs alone have contributed to the record high cost of these Winter Olympics.
But when coupled with the unreasonable expectations set by Russia’s low-ball bid, it is no wonder that many around the world are wondering how these Sochi Olympics got to be so expensive.
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