Crisis May Hit Sochi's Olympic Projects

bloombergA ruined farm building near Sochi. An estimated 80 percent of the city's Olympic venues must be built from scratch.
The global financial crisis may affect Russia's preparations to host the 2014 Winter Olympics and require the state to step in with more cash, A senior official said, Interfax reported Thursday.

"It could have an impact. It all depends on the financial well-being of the investors we have attracted," Regional Development Minister Dmitry Kozak said.

He said no investors have yet pulled out of construction projects for the Games, to be held in Russia's Black Sea resort of Sochi.

"If [delays] do occur, we will have to look for other investors or use budget funds. There is no other choice," he said.

Sochi, better known as a summer vacation spot, has little infrastructure and about 80 percent of the venues have to be built from scratch.

The government has pledged to spend $12 billion on developing Sochi for the Games, of which $7 million is public funding and the rest from private sources.

Real estate developers and construction firms are among the most heavily leveraged companies in the economy and have been among those hit hardest by the credit crisis.

Stock markets, where many of these firms are traded, have been rocked by some of the steepest falls in their history, losing around 60 percent of their value since highs reached in May.

Finance Minister Alexei Kudrin said Russia's war in August with Georgia, which lies just a few kilometers from Sochi, cost the economy $7 billion in capital outflows as investors fled political risk.

In September, Prime Minister Vladimir Putin told a meeting of government officials that no setbacks in preparing for the Games would be tolerated.

Earlier this year, the chairman of the International Olympic Committee's Coordination Commission, Jean-Claude Killy, said preparations for the Sochi Games would be the most challenging ever.