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. Last Updated: 07/27/2016

Counting the Real Cost of the Olympics

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To be perfectly honest, I did not think that Russia would get the Olympics.

  Why did I believe that International Olympic Committee would choose another city? One, because I did not believe that we could outspend the other candidate cities (in the amount of $12 billion) on bringing Sochi up to Olympic standards. Two, because I was sickened by the pompous way in which we presented our case to the IOC. For example, Russia held nearly 80 ceremonial and sporting events for a single IOC visit in the spring. Do you remember the showiness of all of this, which was translated nonstop on television? The members of the IOC evaluation committee were looking at a scale model of future Olympic projects, and suddenly the curtains in the room open and everyone in the room saw the start of the ski race. I don't think that other "curtain openings" of this type have been used successfully as marketing strategies. On the other hand, there were several successful strategies, especially in Guatemala.

What is most important, of course, is the result. If Russia had used other bidding methods, we probably would have lost the contest.

The contract giving Sochi the rights to hold the Winter Olympics has been signed. Now is the right time to think about how we will prepare for all of this. The Olympics can give a large boost to our athletics infrastructure as well as to the overall economy.

We really need to develop the Russian sports sector. Throwing money at the issue is not enough, regardless of the sum. Russian soccer is a good example: lots of money and few results. But hosting the Winter Olympics in your own country is another matter entirely.

In the course of the campaign to host the Olympics, our bureaucrats did not grow weary of repeating how we won more medals in the Winter Olympics than any other country. The real situation, however, is somewhat different.

Russia hasn't finished first in the Olympic Games in a long time. The last time was in 1994 in Lillehammer, Norway, when our sportsmen won 23 medals, including 11 gold medals. It is clear that this was a legacy of the Soviet period.

In the 1998 Olympic Games in Nagano, Japan, Russia took third place: 18 medals, nine of which were gold. But the 2002 Olympics in Salt Lake City were less successful: 13 medals, of which five were gold, and we gained fifth place. Finally, the Turin Games in 2006 brought us fourth place (22 medals, of which eight were gold). Although Russia has held good positions in past Olympics (fourth or fifth place on average), we have a long way to go before we become an Olympic leader.

Now we have a chance to take the lead. If Russia lost the bid to host the Olympics, it is unlikely that we would have had the opportunity to develop our sports infrastructure in any significant way.

It would be incorrect to assume that the economic benefit of the Olympics is limited to the $12 billion in expenditures. There is a much deeper significance for the economy.

What has hindered our economic development during the last years is not setting ambitious enough goals for our economy. And even when we proclaimed goals, we did not believe they were attainable.

Take, for example, the doubling of the gross domestic product by 2010. We barely defined this goal in 2003 and, shortly thereafter, we started planning for declining growth rates. The ideological rationale for such an approach to economic planning was found -- the theory of recovery growth, according to which the high growth rates tends to decrease.

The opportunity to host the Olympics is also beneficial because it will force us to rethink our strategic economic goals. If faster growth were achieved, we would no longer have to compare our growth rates to those of the Group of Eight countries -- a yardstick that is absolutely incorrect. In reality, we should be competing with the economic results of similar, developing countries such as China, India and Kazakhstan. This comparison would be more accurate as a measure of Russia's economic growth: it would show high growth rates and it would define the quality of our economic growth in a completely new fashion.

If the Olympics result in higher economic growth for Russia, then the significance for our country cannot be overstated.

The federal program for the development of Sochi's resorts from 2006 to 2014 was a strong factor in the city getting the XXII Winter Olympic Games. The government earmarked $12.2 billion for the Sochi Games.

This is clearly a colossal amount of money and compares impressively to the spending of other countries. The total cost of the 2006 Games in Turin was 3.4 billion euros ($4.6 billion). Perhaps China's example was contagious for Russia: Beijing wanted the 2008 Summer Games so badly that it was willing to invest $33 billion to win the contest.

While the development plan definitely leaves you with a positive impression, it is easy to get the feeling that some of the cost estimates were not well thought out. The cost to construct the start and finish areas, the stands for spectators and journalists, and the snowmaking equipment for the downhill skiing center has been listed at 468,264,000 rubles ($18.2 million).

It's as if a calculator came up with the number on its own.

The construction of a large hockey arena to seat 12,000 is budgeted at $220 million -- all of it federal money. The price tag for another arena for figure skating, which should hold 12,000 people, interestingly enough is just $55 million. Thus, the cost of building one arena is four times the cost of building another arena of the very same size.

Another example is an 8,000-seat, closed speed skating center that is projected to cost $42 million. Moscow's Krylatskoye speed skating complex, which holds 10,000, cost exactly twice that amount -- $84 million.

There is more than enough nonsense like this in the development plan to allow us to go on for a while, but the government has approved it all. This is a problem not only for the federal planners in Moscow but for Sochi itself. The government made the $12 billion price tag that it was willing to pay for the Games the main argument in its favor. But the least they could have done was take a serious approach to putting together the details of the development and funding program.

This responsibility now falls to those who are left to carry out the plans. Oversight agencies like the Audit Chamber and the Federal Service for Ecological, Technological and Atomic Inspection wasted no time in making it known they are keeping a close eye on the state of the Olympic project.

The victory in the contest to host the 2014 Winter Olympics allows Russia to claim the huge prize. But this golden opportunity is not only for the place where the games will be held -- Sochi -- but for the entire country that gets to play host to the Olympic Games. It is very tempting to take full advantage of this olympic victory.

Igor Nikolayev is director of the strategic analysis department for the auditing consultancy FBK. This comment appeared in Vedomosti.