In the last decade, Russia has been chosen to host a large number of prestigious international sporting events: among them are the 2014 Winter Olympics in Sochi, FIFA’s football World Cup in 2018, the World Summer Universiade in Kazan in 2013, the World Aquatics Championships, the Winter Universiade in 2019 and more.
Staging such events requires the host country to possess sporting facilities that meet the most up-to-date global requirements, as well as appropriate infrastructure (both in terms of transport and hospitality facilities). The regions where these sporting events will be held receive public investment on a vast scale to build and modernize such facilities.
Moreover, as a rule, this goes in hand with the development of other infrastructure (such as electric power grids, water supply networks, health facilities and similar). In essence the issue here is that a locality which accepts a sporting event of this nature obtains a fine opportunity to modernize both its infrastructure and its hospitality industry overall.
Generally, the principal source of investment is Russia’s federal treasury1. Companies that are fully or partly state-owned also invest (for example, OAO Russian Railways, OAO Federal Grid Company of Unified Energy System, and OAO Gazprom to name just a few).
For such huge construction projects to be implemented in the face of extremely tight timescales, special federal laws need to be passed. These regulate matters including land issues, town planning, and the design and construction of sports facilities and infrastructure. Most notably, special laws have been passed with a view to preparing for the 2014 Winter Olympics in Sochi2 and in relation to staging the FIFA football World Cup in 20183.
The above laws have set a special procedure for land plots and/or real estate located on them as well as other property to be appropriated so that infrastructure may be sited and built there. Compensation is paid for any compulsory appropriation of land or property under these laws but the procedure is quicker and simpler in comparison with that under the general legal rules.
In addition, there is a special simplified procedure applicable to urban planning, design and construction processes for Olympic venues.
The amount of funds the state has already spent is eye-watering. For example, the Russian press puts at RUB 1.5 trillion (approximately USD 51 million) the total amounts spent on preparing for the Sochi Olympics4.
This is a record figure. However, it seems to us that in assessing the expenditure it would be more appropriate to keep what has been spent on preparing for and hosting the Olympics themselves separate from the spending on building other infrastructure which is not directly linked to staging the Olympics.
Often, a large amount of the construction work is due to the fact that the development of infrastructure was underfunded over an extended period. This meant that it had to be modernized at a rapid pace, with large-scale construction taking place, in readiness for the Olympics. For example, the governmental Program for the Olympics provided for the construction of facilities not directly related to the Olympics, such as roads and railways, bridges, tunnels, electric power facilities, a sea port (passenger and freight), sea port terminals, flood barriers, the airport (the airfield and the terminal), railway stations and terminals, water treatment plants, sewage plants, water supply networks, telecommunications facilities, facilities for the production and transmission of electricity, hospitals, hotels and other facilities.
Expenditure of this nature may have been made in the context of preparations for the Olympic Games but it does not relate directly to the Olympics.
Only in the future will it be possible to assess how effectively this money has been spent. By this point, it will be understood whether the infrastructure that has been constructed will be used once the sporting events are over and thus whether they deliver any benefit to the regions in question.
This article was published in Russian and German in the German publication titled “Business in Russia” (Business in Russland) in March 2014