Putin’s Downhill Race

When the Russian city of Sochi, on the Black Sea, was chosen as the site of the 2014 Winter Olympics in 2007, Vladimir Putin had every reason to be pleased. Russia was given a chance to show the world the accomplishments of his regime. Now that he is again Russia’s president, after a four-year hiatus as prime minister from 2008 to 2012, Putin himself will be at the center of the events. But the Olympics might not turn out as he and his Kremlin colleagues have envisioned.

According to two of Putin’s critics from the democratic opposition, Boris Nemtsov and Leonid Martynyuk, the Olympics, to be held in February 2014, are a disaster waiting to happen. Nemtsov and Martynyuk have published a booklet, Winter Olympics in the Subtropics: An Independent Expert Report, describing the folly of the choice of Sochi, the unprecedented amount of government money being spent to prepare for the games, and the vast corruption that is part of the process.¹ The Sochi Olympics, for these writers, are a microcosmic example of what is wrong with Russia today. And far from presenting Putin’s Russia in a favorable light, the Olympics could be devastating to the country’s image, as well as Putin’s. The authors begin:

Russia is a winterly country. On the map, it is hard to find a spot where snow would never fall, and where winter sports would not be popular. Yet Putin has found such a spot and decided to hold the winter Olympics there: in the city of Sochi.

Sochi, which Nemtsov knows well—he is a native of the city who ran unsuccessfully for mayor there in 2009—is indeed an unfortunate choice. According to Nemtsov and Martynyuk, the temperature at Krasnaya Polyana, the mountain cluster outside of Sochi where many of the winter sports will take place, reached 55 degrees Fahrenheit this year on February 7, the date when the games will open next year. Four days later the temperature reached close to 60 degrees.

Equally disturbing are the enormous costs involved in construction for the games and the lucrative contracts that have been awarded to members of Putin’s inner circle. Nemtsov and Martynyuk have estimated that the Sochi Olympics will cost more than $50 billion, despite the fact that Putin initially told the Olympic organizers that Russia would be spending $12 billion on them. It is not unusual for a country’s actual expenses on the games to be double what was originally projected, but in Russia’s case the increase from the original estimates is more than fourfold. As the authors write:

The cost of the Sochi Olympics, based on the global average, should have been $24 billion (i.e., Putin’s $12 billion, multiplied by two). The remainder—$26 billion—consisted of embezzlement and kickbacks.

The Rotenberg brothers, Arkady and Boris, friends of Putin since their childhood in St. Petersburg, are a case in point. They were judo partners of Putin at the Yavara- Neva Judo Club in St. Petersburg, and continue, along with him, to be benefactors of the club. In 2008 the brothers, now billionaires, began buying up subsidiaries of Russia’s national energy company, Gazprom; their construction company, SGM Group, is now a major supplier of pipelines to Gazprom. They also have large investments in Mostotrest, a road construction company that won the concession to build the controversial toll road from Moscow to St. Petersburg and is now the contractor for several road projects in connection with the Olympics.

In total, the Rotenbergs have received twenty-one Olympic construction contracts, worth around $7 billion, more than the entire cost of the Olympics in Vancouver in 2010. According to Nemtsov and Martynyuk, the Rotenbergs have reaped enormous profits from the projects because the contracts were awarded without competition.

Another old Putin friend, Vladimir Yakunin, a former neighbor of his at the exclusive Ozero dacha compound outside St. Petersburg, is also a major beneficiary of the Sochi Olympics. Yakunin is the head of Russian Railways (RZD), which was designated to oversee the building of a combined highway and railway from the city of Sochi to the area for downhill skiing at Krasnaya Polyana. As Nemtsov and Martynyuk note:

The most expensive facility of the Sochi Olympics…is not the central stadium, the ski-jumping center, or the bobsled track. Those facilities were peanuts compared to a 48-kilometer stretch of highway….

As in the case of the Rotenbergs, the builders of the road and railway, which have caused unprecedented environmental damage, received their contracts through Russian Railways without competitive bidding.

Yakunin has recently been in the spotlight because of revelations by anticorruption blogger Aleksei Navalny about his questionably acquired luxurious dacha outside Moscow. Navalny’s Fund to Fight Corruption also uncovered a network of offshore companies that Yakunin and his family use to fund real estate ventures abroad. In June it was widely reported that Yakunin had lost his job. But the Kremlin quickly dismissed the reports as unfounded.

Yet another Putin crony, Gennady Timchenko, is a large stakeholder in SK Most, one of the companies contracted by Yakunin to build the road and train to Krasnaya Polyana. He also happens to be a sponsor of the Yavara-Neva Judo Club and reportedly plays ice hockey with Putin and Arkady Rotenberg and some other close friends of the president. Timchenko runs Gunvor, the third-largest oil-trading company in the world. Gunvor rose from a little-known business to become a major force in the oil industry after the takeover by state-run Rosneft of the oil giant Yukos—and the arrest of its owner, Mikhail Khodorkovsky—in 2003. Rosneft now sells a significant amount of its oil through Gunvor.

According to Nemtsov and Martynyuk’s report, the cost of the highway to Krasnaya Polyana would have been radically reduced if the project had not included railway lines. But this would have meant leaving RZD management out of the vast profits, along with the affiliated companies with which it makes contracts.

In addition to the unfavorable climate, Nemtsov and Martynyuk go on to point out other risks of having the Olympics in Sochi. A major problem is the enormously large amount of energy that will be required. Sochi, a city of only a half-million people, is woefully inadequate for this task. In 2012, more than a thousand power outages—an average of three a day in various parts of the city—occurred there because of the poor condition of the electricity network.

The construction of facilities for the Olympics is being carried out by more than 16,000 migrant workers from the former Soviet republics. According to the report’s authors, in 2012 alone forty construction accidents and twenty-five deaths occurred in the preparations for the games:

The poor quality of construction and violations of technological rules and regulations are related to the use of cheap and unskilled labor. A paradoxical situation arose: despite the astronomical budget,…the building workers often did not receive their hard-earned pay. The money ended up in the pockets of the main clients, general contractors, subcontractors, and subsubcontractors…. We can only speculate what the quality of the facilities built will be.²

The authors observe that many of the contractors have not met the deadlines for completion: “This means that the last stage of preparation for the Olympics is being carried out in an emergency mode, and no one cares about the quality and technology used.”

Moreover, the authors predict, visitors to the Olympics in Sochi, which is known for its road congestion, will encounter traffic jams that could make Moscow streets seem tranquil in comparison:

Due to the influx of high-ranking officials of Putin’s government and official delegations, who are used to having the traffic halted to allow them to speed by, the situation on the roads of Sochi will become a real nightmare.

Adding to the concerns about the Kremlin’s planning for the Olympics is the controversy over the draconian anti-gay legislation, including a ban on “homosexual propaganda,” signed by Putin in June. The Interior Ministry, which controls the police, has said that this law will be enforced during the Olympics. Gay activists are calling for a boycott by participants in the games.³

Nemtsov and Martynyuk make only passing reference to the possibility of terrorism at the Olympics, noting that Sochi is part of the notoriously volatile North Caucasus. In fact, Sochi is located just 250 miles from the republics of Chechnya and Dagestan, where Islamist rebels have their base. In early July, Doku Umarov, the leader of the rebel movement, who is believed to be hiding in the mountains between Dagestan and Chechnya, threatened in a video that his followers would use “maximum force” to ensure that the games do not take place. Umarov has claimed responsibility for several terrorist attacks in Russia, including that on the Moscow metro in 2010, which killed forty people, and the 2011 bombing at Domodedovo airport, which resulted in thirty-seven deaths.

According to Ben Judah, a British journalist and the author of Fragile Empire, the North Caucasus regime is likely to become more and more troubled and violent.⁴ Moscow is spending vast amounts of money there but crime and ethnic conflict are rife and living standards abysmal. In Grozny, the capital of Chechnya, half the population is officially unemployed, while in the capital of neighboring Dagestan, Makhachkala, 90 percent of young people are without jobs. As Judah observes: “Stability in the North Caucasus is an illusion. Russians realize this, with only 5 percent thinking that the government fully controls the situation there.”

For Judah, the North Caucasus is only one of many problems plaguing the Kremlin. His excellent book provides a wide-ranging and highly critical account of the current state of Russia, based on travels throughout the country and other states of the former Soviet Union and interviews with people ranging from high-level officials to ordinary shopkeepers. He also gives an insightful historical perspective on the rise of Putin, describing how an unimpressive, former low-level KGB officer who was in the right place at the right time became extremely popular. These insights help us to understand why Russia has evolved since 2000 into a “fragile empire,” beset, as Nemtsov and Martynyuk express it, by “lawlessness, corruption, high-handedness, cronyism, incompetence, and irresponsibility.”

Judah makes a good case for the fact that Putin emerged from the shadows in large part because of the sophisticated use of the Russian media, controlled by the Kremlin, to package him: “The Kremlin seized the airwaves by creating a TV tsar, through telepopulism.” Putin, in Judah’s account, was to a considerable extent a product of his media advisers, who successfully presented him to the public as a man of action, a master of a variety of different skills. Judah quotes the respected Russian journalist Leonid Parfyonov:

The success of Putin was that…he understood that he had to be multiple Putins—Putin diving into the sea to rescue amphorae, Putin driving a yellow car through Siberia, Putin racing a sports car. It was about not being Brezhnev, not being Yeltsin. Not having the image stuck.

As Judah points out, Putin’s popularity, although manipulated by television, was in fact genuine, in the sense that ordinary Russians came to respect him soon after he emerged as Yeltsin’s designated successor when he became prime minister in August 1999. After being elected to the Russian presidency in March 2000, Putin achieved an approval rating of over 60 percent for the next twelve years.

Several factors contributed to the wide public support for Putin, in particular the upturn in the Russian economy because of rising oil and gas prices. Before Yeltsin stepped down as president, the economy was in desperate straits. The government, plagued by debt, had defaulted on the ruble in 1998, and Russian energy exports, which the government depended on for revenue, had fallen steeply, along with prices. Ordinary Russians felt threatened. Putin arrived on the scene just as the economy began to rebound, with the growth rate hitting 10 percent. His government was able to increase spending for pensions, health care, and education, thus convincing the Russian public that he would provide for their economic well-being.

Putin’s appeal lay also in his marked contrast with Yeltsin, whose capricious governing style and drunkenness—not to mention corruption—left Russians yearning for a younger, healthier leader with a firm hand. But it now appears that this image of Putin is wearing thin and that, as Judah puts it, Russia is falling out of love with its president. Judah has discovered from his extensive research that there is a deep dissatisfaction with the Putin regime in many parts of the country, which might not be reflected in Putin’s poll ratings. Time and again, Judah spoke with people who had voted for Putin in the last presidential election, but claimed to have supported him mainly because of the lack of an alternative.

Judah’s conclusions are substantiated by other observers, including the respected Center for Strategic Research in Moscow, which conducted focus groups in sixteen far-flung regions of Russia last year. The results, discussed by Mikhail Dmitriev and Daniel Treisman in Foreign Affairs, were striking:

Yes, Russians outside Moscow and St. Petersburg have no appetite for the noisy street politics and abstract slogans of their big-city counterparts. But they are far from content with the current political system, which they see as hopelessly corrupt and inept at providing basic services. Their support for Putin grows thinner by the month, and a major economic crisis could provoke them into protests on a massive scale.⁵

It might be added that although Putin’s approval rating still stands just above 60 percent, it has steadily decreased from the all-time high of 85 percent in 2008. And the Kremlin-sponsored United Russia Party is suffering a serious decline. Although it still has a majority in the Duma, it received just under 50 percent of the vote in the December 2011 parliamentary elections and its candidates have lost to independents in several regional and local contests since then.

Among the causes of the decline in Putin’s popularity, Judah mentions Russians’ growing use of the Internet as a source of news, in preference to television. According to a recent study published by Russia’s Public Opinion Foundation, 43 percent of adult Russians go online every day, an astounding rise in Internet usage from just a few years ago.

The stories of rampant corruption in government circles are now documented and spread widely on the Web by critics like Nemtsov and Aleksei Navalny, who is running for mayor of Moscow in elections scheduled for September 8. Navalny has been at the center of a growing but still disorganized protest movement against the Kremlin, which has responded by instigating several criminal cases against him on what are clearly bogus financial charges.⁶ On July 18, he was sentenced to five years in a labor camp after being convicted of stealing $500,000 worth of lumber from a state-owned company in Kirov, where he once served as an unpaid adviser to the regional governor. That night several thousand people took to the streets in Moscow to protest Navalny’s conviction and the judge, clearly getting his cues from a nervous Kremlin, reversed himself the next day. Navalny and his codefendant, Pyotr Ofitserov, were released, pending the results of their appeal against their sentences, thus enabling Navalny to continue his mayoral campaign.

Perhaps the allegations of corruption against Putin and his friends would not receive wider and wider attention if Russia’s economic situation were not suffering a significant decline, mainly due to the falling prices of Russia’s chief exports, oil and gas, and a decline in foreign investment. Economic growth in the second quarter of this year fell to 1.2 percent, while inflation continues to rise. Experts, including Russia’s former economic development minister and now Putin’s top economic adviser, Andrei Belousov, have warned that Russia could fall into a recession by the autumn. The declining state of the economic and social infrastructure—roads, education, health care, and housing—is contributing to widespread grumbling among ordinary Russians about the Putin regime.

What lies in the future for Russia and the Kremlin? Judah discusses the ineffectiveness of democratic oppositionists, like Nemtsov and Navalny, who are vociferously critical of the Putin regime but have not managed to build a coherent movement. Indeed, there is still a large difference between politically conscious Muscovites and Russians in the provinces, who are more concerned about daily economics issues than civil rights. But political activism at the local level is growing markedly, as demonstrated by the mobilization of volunteer observers in local and regional elections and protests, such as that in the city of Astrakhan last year over election fraud.

A question raised by Judah’s book is whether at some point local interests could merge with those of a larger democratic movement spurred on by oppositionists in Moscow. A step in this direction occurred last autumn, when Navalny and other nationally known democrats actively supported Yevgenia Chirikova, who ran for mayor of Khimiki—and lost—as an environmentalist opposing the construction of the highway between Moscow and St. Petersburg (in which Putin’s friends the Rotenbergs continue to have a large investment).

In the meantime, the Putin regime is reacting with harsh measures to the efforts of its critics. The Kremlin, along with its subservient parliament, has passed new laws to limit street protests and has instigated raids on nongovernmental organizations, such as Golos, the independent election-monitoring body, and the human rights group Memorial. It has expanded the definition of treason to enable the authorities to persecute Russians who work closely with foreigners. After the so-called “March of Millions” to voice opposition to Putin, held on May 6, 2012, twenty-two protesters were arrested on charges of inciting mass unrest and face lengthy prison terms. These measures have been accompanied by tough and intransigent positions in foreign policy, ranging from Russia’s lack of cooperation with the West on Syria and Iran to its maneuvers with Edward Snowden. Putin appears to be trying to exploit elements of chauvinism and anti-Americanism among ordinary Russians so as to enhance his image.

Liberals see the crackdown at home as an all-out attack on freedom of speech and association. As a Russian journalist observed, Putin “was allegedly so frightened and angered by the events of the winter of 2011–2012” when large street protests erupted “that he has now resolved to wreak a lengthy and pleasurable revenge on those who spoiled his mood prior to and following the elections.”

But the opposition is not to be deterred. Navalny, a charismatic speaker, by all accounts brilliantly tore apart the prosecution’s case against him during his recent trial. If he and his supporters are any indication, it seems that the repressive measures of the Kremlin have strengthened the resolve of at least some of the democrats. As Navalny told the courtroom on July 5 in his final statement, which was greeted with applause:

I am not going to run away. I have no alternative but to work for the citizens of my country. None of us has the right to be neutral. The largest country in the world is controlled by a bunch of freaks, worthless former Komsomol members who became democrats and now are patriots who have seized everything. This an outrage and we will work to remedy it.

Navalny has continued to convey his message during televised debates among Moscow’s mayoral candidates in mid-August. (The Kremlin’s favored candidate, incumbent Sergei Sobyanin, declined to take part.) Navalny forcefully asserted his vow to end official corruption, linking the problem directly to Putin and his allies, including the Rotenbergs and Gennady Timchenko.

In opinion polls Navalny has lagged considerably behind Sobyanin. A poll conducted by the All-Russian Center for the Study of Public Opinion on August 8–10 showed 53 percent of the respondents saying they would vote for Sobyanin and 9 percent for Navalny (the remainder are either voting for one of the other four candidates or not planning to vote). Newer polling data, however, show that Navalny is narrowing the gap between him and Sobyanin, raising the possibility of a second round of elections, if Sobyanin does not receive over 50 percent of the votes. This would be a huge setback for the Kremlin and raise Navalny’s stature even further.

Regardless of the election results, Navalny has achieved something remarkable in showing his fellow Russians by his example that they have rights that are worth defending. In the words of a prominent Russian political analyst:

On July 18, 2013 [the day of the pro-Navalny protests in Moscow], a new political phenomenon—civil intolerance to the politically biased and inadequate actions of the authorities—was born in the country. It could be a turning point in the history of Putin’s Russia.

Even if Navalny loses the appeal of his conviction and ends up behind bars—and prosecutors have just come up with new charges against him, claiming his campaign has been financed with foreign funds—he has already created a huge change in Russia’s political atmosphere.

—August 27, 2013