Putin Orders Olympics Financing Overhaul

The state corporation model has made it difficult to oversee expenses for Olympics preparations, government sources say, and Prime Minister Vladimir Putin has proposed returning to the previous financing model — a federal targeted program. The Regional Development Ministry is changing the way it finances construction work for the 2014 Winter Olympic Games in Sochi, sources in the Regional Development, Finance and Economic Development ministries said. The construction program is spelled out in a government order from Dec. 29, 2007, which lists 235 sites and events that are part of the preparations. According to the Regional Development Ministry, the program's overall cost is 1.3 trillion rubles ($41.5 billion). The effort is being overseen by Olimpstroi, a state corporation created Oct. 10, 2007, whose supervisory board is led by Deputy Prime Minister Dmitry Kozak. It was transferred state assets worth 72 billion rubles in 2008. The ministry sources said Putin issued an order that would reform the program for the work in Sochi. "The order goes like this: 'Prepare a proposal on reforming the construction program for the Olympics sites and the development of Sochi as a mountain resort into a federal targeted program,'" one of the officials said. "We'll prepare such an order and get it approved with the relevant ministries and agencies," a senior regions ministry official said. Spokespeople for the Regional Development Ministry declined to comment. "Life and the crisis forced us to change legal directions," the regions ministry source said. "When we won the rights to hold the Olympics, the federal targeted program was hastily turned into a government program, and the money just kept flowing out. With the targeted program, that would have been impossible because everything was clearly spelled out with an explanation of the project's costs." When told of the proposal, Olimpstroi president Taimuraz Bolloyev said that "any experiments conducted on the Olympics project will only lead to negative consequences." Another Olimpstroi official said the building needed to start later this year or early next year. "If it doesn't happen, we won't finish," he said. "We're just the administrators," not the ones ordering all of the work, he added. After weeks of discussion, it was decided not to create a completely new targeted program, a senior Finance Ministry source said. "It would be really strange, since we already had a big targeted program to develop Sochi as a resort, and in 2007 it was wrapped up, with most of its money going to Olimpstroi." Creating a new targeted program would mean a return to the past and the closure of Olimpstroi, he said. "Olimpstroi has become something of a black box: They approve the list of sites but with no numbers." Eventually, a compromise was reached, he said. "The construction cost of each Olympic site will be determined, but the money will be deposited as equity capital, not through a federal targeted program." The arrangement is somewhat strange, the Finance Ministry official conceded. The planning element will be borrowed from the federal targeted program model, while the expenditures will continue to be made through the framework of the state corporation. "The aims justify the means. We need to strengthen oversight of the state corporation, as well as speed up, and most important, coordinate the Olympics building work." "Putting prices on the sites needs be done to make the construction more transparent," Kozak told Vedomosti. A source in the Economic Development Ministry said Kozak made the decision. Now, money will be added to Olimpstroi's equity capital gradually, as work on each project progresses, a regions ministry source said. "As before, we'll need to oversee the money," the source said. An Audit Chamber official said the changes would also strengthen oversight of other state bodies involved, including the Transportation Ministry, the Federal Road Agency and the Office for Presidential Affairs. The ensuing disagreements within the government over construction dates could put some of the projects at risk, however, a source in the Cabinet warned. "We're glad that the government has paid attention to the president's comments on the need to rethink the organizational and legal basis of the state corporations," a Kremlin official said. He said the Kremlin had not yet seen the order. "Even the partial reformation of any state corporation is a step forward and the start of the transformation of these legal entities, which people are still questioning." Another source in the Kremlin said President Dmitry Medvedev had not given orders about any specific state corporation. "The change in financing Olimpstroi is an internal matter for the White House and isn't at all connected with questions about the state corporations."