It's Raining Rubles In Sochi

Thanks in part to oligarchs, a Black Sea resort will be transformed for the 2014 Winter Olympics

EVEN MANY Russians scratched their heads 17 months ago when the Black Sea resort city of Sochi won the right to host the 2014 Winter Olympics on its third try. That's because Sochi is regarded as the Cannes of the Russian Riviera, a temperate retreat where tourists dine alfresco along a palm-fringed promenade. Yet the city where Soviet strongman Joseph Stalin kept a dacha and prime minister Vladimir Putin now lights out for summer getaways is committed to pulling off the best and most compact Winter Games in history. The opening and closing ceremonies, as well as any sport contested on a sheet of ice (hockey, skating, curling), are set for a cluster of coastal venues. Not 30 miles away, an Alpine cluster in the Krasnaya Polyana mountains promises skiing on the dry, fluffy snow known as champagne powder.

Today untended cows wander along the highway that links the mountains to the coast. A burst of building over the next five years will upgrade this road and add a parallel light-rail link and a three- to four-lane expressway, not to mention a new port where oligarchs can berth their yachts. To ensure that these ambitious plans come off on time, the Kremlin has tapped as its liaison to the organizing committee Dmitry Kozak, the no-nonsense bureaucrat Putin once entrusted with running Russia's restive and resource-rich Southern Federal District. After reports in April that the Games could wind up costing twice the budgeted $12 billion, and in light of the subsequent global financial crisis, Kozak in November announced that spending might in fact be scaled back. In any case, he reaffirmed commitments from private investors, who are footing some 40% of the bill.

Those Olympic angels include three of Russia's wealthiest men—or at least the richest before the meltdown double-boiled the oligarchs' wealth. Roman Abramovich's companies are invested in infrastructure around the coastal cluster. Oleg Deripaska is building the athletes' village, the main press center and a new airport terminal. Vladimir Potanin, whose Rosa Khutor resort will host Alpine skiing and snowboarding, is the most emotionally invested; he is an avid skier who urged Putin to mount bid No. 3 for Sochi. The grand plan is to transform the region into a year-round tourist destination so that the thousands of Russians who visit French ski resorts each winter, most of them millionaire "minigarchs," won't have to leave the country to get in a good run.

Putin's persuasive presence at the 2007 IOC vote in Guatemala City helped Sochi edge PyeongChang, South Korea, for the 2014 hosting rights. Even if the world economy deteriorates further, and the price of oil continues to snorkel below $70 a barrel (the minimum at which the government balances its budget), Russia is sure to find a way to pay for the Games because of the national pride at stake. "There's tremendous pressure from Putin on down to make this happen," says David Watts, a U.S. sports marketing consultant based in Moscow. " Putin himself recently approved changes to the Alpine cluster. It never should have gotten to him, but people are so paranoid, they're afraid the IOC will say they're doing something wrong and take the Games away."

If there's any doubt that a resurgent nationalism is joined to the oligarch-fueled sports boom and to plans for the Sochi Olympics, a rejoinder will soon be visible. A $6 billion resort called Federation Island and shaped like the Russian mainland is to be built just nine miles from town off the Sochi coast. An architect and two engineering firms from the Netherlands are behind the project, which will meet the housing, shopping and recreational needs of 25,000 people. Though formally unconnected to the Olympic effort and bankrolled entirely with foreign capital, the resort is scheduled to be completed in time for the Games.

As the global financial crisis has made clear, no nation is an island. But the Russian Riviera is trying to offer up evidence to the contrary.