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The represents an inflection point for , a test of how the nation handles many challenges both domestically and abroad. The will test the ability of the leaders of the country and its citizens to provide adequate answers to these challenges. ABOUT RUSSIA DIRECT:

Russia Direct is an international analytical outlet of Russia Beyond The Headlines launched in June of 2013. The website, russia-direct.org, features articles, white pa- pers and monthly memos that provide the kind of nuanced understanding required by those with a deep involvement and interest in Russia-U.S. relations and Russian foreign policy. Russia Direct is fast becoming the pre-eminent forum for high-level policy mak- ers, experts, international observers and business leaders from the U.S., Russia and other countries. Long-term, the goal of the project is to improve multilateral relations at the interpersonal, interagency and intergovernmental levels.

sia-U.S. cooperation in the nuclear energy COMING UP IN FEBRUARY sphere. The big question now is what will come in place of the agreement. The Russia Direct Quarterly report will outline the history of the HEU Purchase Agreement and will give an assessment of the results in the format of a round- table discussion where Russian and inter- national experts will share their views. The report will also examine the unique- ness of the project and show how the disarmament process can use commer- cial mechanisms. It will conclude with a AFP/EAST NEWS discussion exploring various perspectives of the future of Russia-U.S. cooperation in the nuclear energy and nuclear disarma- ment spheres. © Russia Direct HEU PURCHASE The work on the report will be led by 2013 – All rights reserved. AGREEMENT: Director of the Center for Energy and Se- WHAT COMES NEXT? curity Studies (CENESS) Anton Khlopkov. No part of this publication may Also contributing to the discussion will be reproduced or transmitted Don’t miss our next Russia Direct Quar- be the specialists who participated in the in any form or by any means, diff erent stages of project design and im- including photocopying, or by any terly report on the Megatons to Mega- information storage and retrieval plementation. watts (HEU Purchase) Agreement. Hav- system. ing been one of the most successful and mutually benefi cial examples of coopera- The views expressed are those tion between the U.S. and Russia, it has To get this report for free, of certain participants in the become an RD subscriber - discussion and do not necessarily come to an end after 20 years of work. refl ect the views of all participants The project paved the way for future Rus- http://russia-direct.org/subscribe or of Russia Direct. SOCHI SPECIAL | #3 | JANUARY 2014

EDITOR’S NOTE

With the Sochi 2014 Winter Olympics drawing near, Russia Di- rect presents a special issue of RD Quarterly on Sochi. In it, we take a look at some of the special challenges that Russia needed to address in preparation for one of the world’s most signifi cant sporting events. As Russia Direct experts point out, these challenges were far more diverse than anything that had been experienced before. Ekaterina While the countries previously hosting the Winter Olympics Zabrovskaya also considered questions related to their international image, ability to build a sustainable tourism industry, and long-term Editor-in-Chief investments into infrastructure, they were never forced to con- front the types of issues that Russia has had to consider. These include transforming a city with a subtropical climate into a world-class ski resort, and ensuring the safety of participants and spectators, despite Sochi’s close proximity to the politically turbulent . The RD Quarterly report includes analysis from such experts as Ivan Timofeev and Timur Makhmutov of the Russian Interna- tional Aff airs Council (RIAC), Christopher Hartwell and William Wilson of the Skolkovo Institute for Emerging Market Studies (IEMS), and Sergey Markedonov of PONARS Eurasia. These experts analyze in several parts Sochi 2014’s impact on Russia’s image abroad, some of the unique security issues faced by Sochi’s organizers, and how to measure the return on Russia’s $50 billion investment. In addition, Oleg Boyko of the Commission for the Development of the Paralympic Movement in Russia discusses the expected gains from hosting the Para- lympics for Russia’s disabled. We invite you to read this special issue of the RD Quarterly and share your opinions with us. Please send your thoughts, as well as any questions regarding Russia Direct and its products, to me directly at [email protected].

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CONTENTS

Introduction 5 Sochi 2014: Two trials for Russia − How Sochi can transform the image of Russia − The link between the Sochi Olympics and Russian foreign policy − Internal challenges to hosting the Winter Olympics

Part I 8 The Sochi Olympics: Winning a gold medal? − Sochi prepares for a $50 billion makeover − The scale and scope of Sochi’s modernization program − Keeping score in post-Olympic Sochi − How do you measure the return on a $50 billion investment?

Part II 16 Security threats to Sochi’s modernization program − North Caucasus as a political hot spot − The roots of radical Islam in the North Caucasus − US-Russian security cooperation in the Caucasus − Sochi’s bid to become the safest Olympics ever − Problems and solutions to radical Islam in the North Caucasus − The link between security and economic development in the Caucasus

Part III 22 The Paralympics as a model for success − The secrets of Russia’s Paralympic success − Expected gains for Russia from hosting the Paralympics − How the Paralympics can boost Sochi’s global profile

25 Policy recommendations

26 Recommended books on Sochi

27 Top 10 Twitter accounts for #Sochi

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ABOUT THE AUTHORS

Boyko, Oleg Oleg Boyko is the Founder and Chairman of the investment holding company Finstar, one of the largest private investment groups in Russia. In 1996, Oleg Boyko suff ered a serious spinal injury, keep- ing him out of the public eye. Today, he heads the Commission for Development of the Paralympic Movement in Russia under the Rus- sian Paralympic Committee. In 2005, he set up the Parasport Foun- dation in support of the Paralympic movement. Hartwell, Christopher Christopher Hartwell is a Senior Research Fellow at the Institute for Emerging Market Economies (IEMS) of the School of Management Skolkovo in Moscow. Dr. Hartwell previously served as a Public Administration Expert and Financial Economist for two USAID-funded projects and was an International Economist for the U.S. Department of the Treasury. He completed his Ph.D. in Eco- nomics at the Warsaw School of Economics. Makhmutov, Timur Timur Makhmutov is a Deputy Program Director at the Russian International Aff airs Council (RIAC). Dr. Makhmutov worked as a lecturer and as Head of Staff of the Analytical Monitoring Center at MGIMO-University before joining RIAC. Timur Makhmutov was awarded a doctoral degree in Political Science at MGIMO-University in 2007.

Markedonov, Sergey Sergey Markedonov is an expert for the Council of Europe and the Federal Assembly of the Russian Federation, a member of the Pro- gram on New Approaches to Research and Security in Eurasia (PO- NARS Eurasia). Sergey Markedonov completed his Ph.D. in 1999 at the Council of the Institute of Russian History under the Russian Academy of Sciences.

Timofeev, Ivan Ivan Timofeev is a Program Director at the Russian International Af- fairs Council (RIAC). Before joining RIAC, Dr. Timofeev held positions of lecturer, senior lecturer and associate professor at MGIMO-Uni- versity in Moscow and later was the Head of the Analytical Moni- toring Center at MGIMO-University. Ivan Timofeev was awarded a doctoral degree in Political Science at MGIMO-University in 2006.

Wilson, William William Wilson is a Senior Research Fellow at the Institute for Emerging Market Economies (IEMS) of the Moscow School of Man- agement Skolkovo in Moscow. Prior to joining IEMS, Dr. Wilson was the Director of Economic Research at the National Bank of Kuwait and also served as the Chief Economist for Ernst & Young. He re- ceived his Ph.D. in Economics from Purdue University.

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Executive The Sochi Olympics are intended to be a demonstration of Russia’s Summary growing foreign policy and economic infl uence on the world stage. To a certain extent, hosting the Winter Olympics is viewed as Russia’s return as a great power in world politics and as clear evidence that internal instability and fragmentation along its borders are a thing of the past. Of all the issues raised by experts and politicians ahead of the Olympics, both in Russia and abroad, the situation in the politically volatile North Caucasus – the most problematic and vulnerable region in modern Russia – poses the greatest threat to the economic develop- ment of post-Olympic Sochi. As a result, the attention paid to security before, during and after the Winter Olympics has been unprecedented. What remains to be seen is how the massive $50 billion public invest- ment program leading up to the Sochi Olympics might contribute to broader stability and economic development in the region. In a best- case scenario, the increased attention to security in the North Cauca- sus region, combined with the creation of a vast new infrastructure network and a revitalized tourism industry, will deliver on President Putin’s vision to transform Sochi into a showcase of Russia’s economic modernization. MIKHAIL MORDASOV

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SOCHI 2014: TWO TRIALS FOR RUSSIA Authors: Ivan Timofeev and Timur Makhmutov INTRODUCTION

© ALEXEY NIKOLSKIY/RIA NOVOSTI The Sochi 2014 Winter Olympics represents a test of how Russia handles many challenges both domestically and abroad

he 2014 Sochi Olympics became more than a sporting ties. On the other hand, there are the old stereotypes event before it even started, acquiring a scope and impor- and fears, combined with the inherent instability of hosting the Ttance within Russia that was unprecedented in the history Olympics in a region – the North Caucasus – where hostilities of the modern Olympic movement. In this regard, Russia is very trace back almost to antiquity. diff erent from previous nations that have hosted the Winter In addition to questions of Russia’s reputation and prestige, Olympics, such as the , Italy, Canada and . there is an important foreign policy challenge. Hosting the Win- Each of these countries attempted to maximize their hosting ter Olympics is in many ways an indicator of Russia’s future abil- of the Olympics in terms of international image, prestige, tour- ity to uphold its international obligations as well as to play an ism dollars, and long-term investments into infrastructure – but active role in resolving confl icts of both a regional and global never were forced to confront the types of issues that Russia scale. It is enough to recall the boycotts of the Summer Olym- was forced to consider. pics in Moscow in 1980 and in Los Angeles in 1984, to under- The Sochi 2014 Winter Olympics represents an infl ection point stand the global context of Sochi 2014. for Russia, a test of how the nation handles many challenges There is also an impressive list of domestic challenges, each both domestically and abroad. The Olympic Games will test the of which seems to have acquired a greater than expected reso- ability of the leaders of the country and its citizens to provide nance. The challenges for Russia are extensive: managing the adequate answers to these challenges. logistics of a mega-sporting event; allocating resources to meet Of course, the primary challenge is related to the prestige, im- the challenges of the many Olympic construction projects; age and global reputation of Russia. There is hardly a country managing the expectations of the now more open and outspo- in the world where there could be so many controversial items ken Russian society; and preparing for the safety and security of that could impact a nation’s reputation. On one hand, there is a guests and athletes, especially in the context of terrorist threats perception of Russia as a partner and a country of opportuni- and the fragile political situation in the Caucasus.

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The Olympics is a symbol of how relations between Russia and the world have changed over the last decade

On the eve of, and during the Olympics, even small failures in However, in image and reputational terms, there are a number these areas will have a resonance far beyond Russia’s borders. of serious problems. The perception of Russia in many countries After the Winter Olympics, we will fi nally be able to judge the remains very eclectic, and sometimes confused. Old-fashioned country’s return on investment: Did Russia achieve at least a notions of from Tolstoy, Pushkin and Dostoevs- modest success – or did the country simply spend billions of ky are combined with extremely simplifi ed patterns, which are dollars for a beautiful two-week holiday and a bunch of “white substituted, only with new faces and characters. elephant” projects? The image of Russia is, in many ways, an image of extremes. Russia is authoritarian, imperial, corrupt, inconvenient, poor HOW SOCHI CAN TRANSFORM THE IMAGE (but also rich), unpredictable, full of raw resources, one-dimen- OF RUSSIA sional, irregular, non-market oriented, destructive, and archaic, etc. This perception is shared by a large number of foreign and Let us start with the image of Russia abroad and its image in Russian journalists, experts and some political cliques. They are the international arena. Over the past 10–15 years, this image has readily accepted by voters, TV viewers, and now, Internet users. changed dramatically. In the early 2000s, many people saw Rus- It would be a serious mistake to consider this situation as a sia as a fragile and unstable state. Its role in the world was re- kind of plot against the country. The image of a nation has many garded as limited at best, as the country was beset with a seem- layers, and as a result, it is extremely diffi cult to change over- ingly insurmountable set of domestic challenges. night. Its resistance to a changed reality can be very long and At that time, scenarios for the future of Russia included risks sustained. Thus, instead of looking for those to blame abroad, due to the disintegration of the state, internal confl icts, and and within Russia itself, it is necessary to work consistently to large ecological disasters caused by the nation’s aging infra- improve the situation for the better. structure. This shaped the perception of Russia as an inferior The Sochi Olympics are one way to improve the situation for player in international relations. It was the image of a country the better. In the modern age of the Internet and social net- that had experienced a great catastrophe, as if it had been dev- working, with the transparency and interactivity that they astated, which needed assistance, at best, and at worst, to be bring, it is possible to challenge long-held myths and shatter avoided or isolated. prevailing stereotypes. By showcasing real work, real achieve- And now the Olympic Games are in Russia? Sochi, city of ments, and world-class professionalism, the organizers of the the Olympics? Back in those diffi cult days, people abroad and Sochi Olympics are making it possible to present a new face of within Russia would have hardly believed that this was ever Russia to the world. As a result, Sochi 2014 will be a litmus test possible. for the image of Russia, a test of how well its new image will The fact that in 2007 Russia won the right to host the Olym- play to global audiences. pics proved one very important thing. Russia had somehow regained the world’s trust. Russia began to be considered as THE LINK BETWEEN THE SOCHI OLYMPICS a partner capable of implementing large-scale, long-term pro- AND RUSSIAN FOREIGN POLICY jects. Of course, this did not happen at once. By the time that Sochi For all the importance of changing the reputation and the in- had won its Olympic bid, Russia had already announced a num- ternational image of Russia, the Olympics also call into question ber of major long-term projects of regional and even global im- more fundamental problems about the role and place of Russia portance: new pipelines, modernization of the military satellite in the world, its future prospects in the international arena, and network, aeronautical projects with international cooperation, its specifi c relationships with countries in both Europe and Asia. private business projects in the IT fi eld, and many others. Having won the bid to host the Olympic Games in Sochi, Rus- Rapid economic growth led to an almost unprecedented inte- sia found itself in a somewhat vulnerable position. A $50 bil- gration with the world economy. Almost overnight, there were lion investment in hosting the Games could have been wasted thousands of links that tied the country to the outside world. if several countries chose to boycott or refuse to participate in The victory of the Russian Olympic bid took place against the the competition for any number of reasons. background of growth in many areas. This was an indicator of a And there were more than enough reasons mentioned in the new quality of relations between Russia and the world. media: Russia’s fi rm position on the Syrian issue, the crisis in

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Ukraine, the consequences of a military confl ict with Georgia in 2008, not to mention the smaller, but still high-profi le events like the restrictions on LGBT rights within Russia or the contro- versy surrounding Pussy Riot. Importantly, Russia still has not yet fully formed its foreign policy identity – it is still looking for some consensus about its role and place in the world order. This search for an identity is superimposed on the remaining vestiges of the Cold War, at a time when the modern world order is marked by fragility and formlessness. Taking into account the so-called “compres- sion” of the historical process, when the situation in the world is changing very fast, changing a nation’s foreign policy identity becomes even more diffi cult. Against this background, on the tactical and operational lev- el of Russian diplomacy (both state and public), a number of important successes were achieved. In almost every complex international dilemma of the passing year, Russia off ered con- structive and feasible solutions, acting as an eff ective mediator and managing to avoid a zero-sum mentality. This is a fundamentally new quality of Russian diplomacy, something diffi cult to realize or even imagine in an era of bipo- larity. Russia prevented intervention by external forces in , which would inevitably have led to an escalation of the internal confl ict. Russia contributed to signifi cant progress in resolving the Iranian nuclear issue. Russia continued to actively assist the international community in solving the Afghan problem. Rus- sia also managed to promote new integration processes in the CIS countries. The process of normalization of relations with AFP/EASTNEWS Georgia – important for a successful Olympic Games in terms of security – has started. terrorist activity, radicalism and crime remain unsolved. How In other words, in a fairly diffi cult international environment, Russia answers these problems will go a long way in determin- Russian diplomacy has created the most favorable environment ing the future prospects of Sochi as a globally attractive city. for the Olympics. Ignoring the Games for political reasons is not Another problem is associated with the eff ective use of the possible for any foreign governments at the moment. Olympics infrastructure after the end of the Winter Games. The Olympics symbolizes Russia’s increased role in interna- Here, there are two possible scenarios. In the fi rst scenario, the tional aff airs. Sochi 2014 is a symbol of how relations between new venues, ski resorts and stadiums enable Sochi to trans- Russia and the world have changed over the last decade. How- form into a regional and tourism hub. Then there is the ever, the Olympics is simultaneously a reminder that Moscow reverse scenario, very common for Olympic cities where sports will require new approaches, new resources, and technologies, and other infrastructure remain largely superfl uous, trans- to mature as a world power. formed from an asset into a liability. The ability for Sochi to make the transformation into a regional and international hub INTERNAL CHALLENGES TO HOSTING THE is one way to judge the eff ectiveness of federal and regional WINTER OLYMPICS policy. Finally, another problem is related to the overall investment Finally, it’s important to consider Russia’s domestic problems, climate. Obviously, during the Games, the most convenient sys- many of which have received particular scrutiny in connection tem will be implemented for the accommodation of visitors in with the Olympics. Many of these are most closely associated Sochi. The question is – to what extent these conditions can be with the global and regional perspectives about Russia. maintained after the Games? How long will it take to get a visa, The fi rst problem is related to security issues. Holding the what will be the quality of the service and attitude towards Olympics in the North Caucasus has become a serious chal- foreigners in an environment where the excitement about the lenge to the Russian leadership. Security threats in the region Olympics subsides, volunteers and Olympic staff leave the city, are well known.The fundamental problems of unemployment, and the attention of authorities is reoriented to other major inequality, and corruption that can create a breeding ground for sporting and political events?

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GETTY IMAGES/FOTOBANK

Part 1 Christopher Hartwell and William Wilson THE SOCHI OLYMPICS: WINNING A GOLD MEDAL?

The Sochi Olympics have offered the Russian government a glimpse of an improved investment environment and a more liberalized travel regime.

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he long road to Russia’s fi rst-ever Winter Olympics is fi - nally ending in Sochi in February 2014, with athletes from Taround the world competing for a chance at glory while hundreds of millions of viewers from around the world watch on their televisions and mobile devices. Surrounding the Games has been the controversy about an unprecedented $50 billion investment program by the Russian government, making these Olympic Games the most expensive in history. Plagued by al- legations of corruption and, at the same time, accompanied by amazing engineering feats, the entire build-up to Sochi 2014 has showcased Russia as it really is: a country of contradictions that may lack some of the institutions of the West but is none- theless capable of large-scale economic transformations. The intense activity accompanying the Olympics has radically reshaped the city of Sochi and parts of the surrounding region. In a feat of engineering prowess, Sochi created every com- petition venue from scratch in just a seven-year period, while simultaneously upgrading nearly every element of the city’s NATALIA MIKHAYLENKO infrastructure – air transportation, rail networks, highways, and power plants – and re-inventing its tourism and hospital- ity industry along international standards. As a result, the real question that is on the minds of people in Sochi, as well as in Moscow and the rest of the world, is what happens when the Olympic fl ame is extinguished? through the end of October (the “velvet season”). Due to its Keep in mind that even the most successful example of Olym- unique geographical position – wedged in between the Black pic investment, Lillehammer (), saw negligible tourism Sea and the – central Sochi has a sub- increases after the Olympics were complete in 1994, and 40% tropical climate with an average winter temperature of 6 de- of the hotels built to accommodate the Olympic rush went grees Celsius. bankrupt within a few years. The same concerns are being In the mountains of Krasnaya Polyana, just 40 minutes away raised about Sochi, which is attempting to transition from Rus- from central Sochi, there is a more traditional climate for host- sia’s premier summer resort into a true four-season resort with ing the Winter Olympics. There, Sochi has built three new world-class destinations in the mountains of Krasnaya alpine ski resorts and transformed the old Alpika-Service ski Polyana. resort into a gleaming new Olympic venue for bobsled, However, unlike previous Olympic host sites (including Lille- and . There is also a brand-new mountain train that hammer), Sochi has a slate of additional international events connects Adler on the coast with the new mountain resorts. lined up in the immediate post-Olympic period. These events The alpine ski resort of Rosa Khutor, which will host skiing and include the inaugural F1 racing event in the brand-new Olympic snowboarding events during the Olympics, is now among the Park, the G8 summit in mid-2014 and, perhaps most promi- most popular in Russia during the period from December to nently, the FIFA World Cup in 2018. So will Sochi be able to March. transition successfully to its post-Olympics life and see con- Sochi, along with other cities along the Black Sea coast, tinued economic gains from such massive investments? Or will has long been a popular tourist destination for . The Russia only have memories and ski jumps to show for its bil- area at one time was known as the “Russian Riviera” due to lions of dollars? its pebbled beaches and its ability to attract higher-income tourists from Russia. During the earlier Soviet period, Sochi’s SOCHI PREPARES FOR A $50 BILLION sanatoriums were sought-after by members of the nation’s MAKEOVER elite, who had few options for traveling outside of the . However, in recent years the city has lost its popularity, Even before winning the bid to host the Winter Olympics, as many Russians found they could travel abroad for the same Sochi was always a pleasant, if unassuming, Black Sea summer cost and a more developed tourist infrastructure, leading to resort town that was the economic center of the Krasnodar rubles being spent in resorts along the Mediterranean rather Krai region in Russia. Sochi, which has a permanent popula- than along the boardwalk of Sochi. tion close to 400,000 people, typically experiences an infl ux of The city has also lacked a concerted marketing eff ort that visitors during the summer months and then from September might have helped the city to become a more popular desti-

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nation for younger Russians. The number of visitors has plum- trade makes up the biggest component of GDP (nearly 44% in meted even in just the last year, from 1.3 million travelers in Krasnodar), with manufacturing, transport and telecommuni- 2012 to 900,000 in 2013, most likely due to concerns about cations also important for regional growth. Construction sky- the Olympic construction and related traffi c. However, this de- rocketed in recent years in preparation for the Olympics, but cline in tourism is consistent with other Olympic host cities: this is similar to nearby , which has also seen a heavy the European Tour Operators’ Association (ETOA) has noted weighting of construction (as part of post-confl ict reconstruc- the disruption of the Olympics to normal tourist traffi c in the tion) in regional GDP. run-up to the games, which ranged from a 5% drop in occu- This does not mean that Sochi and Krasnodar in general have pancy in Atlanta prior to the Olympics to a staggering 30% not had their share of challenges over the past decade; indeed, decline in Beijing. the economic challenges the region has faced is another issue In terms of economic development, Sochi and Krasnodar it shares with both its neighbors in the Caucasus and Russia Krai have always been outliers from neighboring regions in as a whole. At a more basic economic level, Krasnodar Krai is the Russian Caucasus. Largely due to its relative stability and better situated than the rest of Russia due to its diversifi cation, obvious lack of a major confl ict (as in Chechnya from 1994-96 but it also is more fragile: the proximity of , Ingushe- and 1999-2000) or Islamic insurgency (as in Chechnya 2000- tia, and Chechnya mean that any spread of instability or terror- 2009, 2003-present, and Dagestan 2000-pre- ism could severely impact the region’s economic potential. As sent), Krasnodar Krai has seen the greatest economic activity. a result, security has been front-and-center in Russia’s prepa- In 2010, its GDP was 3.5 times greater than that of the next rations for the Winter Olympics. most economically active region (Dagestan) and twice that of all other Caucasus regions combined. Unemployment is also THE SCALE AND SCOPE OF SOCHI’S much lower in Krasnodar than in the rest of the Russian Cau- MODERNIZATION PROGRAM casus, at an estimated 6% of the labor force in 2011, with infl a- tion moving at a slower pace than in its neighbors (although, presumably due to Olympics-related eff ects, it began to pick The public spending program in Sochi was focused mainly on up in 2011 relative to other regions). the infrastructure necessary to run an event such as the Olym- Other than the scale of the economy and with the notable ex- pics. The scale was perhaps much larger than in recent years ception of tourism, the composition of Krasnodar’s economy is given the dearth of infrastructure in the Russian Caucasus similar to the rest of the North Caucasus: wholesale and retail relative to other countries that have hosted the Winter Games

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Sochi has a slate of additional international events lined up in the immediate post-Olympic period

(Canada, Italy, Japan, Norway). The transformation has been amazing, however: Russian vacationers who have not seen the area around Sochi in years would not recognize it. Built from scratch, there are now three world-class ski resorts, massive condo complexes and a large mixed-use Alpine village built at two diff erent mountain elevations. Alongside this amazing transformation has come an as- tounding tally of costs. According to Russian researchers, the combined 48km rail and highway linkages from Adler to the mountain resorts of Krasnaya Polyana was estimated to cost at least $7.45 billion.1 In addition, the doubling in size of Kurortny Prospekt in Sochi in order to bypass downtown, was also a major undertaking, necessitating the building of new tunnels, traversing gorges, and creating new construction in a fairly densely populated area. The estimated cost of the project in 2010 was already incredibly expensive: only 16km long, it was projected to cost $3.3 billion, or nearly $200,000 per meter, an estimate that has been borne out by the actual government tenders put out for the bypass project and that shows a cost of approximately $170 million per kilometer. GETTY IMAGES/FOTOBANK Roads were not the only infrastructure investment. Sochi’s international airport was substantially upgraded, and accord- Much of the infrastructure work has been done by Russian ing to Euromonitor International, can now handle about 3,800 private or state-owned fi rms as well, with Russian Railways passengers per hour. Energy projects were also near the top of handling rail upgrades, state corporation Olympstroy building the Olympics priority list, including the Adler Thermal Power the Olympic Village in the coastal region, Basel Aero (part of Plant (ATPP), with a goal of increasing the regional energy Basic Element) renovating Sochi’s international airport, and supply by two and a half times its previous capacity. And of Mostotrest OJSC working on the Kurortny Bypass. Given the course, construction has substantially increased the tourist in- diffi culties of doing business in Russia, it was perhaps inevi- frastructure in Sochi, with 42 new hotels built and an increase table that Russian fi rms would grab the lion’s share of these of approximately 27,000 rooms from its pre-Olympic days. investments, but charges of favoritism or unclear procurement Along with this increase, residential building also proceeded practices were leveled at the Russian government by the op- apace, with new and modern facilities catering to the Russian position almost continuously from the beginning of the Olym- elite both along the coastline and in the mountains. pic construction cycle. A key point surrounding this massive activity is that these In contrast, the share of foreign investment in the Olympic investment projects were undertaken almost exclusively by undertaking was fairly muted, with the largest contribution Russian fi rms. As part of the ramp-up for building the Olym- coming in the area of telecommunications. Global telecoms pic venues, Vnesheconombank (VEB) has lent $7.4 billion to giant Avaya created the common telecoms platform for the some of the most powerful and successful oligarchs in Rus- event, with much of the network being built entirely from sia, many of whom represent state-owned or state-controlled scratch (due to the low level of pre-existing IT architecture in businesses. For example, Sberbank, Gazprom, and OAO GMK the Sochi region). However, even these initiatives have been Norilsk Nickel all received substantial loans in order to fi nance teamed with Russian companies, who have also been invest- the mega-investments in Sochi and Krasnodar. ing substantial sums: MegaFon invested approximately $230

1. Andrei Tatarinov. Olympic winter games in Sochi – costs and expected benefi ts. Baltic Rim Economies, 4/2010 (August). http://www.utu.fi/fi/yksikot/tse/yksikot/PEI/raportit-ja-tietopaketit/Documents/BRE%20Expert%20Articles%20 2010%20netti.pdf#page=181.

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ITAR-TASS million in fi ber optic communication lines, while Rostelekom KEEPING SCORE IN POST-OLYMPIC SOCHI is purported to have put in a further $130 million into land- line architecture. Similarly, the “Offi cial Chemistry Company With such extensive investment activity fi nanced by the Russian of the Olympic Games,” Dow Chemicals, has created much state and the country’s top businessmen, a natural question to of the advanced materials that have gone into the infrastruc- be asked is: Apart from the Olympics themselves, what benefi ts ture development, but are partnering with Russian companies will accrue to Sochi, Krasnodar Krai, and Russia in general? Per- in order to have the raw materials put in place. In sum, the haps the most obvious benefi t from the Games is the accelera- vast majority of investments for the Sochi games have come tion in regional economic development in Krasnodar Krai. from within Russia, while international investment has been By some estimates, the investment compression caused by directed mainly towards broadcast and communication (such the Olympic Games accelerates the urban development of the as NBC’s investments for broadcast rights around the world). host city by up to 10 years. Municipal decision-makers, who Finally, the Russian government and the Russian people have may be gridlocked under normal circumstances, are forced to incurred a cost related to the Olympics that is relatively much overcome political squabbling to approve fi nancing for con- higher than other recent games, and that was the extremely struction projects, and many of these projects go a long way tight security. Given Sochi’s proximity to troubled regions of in improving the city’s (and the region’s) infrastructure. Before the Russian Caucasus, the security surrounding Sochi was the the Games, Sochi lacked a modern communications infrastruc- most extensive in history: according to Stefan Hedlund, Pro- ture and had signifi cant defi ciencies in its transportation infra- fessor and Research Director at the Centre for Russian and structure. Many of those defi ciencies have been considerably Eurasian Studies at Uppsala University, 25,000 police, 8,000 improved, and Sochi can now better compete with other vaca- other security troops, and 20,000-30,000 army troops were tion destinations in Europe for the tourist dollars of Russians. placed on call for the Games.2 This “investment” represented a And, as seen earlier, creating an enhanced security environ- burden that has not been factored into any other estimates of ment in Sochi and the North Caucasus can also consolidate the total cost of the Olympics, and, more importantly, leaves some of the economic gains in the region. In a best-case sce- nothing of tangible economic value (such as highways or sta- nario, there will be a virtuous circle, as enhanced security pro- diums) behind. vides the basis for economic development, which in turn makes

2. Stefan Hedlund. Sochi breaks records before 2014 Olympics start. World Review. November 28, 2013. http://www.worl- dreview.info/content/sochi-breaks-records-2014-olympics-start.

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The Greater Sochi area

GAIA RUSSO it possible to tame some of the more radical elements of politi- to diff erent regions of Russia all of the new competition venues cal Islam in the region. in the period after the Olympics. The coastal Olympic Village, However, whether this investment in Sochi ultimately lasts for example, is set to become a condo development, while the for the region depends on both continued attraction of inter- main venue – the Bolshoi Ice Dome – is set to be- national events (such as the aforementioned F1 races and the come a site of future sporting events, trade shows and con- World Cup) and in the month-to-month sustainability of the certs. (In autumn 2013, it hosted the Sochi Investment Forum) resort becoming once again a popular travel destination for Apart from the narrow regional benefi ts, it is diffi cult to as- Russians and for foreigners. In Sochi’s case, it is simultaneously certain what the broader benefi ts of the $50 billion expendi- attempting to attract new summertime vacationers while also ture will be to Russia. Some have suggested that the Sochi luring away elite Russians who might have gone to Switzerland experience could help to improve Russia’s investment climate, or France for a ski vacation during the winter months. by involving investors from around the world and demonstrat- This is not inconceivable, as there have been instances where ing that much of Russia’s reputation as a diffi cult place to do the Olympic Games practically gave the host city a new life. business may have been overstated. For example, the industrial center of Barcelona has become a It is unlikely that this will be the case, as Russia actually is worldwide tourist destination and Beijing became a true show- a diffi cult place to do business, although it is getting better. case of modern China’s achievements while providing a huge According to the World Bank, Russia is notoriously tough on lift to China’s sagging soft power. But despite this revitaliza- international trade (ranked 157th out of 183 countries in the tion, many of these former Olympic venues are scarcely used, world in “trading across borders”), while obtaining a construc- as is the case with Beijing’s Bird’s Nest and Water Cube, or tion permit if you are not working on Sochi is near impossible many of the venues built for the Athens games. (178th in the world). While much taxpayer money has been Thus, it is possible to imagine that Sochi as a tourist desti- spent on making the Games a success and helping the region- nation may be revitalized, while many of the big-ticket items al economy, there is likely to be little direct eff ect on the plight that were created themselves fall into disrepair. Whether the of the average Russian businessman who has to deal with the broader tourism benefi ts will equal or exceed the specifi c Tax Administration, the Ministry of Justice, or the Customs sports infrastructure investments will of course remain to be Administration. The issues that impede the Russian business seen, but the infrastructure will need a long time horizon to environment, including low bureaucratic quality, contradictory prove its worth. legislation, and uneven enforcement, are structural in nature The good news is that the Russian government has created a and cannot be solved by government spending – only govern- comprehensive plan for how to adapt, retrofi t and even move ment reform.

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GETTY IMAGES/FOTOBANK Weighed against the huge costs of hosting the Olympics, including the expenses related to the bidding process years in advance, Russia will most likely never break-even

HOW DO YOU MEASURE THE RETURN ON A is, perhaps not surprisingly, private developers and construction $50 BILLION INVESTMENT? fi rms that are politically well-connected). A key point is that these studies have looked mainly at the Summer Olympics, which tend to play in much larger cities than Given this reality, where does this leave Sochi and the massive the Winter Olympics, which are traditionally held in smaller public investment program that has transformed the region? If cities (Lillehammer, Calgary, Nagano, or Sochi). In this sense, previous experience is a guide, the future is uncertain at best. there may not be much normal tourism to displace, nor would Studies have shown that the eff ect of the Olympics on a local a location such as Sochi, due to other issues (mainly related to economy is profound but fl eeting, and rarely evenly distributed. Russia’s visa regime), ever actually see a large delegation of vis- Mark Perryman, a research fellow in sports at the University of iting Norwegians or South Koreans. Thus, Sochi may gain from Brighton and a columnist for the Guardian, has written a book an infl ux of tourism that would never have been possible. But on the impact of the Olympics and concluded that it is over- weighed against the huge costs of hosting an Olympics, includ- whelmingly negative. As he says, the only benefi ts often are ing all of the expenses related to the bidding process years in related to tourism, which are short-term and often “hotel-spe- advance, Russia will most likely never break-even given any ra- cifi c” (this assessment of narrow benefi ts is seconded in a study tional economic calculation of the benefi ts of the Olympics. by Brazilian economists, who show that the real benefi ciaries For some, such as the Regional Minister for Economic Develop- of the gigantic construction that comes with an Olympic event ment, this is not a problem: “If you look at the Games from an ac-

14 RUSSIA DIRECT QUARTERLY REPORT WWW.RUSSIA-DIRECT.ORG SOCHI SPECIAL | #3 | JANUARY 2014 counting perspective, of course they’re a loss…but you just can’t visa system, while making some movement in recent years, imagine a country like Russia without fl ights into space and big remains an anachronism in the modern age, needlessly stifl ing sporting events like the Olympics.”3 But to put the cost of the the tourism that could make post-Olympics Sochi a preferred Sochi Olympics into perspective, the Moscow Olympics in 1980 destination. The simplifi ed regime that was put in place during cost an estimated $3 billion in 1980 dollars, or $8.5 billion in to- the Olympics (similar to the changes in the travel regime that day’s dollars. This means that the Sochi Olympics are more than have been part of the Customs Union reforms with Belarus and 6 times the cost of the Summer Olympics, traditionally a much Kazakhstan) demonstrates that the ability does exist for such a more expensive endeavor. For an even starker comparison, to sweeping change at the legislative and, more importantly, ad- use the Regional Minister’s own example, the entire (estimated) ministrative level. The success of Sochi may have been in show- expenditure of the from its fi rst years to ing the Russian government that allowing Americans, Koreans, 1972 was approximately $275 billion in 2013 dollars; thus, the Norwegians, Chinese or Australians (in addition to Kazakhs and Sochi Olympics cost approximately 20% of the entire Soviet Belarusians) to travel to Russia more easily is actually a benefi t space journey, including Sputnik and Yuri Gagarin. The Sochi rather than a threat. Olympics would then seem not to be very cost-eff ective, even In addition, the Sochi Olympics have shown the value of “soft to be merely a “prestige project” (although, as noted above, we power” in terms of Russia’s infl uence in the world. This is only must consider a long-term time horizon for payoff s from infra- the second time an emerging market (loosely defi ned) has structure projects). Thus, as a model of development, the enor- hosted the Olympics, but Russia’s development puts it outside mous amounts of public investment in Sochi are unlikely to be of that simple classifi cation: with per capita income approach- replicated any time soon across Russia. For now, it appears that ing $20,000, Russia is now a “high-income” developing country the costs are too great: they displace private investments and with a middle class that has quadrupled in size over the past normal economic patterns, and, with history as a guide, simply decade. Additionally, Russia has the largest Internet market and do not deliver the desired benefi ts. Only by placing an economic the second largest car market in Europe, and while the “com- value on something as tangible as “political stability” could the manding heights” lie in the Kremlin’s hands, the economy is benefi ts be seen to outweigh the costs. largely private. For many older Westerners who still cling to However, the Sochi experience can provide some ways for- Cold War stereotypes, the Sochi Games have been a tremen- ward for Russia. The fi rst and perhaps most important is that the dous opportunity to improve Russia’s image abroad. This, Sochi Olympics have off ered the Russian government a glimpse coupled with a concerted policy move towards liberalization of an improved investment environment, starting fi rst and fore- engendered by the Olympics preparations, may be the lasting most with a liberalized travel and visa regime. Russia’s current legacy of the 2014 Games.

3. Artem Zagorodonov. Planning for Sochi after the Olympics. Russia Beyond the Headlines. October 2, 2013. http://rbth. co.uk/business/2013/10/02/planning_for_sochi_after_the_olympics_30423.html.

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© MIKHAIL MOKRUSHIN/RIA NOVOSTI

Part 2 Sergey Markedonov SECURITY THREATS TO SOCHI’S MODERNIZATION PROGRAM

Successful Olympic security measures in Sochi are not sufficiently embedded in the general context of Russia’s domestic politics in the North Caucasus and foreign policy in Transcaucasia.

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In today’s North Caucasus, Salafism is almost a fashion for young people, and the trend itself has morphed into a kind of quasi-ideology for the youth

nlike previous host cities of the Summer and Winter Olym- ground movement have repeatedly stated their willingness to pics (Vancouver, Turin, London, Beijing), Sochi lies in close disrupt the Olympic Games in Sochi, by attacking either Olym- Uproximity to a politically turbulent region: the North Cau- pic facilities or civilian targets anywhere in Russia. Such threats casus. As a result, any discussion of Sochi’s planned economic were voiced in 2007 by the leader of “Jamaat Shariat,” also modernization program must take into account the stability known as “Vilayat Dagestan” or “Dagestan Front,” and in July of the broader region, as well as how the Olympic Games are 2013 by Doku Umarov, the leader of the largest North Caucasus viewed by the politically volatile republics of the North Caucasus. terrorist network, the “Caucasus Emirate.” The North Caucasus consists of seven national republics – Adygeya, Dagestan, Ingushetia, Karachay-Cherkessia, Kab- THE ROOTS OF RADICAL ISLAM IN THE ardino-Balkaria, North Ossetia, and Chechnya – as well as the NORTH CAUCASUS border territories (krais) of Krasnodar and Stavropol. In the past two decades, the notions of “terrorism” and “confl ict” in Rus- The separatist movement in 1990s Chechnya gave rise to the sian minds have been associated namely with this region. Of use of Islam as a tool for political legitimization. Since then, po- the eight armed ethno-political struggles to have taken place litical Islam has assumed gigantic proportions throughout the in the post-Soviet space, two occurred in the Russian Caucasus Caucasus and far beyond the borders of Chechnya. The reason (the Ossetian-Ingush confl ict and the war in Chechnya). stems from the population’s frustration with secular nationalism. Many politicians came to power in the early 1990s under promis- NORTH CAUCASUS AS A POLITICAL HOT ing slogans, but failed to solve the problems facing the North SPOT Caucasian republics. Yet many had a hand in the privatization of power and property in the interests of a very narrow clique. Due to the ongoing terrorist and subversive activity of radical During the two military campaigns waged by the breakaway jihadist groups, the North Caucasus remains a “hot spot” on the Chechen republic against the Russian army, the most combat- map of Russia and the single greatest threat to the future of ready contingents proved to be the jihadists, whose views Sochi’s economic modernization. The situation in the region is were adopted by warlords who had originally shunned them also exacerbated by various latent ethnic divisions that date back (the most striking example being Shamil Basayev). to the Soviet and pre-Soviet period, as well as disputed borders In addition, the growing popularity of Islamic rules in locali- with the breakaway republic of Abkhazia, and the politically vola- ties dotted around other North Caucasus republics is not so tile South Caucasus (Georgia and Azerbaijan) next door. In 2012, much the result of the eff orts of local or foreign preachers, but armed violence in the North Caucasus resulted in 1,225 casualties of the collapse of secular control in various walks of life. Of (700 killed and 525 injured).1 Despite a slight decline in the num- particular note in this context are the scarcity of land, ongoing ber of incidents in 2013, the region remains insecure.2 urbanization, and unemployment. All this is happening against The present-day instability of the North Caucasus extends far a backdrop of ineff ective law enforcement and administration. beyond the region itself. Jihadists from the region have carried The Russian authorities have repeatedly tried to check the out numerous attacks elsewhere: the Nevsky Express rail ser- advance of political Islam in the Caucasus through supporting vice between Moscow and St. Petersburg in 2009; the Moscow offi cial structures, such as the Spiritual Administration of Mus- metro in 2010; Domodedovo Airport in 2011, and a bus in Vol- lims of Central Asia and Kazakhstan. But it has been obvious gograd in 2013. for a long time now that they cannot properly compete with At the same time, the leaders of the North Caucasus under- unconventional and radical versions of Islam.

1. In 2012, armed violence in the North Caucasus caused 1,225 casualties. January 21, 2013. http://www.kavkaz-uzel.ru/ articles/218946/. 2. In Q3 2013, armed violence in the North Caucasus caused 223 casualties. October 15, 2013. http://www.kavkaz-uzel.ru/ articles/231743/.

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in the operation to capture the suspects, had been previously questioned by the FBI over possible links to the North Cauca- sus underground. In 2012, he spent six months in Russia’s North Caucasus, where he is believed to have met with Caucasian ji- hadists.4 The terrorist act in Boston not only caused Washington to downplay its reservations about Russia’s counterterrorism ac- tivities in the North Caucasus, but also to strengthen coopera- tion with Moscow on security in Sochi. In June 2013, Barack Obama and declared their shared desire to cooperate on security issues. In November 2013, Matthew Olsen, director of the U.S. National Counter- terrorism Center, confi rmed that the level of cooperation be- tween the two countries’ intelligence agencies on the eve of the Winter Olympics was much improved.5 Thus, the ultimate AP/EASTNEWS success of the Olympic Games in Sochi depends largely on the In today’s North Caucasus, Salafi sm is almost a fashion for response to the existing ethno-political challenges. However, young people, and the trend itself has morphed into a kind of even after the Olympics, security in the North Caucasus, as well quasi-ideology for certain sections of the youth population. as the region’s integration into Russia’s legal, political, socio- The popularity of Salafi views has had another consequence: economic, cultural, and educational framework, will remain one the cloak of radical Islam has been donned by many criminal of the most urgent issues of domestic and foreign policy. organizations, which in fact have little interest in religion. This has given rise to misleading media reports laying the blame for certain categories of crime at the doorstep of the Salafi s, when SOCHI’S BID TO BECOME THE SAFEST in fact it is the work of common criminals. OLYMPICS EVER

The proximity of Sochi to the North Caucasus region explains the US-RUSSIAN SECURITY COOPERATION IN unprecedented attention that Russia is paying to the issue of se- THE CAUCASUS curity. Any act of terrorism in or near the Winter Olympic capital would undermine President Vladimir Putin’s political credentials Security in the North Caucasus is not merely of regional and na- and jeopardize Russia’s newfound assertiveness in world aff airs. tional concern, but international too. On May 26, 2011, the U.S. To prevent any such scenario, serious measures have been un- State Department admitted that the “Caucasus Emirate,” which dertaken. As of June 2013, around $2.5 billion had been spent aims to create an Islamic state, is a threat not only to the national on security at Olympic venues in and around Sochi. The Rus- interests of Russia, but also the United States.3 Umarov, whose sian Ministry of Internal Aff airs plans to establish a “security aim is jihad against all “enemies of Islam” (not only Russia, but cordon” extending 100 km along the coast of Greater Sochi also the U.S., Europe, and Israel), has been blacklisted as a terror- and 40 km into the interior (from the village of Magri in the ist whose activities pose a threat to U.S. interests. west to the peak of Kardyvach Uzlovoi in the east, and from the The worst terrorist attack in the United States since 9/11, at Kashin Mountains in the north to the Imeretinskaya Lowlands the Boston Marathon in 2013, brought worldwide attention to in the south). The skiing competitions will be held 39 km from Chechnya and Tamerlan and Jahar Tsarnaev, two brothers of the center of Sochi near the mountain settlements of Krasnaya Avar-Chechen descent. The elder, Tamerlan, who was killed Polyana and Esto-Sadok.

3. U.S. Department of State, Offi ce of the Spokesman. Designation of the Caucasus Emirate. Media Note. Washington, D.C., May 26, 2011. http://www.state.gov/r/pa/prs/ps/2011/05/164312.htm U.S. Department of State, Offi ce of the Coor- dinator for Counterterrorism. Designation of Caucasus Emirates Leader Doku Umarov. Washington, D.C., June 23, 2010. http://www.state. gov/s/ct/rls/other/des/143564.htm For more details about the motives of the American side, see Sergey Markedonov: Caucasus Cauldron. Journal of International Security Aff airs. 2010. #19 (Fall). Pp. 123-128. 4. The Dagestan trail of Tamerlan Tsarnaev. April 22, 2013. http://www.youtube.com/watch?v=y31Vn1_76g4. 5. Obama promises to help ensure the safety of the Sochi Olympics. http://lenta.ru/news/2013/06/18/summit, June 18, 2013. Timothy Phelps, “Offi cials say terrorist threat on U.S. soil is declining”. http://www.latimes.com/world/worldnow/ la-fg-wn-us-terrorist-threat-declines-20131114,0,2603061.story#ixzz2lg747aLX November 14, 2013.

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NATALIA MIKHAYLENKO Under the Federal Law “On the Organization and Hosting of Greater Sochi and more than half the territory of Krasnodar the Olympic and Paralympic Games,” the head of state has the Krai, Stavropol Krai, and the Republic of Karachay-Cherkes- right to impose additional security measures.6 According to the sia. These restrictions will remain in force for more than three document, the organizational period of the Games runs from months (from January 27 to April 16, 2014). For comparison, July 5, 2007 to December 31, 2015. Thus, for nearly two years during the London Games in 2012, Olympic restrictions were after the completion of the Olympics and Paralympics, Russia in force for just one month. All non-Olympic fl ights will have will be able to exert an expanded security presence in Greater to obtain special permission from the head of the Operations Sochi. Staff for Olympic Security. The law imposes severe restrictions on entering the territory To ensure even greater security, the organizers plan to use of the Games, and stipulates a visitation schedule. It also pro- a wide range of technical resources. The Ministry of Internal vides for the suspension and prohibition of the production of Aff airs is expected to spend 320 million rubles (approximately various chemical, biological, and radioactive substances, as well $10 million) on the acquisition of speedboats, underwater anti- as alcohols, toxins, and spirits unsuitable for making beverages. sabotage gear, and seaport surveillance and protection equip- Pursuant to these provisions, the Ministry of Internal Aff airs ment. has drawn up a list of specifi c actions. In addition to its own Specially procured devices will monitor the movement of forces and FSB units, security at the Games will involve the De- large and small vessels, including infl atable boats. They will be fense Ministry (the Black Sea Fleet and military bases in Abk- installed at the Sochi seaport. Furthermore, the Ministry of In- hazia). ternal Aff airs intends to deploy special underwater guns (cost- The security measures entail the deployment of a wide arse- ing 24 million rubles, roughly $770,000) to combat militant nal of tools, ranging from speedboats to protect the shoreline frogmen. Public order will be maintained by the presence of to the latest hi-tech detectors, jammers, unmanned aerial vehi- 70,000 police offi cers across Greater Sochi. The Russian Minis- cles (i.e. drones), and surveillance cameras. try of Emergency Situations will also lend a hand. During the Olympic Games, fl ights will be restricted over Experts who were involved in the security arrangements for

6. See the full text of the law: http://www.rg.ru/2007/12/05/sochi-dok.html December 5, 2007.

WWW.RUSSIA-DIRECT.ORG RUSSIA DIRECT QUARTERLY REPORT 19 SOCHI SPECIAL | #3 | JANUARY 2014 the APEC summit in Vladivostok and the Summer Universiade The initiatives to attach criminal responsibility to the families in Kazan are involved in the Sochi Olympics as mentors and of terrorists have also stumbled, because they seemed to pro- instructors. Despite the antagonisms between Russia and its mote the idea of preserving the “special traditions” and blood Western partners (the U.S. and Britain), their respective intel- ties of the peoples of the North Caucasus. In reality, their tradi- ligence agencies are coordinating eff orts ahead of the forth- tional social structures are undergoing a major crisis and trans- coming Games. formation. Sochi represents only part of the panorama of security in the The highly patriarchal institution of the North Caucasus is North Caucasus. Recent years have seen a slight decrease in becoming degenerate, undermined by armed confl ict in which the number of terrorist incidents. And in 2009-2013, several weapons carry more clout than seniority. The process of Islamic iconic leaders of the jihadi underground were removed. revival is accompanied by a generational confl ict. For Salafi However, a decisive psychological and political breakthrough youth, the older generation is made up of “untrue, superfi cial” in the struggle against the underground movement is still Muslims, who lack authority. In this context, Russia’s attempts pending. That is primarily because the Russian authorities are to utilize the practice of “collective guilt” could backfi re if the staking all on crushing the militants, with far less attention on people of the Caucasus unite in rejection of Moscow’s policy. changing the social reality. With the growth of the Islamist movement (which is the most serious challenge to Russian statehood) comes the need for major changes in Russian politics. Today, Russia’s North Cau- PROBLEMS AND SOLUTIONS TO RADICAL casus region is largely repeating the experience of the Middle ISLAM IN THE NORTH CAUCASUS East, North Africa, and Central Asia (where ethnic nationalism is bowing to an aggressive Islamist propaganda, replete with Until now, little heed has been taken of the existing models of ideas of social justice and supranational values and slogans). In government in the republics. The appointment of Ramazan this regard, the state’s primary task is to fi nd an ally to deal with Abdulatipov to the post of president of Dagestan, a politician the situation “on the ground.” and academic of national standing, has been almost the only at- The offi cial Islamic clergy in the republics cannot be relied tempt to change the rules of the game in the North Caucasus. upon as the sole instrument of Russian policy. Often, its adher- ents are members of oligarchic clans seeking to privatize power, and are therefore interested in preserving the local tendencies, regional apartheid, closed offi cialdom, xenophobia, and (con- trary to Russia’s desire) lack of modernization. ©KONSTANTIN CHALABOV/ RIA NOVOSTI

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A signifi cant source of backup could be the so-called “informal have not acquired broad international legitimacy. In the overall Muslims” (those who adopt a nonconformist stance towards context of “global jihad,” they appear to be a relatively mar- the offi cial clergy, yet remain unaligned to the Salafi (Wahhabi) ginal storyline. In the West, for instance, they are labeled as underground movement). Thereupon, it is critically important terrorists, not as “freedom fi ghters” or “self-determinists.” to involve them in open public policy, and draw them out of The tough actions of the Russian Special Forces are not inter- the shadows through existing party-political structures, as well preted as an excuse to boycott the Games. There is a general as civic, human rights, and centrally controlled ones. Securing understanding that Olympic security in the Caucasus region the loyalty of the informal Muslims would serve to minimize the requires unprecedented measures. Islamist threat. A major plus, it would seem, is the cooperation on security is- Hence, the implementation of these new undertakings in the sues between Russia and the West, as well as the willingness of North Caucasus requires a serious revival of internal political Moscow’s most problematic partner in the post-Soviet space, debate. This liberalization is not a reaction to the demands of Georgia, to play ball. Russia’s security measures have been in the West, but an urgent, pragmatic need. First of all, without receipt of substantial material and technical support, which it, there is a risk of overlooking some acute problems (when has helped to beef up security ahead of the Games. analysis is replaced by propaganda). Second, a higher degree However, one gets the impression that Olympic security in of informational freedom would arm the federal center with a Sochi is not suffi ciently embedded in the general context of tool against the regional authorities (especially if particularism Russia’s domestic politics in the North Caucasus and foreign is on their agenda). A continuation of the one-sided “strong policy in Transcaucasia. arm” policy would only foment more anti-Russian sentiment. Moreover, the Olympics itself is still just an event of limited The “excesses” of such policy delegitimizes the results that the duration. Even the highest level of organization and security authorities are trying to achieve. during the Winter Olympics is powerless to change the dy- If a solution to the above tasks can be found, it will attenu- namics in the North Caucasus region. In this regard, it is im- ate the grounds for extremist and terrorist activity against the portant to understand that without the framing of a qualitative state, since such activity is essentially a radical response to the and comprehensive integration strategy, extremism and radi- privatization of power, corruption, coalescence of government calism will continue to breed. and business, monopolization of economic resources, isolation Security measures alone, without alternative projects to from criticism, and injustice. A curtailment of these social ills regulate internal migration, resolve socio-economic problems, will make extreme political slogans less popular. and strengthen interregional ties (from education to personnel policy), will not produce the desired eff ect, only tactical results. They will merely “lower the patient’s temperature” without THE LINK BETWEEN SECURITY AND treating the dangerous virus. ECONOMIC DEVELOPMENT IN THE In that connection, the principal conclusion is as follows: CAUCASUS Preparation and security ahead of the Sochi Olympics should be considered as an initial step and an important precondition The fi rst Winter Olympics to be held in Russia will require not for the development of a comprehensive strategy for the Cau- only expert marketing skills and tremendous fi nancial backing casus region. on the part of the organizers. Without due regard to the com- plex ethno-political issues, the Kremlin might let slip the payback from Sochi 2014, something it has been fearing for many years. After all, the country’s entry into the group of great powers is not a promotional gimmick, but a demonstration of its manage- rial capabilities, including regional control, anti-terrorism, and relations with neighboring states that have UN membership or partial recognition. And, of course, a qualitative interpretation of the historical past would be in the interests of real (not just hypo- thetical) national unity. To date, the Russian government has achieved some notable successes. As the Opening Ceremony of the Games approach- es, no large-scale terrorist attacks have occurred with one trag- ic exception, the terror blasts in Volgograd in late 2013. Many warlords and leaders of the Islamist underground movement have been eliminated, their cells weakened.

Unlike in some countries in the Middle East, their activities MIKHAIL MORDASOV

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GETTY IMAGES/FOTOBANK

Part 3 Oleg Boyko THE PARALYMPICS AS A MODEL FOR SUCCESS

The Paralympics should not be viewed as a universal panacea, but as a real opportunity to change society’s attitude towards people with disabilities and to draw public attention to the problems of their socialization.

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There is growing optimism about the results that the Russian Paralympic team can be expected to achieve in Sochi

n March 2014, the Paralympic Games will be held in Russia The number of Russian athletes participating has also risen for the fi rst time, gathering together 1,350 athletes and team sharply, with the summer team having more than tripled since Imembers from 47 countries. Over the past decade, the Rus- 1996 (60 Paralympians in Atlanta, compared with 182 in Lon- sian team has made incredible progress, holding top positions don). As for winter sports, whereas in 2002 only 26 Russian in the team events since 2006. The Paralympic movement be- athletes competed in the Paralympics in Salt Lake City, the gan its development in Russia only 17 years ago, in 1996, with country’s sporting delegation in Sochi will consist of 162 mem- the creation of the Russian Paralympic Committee. For com- bers, including 64 sportsmen and women. For the fi rst time parison, in most Western European countries and the U.S., the ever, the Russian team will participate in all events. policy of involving disabled people in sporting events dates These impressive results and the active development of Par- back to the 1950s. asport in Russia rest upon the following factors: In the mid-1990s, Russia had to start from a clean slate, since • The motivation of the athletes themselves. For Russian ath- “invalids did not exist” in the Soviet Union.1 Paralympic in letes, participation and victory in the Paralympics is seen as a Russia was in its infancy and lacked the necessary infrastruc- springboard to a fuller life and a chance to be “noticed” in soci- ture and fi nancial support. Programs had to be swiftly set up ety. They have an opportunity to socialize, win sizable scholar- to prepare coaching staff and experts in the fi eld of adaptive ships and awards for successful performances, and have better physical culture; training bases for individual disciplines needed employment opportunities after their sporting careers. to be established; and matters relating to equipment, logistics, • The role of modern sports management. This includes the etc. resolved. fi ne-tuned mechanism of interaction between the Russian Min- Russia made such a monumental breakthrough in the devel- istry of Sports and the Russian Paralympic Committee, whose opment of Paralympic sport (becoming a center of the interna- tasks extend beyond developing and supporting Paralympic tional Paralympic movement in the process) and in such a short sport in Russia. Its activity involves organizing assistance for space of time that the world began to talk about the “successful disabled children, promoting the ideas of the international Par- phenomenon” of the Russian Paralympic team. Thus, there is alympic movement, training sports professionals to work with growing optimism about the results that the Russian team can the disabled and creating jobs. be expected to achieve at the 2014 Paralympics in Sochi, as well • The integrated approach of government and business. For as the types of changes to Russian society we might expect in comparison, the Chinese Paralympic team – the undisputed the near future. leader in summer sports – is fi nanced from public sources, while the U.S. team is funded by the private sector. In Russia, THE SECRETS OF RUSSIA’S PARALYMPIC it is the public budget that covers most of the costs of Para- SUCCESS lympic development. At the federal and regional level, the state funds the procurement of equipment and facilities, the Since 2006, the Russian team has consistently medaled in win- participation of team members in interregional, national, and ter sports team events. In 2012 at the XIV Paralympic Games international Paralympic and Deafl ympic events (702 events in in London, Russia was among the leading countries in summer 2013), and the provision of moral and material incentives for sports, too, producing its best ever performance in terms of athletes, coaches, and specialists. In 2007, Russian President both number of medals won and position in the table. In total, Vladimir Putin decreed that Paralympic cash rewards should the team picked up 102 medals (36 gold, 38 silver, 28 bronze) match their Olympic equivalents.2 in the individual and team disciplines. 42 athletes received a Business also plays an important role in promoting Paralym- gold medal, and 14 world records were set in swimming and pic sport. It supports the educational side through organizing athletics. events to honor Paralympic athletes, raising public awareness

1. The problems of disabled people in the Soviet Union were downplayed and hushed up. In 1980, despite all its traditions, the Paralympics were not held in Moscow because there were “no invalids in the country.” 2. Presidential Decree #1221-R. September 11, 2007. http://paralymp.ru/docs/11.10.2007.php

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of unifi ed approaches and standards to ensure an accessible environment. In everyday life, people with disabilities encoun- ter diffi cult and, at times, insurmountable obstacles: Simple things like journeying to work or university, or meeting up with friends are ruled out because of “inaccessible” stations and public transport. However, the Moscow Metro, built in Soviet times when there were “no disabled people,” is expected to be adapted to meet their needs by 2017-2018.3 Many people with disabilities in Russia are socially inactive and “isolated.” Their potential in the labor market is underused. Of the 2.57 million disabled people of working age, only 817,200 are employed (6% of the total number of people with disabili- ties); the number of unemployed people with disabilities, mean- while, is 1.8 million (77% of disabled people of working age).4 Yet it should not be forgotten that the problem of employ- ment of people with disabilities is relevant to all countries. In March 2012, the level of unemployment among people with dis- abilities in Britain was 45.9%, two and a half times higher than © MIKHAIL MOKRUSHIN/RIA NOVOSTI the rate among people without disabilities (17.8%). of their sporting merits, and nurturing a sense of recognition and respect in society at large. For example, the Parasport HOW THE PARALYMPICS CAN BOOST Foundation, together with the Paralympic Committee, holds SOCHI’S GLOBAL PROFILE the “Return to Life” annual national awards ceremony to cel- ebrate athletes, coaches, and doctors, all of whom contribute Since their inception, the Paralympic Games have grown in both greatly to the development of Paralympic sport. It is already a scope and signifi cance, becoming a kind of “humanist philosophy kind of tradition to host offi cial receptions for Paralympians on of the 21st century.” They are now an important sporting event of the last day of international competition. global stature: The image of athletes conquering themselves and their circumstances (internal and external) is watched with de- EXPECTED GAINS FOR RUSSIA FROM light by billions of people worldwide. The occasion has long since HOSTING THE PARALYMPICS moved beyond a mere competition for people with disabilities. The Paralympics can be a turning point in removing the psy- Experience shows that the Paralympic Games ultimately improve chological barriers between people with disabilities and soci- the situation for disabled people in the host country and contrib- ety, and in assisting their integration and socialization. There ute to their greater integration into society, thereby creating a still exists a barrier in Russia between the disabled and the powerful impetus to further develop the Paralympic movement. able-bodied. The Paralympics should not be viewed as a uni- China’s experience is particularly noteworthy. In the fi ve years versal panacea, but as a real opportunity to change society’s after the 2008 Paralympics, Beijing undertook seismic measures attitude towards people with disabilities and to draw public at- to integrate people with disabilities into the community. tention to the problems of their socialization and rehabilitation. It is greatly hoped that Russia’s hosting of the 2014 Paralym- It is hoped that the 2014 Paralympics will nudge Russia towards pic Winter Games will help change stereotypical attitudes to- some qualitative changes in relation to people with disabilities. wards disability. In 2012, for example, the country ratifi ed the As such, there are important lessons for Sochi of how hosting Convention on the Rights of Persons with Disabilities and is im- events such as the Paralympics can improve Russia’s image on plementing the “Accessible Environment” program, although it the world stage. By changing public perceptions of the event, remains fairly localized. the Paralympics can – and must – be transformed into a van- Russia faces considerable challenges in the rehabilitation of guard of achievements, into something not simply worthy, but invalids due to insuffi cient social infrastructure and the lack heroic..

3. Moscow Metro will be adapted to the needs of disabled people by 2017. RIA Novosti. November 1, 2013. http://ria.ru/disabled_vz- rosl/20131101/974215537.html 4. A decree is signed to facilitate larger employment among disabled people. RosMinTrud. July 3, 2013. http://www.rosmintrud.ru/employment/employ- ment/337

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Policy Recommendations

BASED ON OPINIONS OF CHRISTOPHER HARTWELL, SERGEY MARKEDONOV AND WILLIAM WILSON

1. Extend security measures put into place in Sochi beyond the immediate vicinity of the Olympic competition venues and the infrastructure of Greater Sochi. In this regard, special attention should be paid to the situation in the Volga region, which has recently seen a resurgence of radical Islamism, involving leaders of the North Caucasus underground (in the context of the Sochi Olympics). Therefore, the problem of security must extend beyond the narrow geographical confi nes of Greater Sochi. For those seeking to disrupt the Games, any incident on Russian soil would have the intended eff ect; hence the need for a broader approach. 2. Use Olympic security as a starting point for considering the ethno-political development of the North Caucasus, and the religious and national policies of the Russian Federation as a whole. In addition to technical measures, the ideological, socio-economic, cultural, and humanitarian factors in the medium and long term also need to be addressed. The groundwork laid in Sochi needs to reach beyond the actual event. The Olympics (even if successful with no unpleasant “surprises”) will not make the Caucasus region safe by itself. Consequently, improving the security of this part of Russia should remain a priority of domestic policy. 3. Create a liberalized travel and visa regime to encourage foreign investment. The Sochi 2014 Games have demonstrated that it can be done. 4. Market Sochi as a desirable tourist destination beyond Russia’s borders. The investment in Sochi can work in the long run if there is appropriate marketing (and, as noted above, it is easier for foreigners to get there). 5. Spearhead a shift from public investment to private investment. For the future, public investment programs are rarely a way to spur growth, and Russia needs to concentrate on spurring private investment for profi table projects. 6. Focus on “soft power” as a way to attract foreign investment since Russia’s investment climate is intertwined with its image abroad. 7. Continue the cooperation between Russian Special Forces and units of the Ministry of Internal Aff airs, the Ministry of Defense, and the Ministry of Emergency Situations. This process began in preparation for the Olympic Games and needs to become a permanent fi xture in all North Caucasian matters. 8. Make international cooperation on security (with U.S., British, and other foreign intelligence agencies) a cornerstone of regional security post-Sochi. Such cooperation should become a regular occurrence. Not only in the run-up to the soccer world cup of 2018, but in the context of regional and international security, counter-terrorism, and anti-extremism. 9. Pay greater attention to cooperation with Russia’s immediate neighbors in the North Caucasus region (Georgia and Azerbaijan). A willingness on their part to collaborate in matters of security at the Games in Sochi should be used as an impetus for more fruitful cooperation in the future. The establishment of joint anti-terrorism centers is worth considering once more (the idea was discussed in 2004-2005 by Moscow and Tbilisi in the context of transforming Russia’s former military facilities in the Transcaucasus region). Hence, there is a chance to give extra stimulus to the normalization of relations with Georgia, as well as the restoration of Russian infl uence in Azerbaijan. 10. Reinforce elements of Caucasian identity throughout the Winter Olympics. It is crucial to consolidate the view that the Games are not alien to the peoples of the Caucasus.

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RECOMMENDED 1. Abdurahman Avtorkhanov, Marie Broxup. The North Caucasus BOOKS ON SOCHI barrier: The Russian advance towards the Muslim world. London: Hurst, 1992.

2. Anna Matveeva. The North Caucasus: Russia’s fragile border- land. London: Royal Institute of International Aff airs, Russia and Eurasia Program, 1999.

3. Steven Main. North Caucasus Military District: Defending Rus- sia’s interests in the Caucasus. Camberley: Confl ict Studies Re- search Centre, RMA Sandhurst, 2000.

4. Mark Smith. Russia and Islam. Camberley: Confl ict Studies Re- search Centre, 2001.

5. Gordon Hahn. Russia’s Islamic Threat. New Haven, Conn: Yale University Press, 2007.

6. Alla Yazkova, Sergey Markedonov. North Caucasus: Socio-eco- nomic and political factors of the contemporary crises in the na- tional republics. Moscow: RAS Institute of Economics, 2009.

7. Konstantin Kazenin. The “quiet confl icts” of the North Cauca- sus: Adygeya, Kabardino-Balkaria, Karachay-Cherkessia. Moscow: REGNUM, 2009.

8. Robert Schaefer. The insurgency in Chechnya and the North Caucasus. Santa Barbara, Calif.: Praeger Security International, 2010.

9. Thomas Remington. The politics of inequality in Russia. Cam- bridge: University Press, 2011.

10. Mike Bowker. Russia, America and the Islamic world. Aldershot, England: Ashgate, 2007.

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TOP 10 TWITTER ACCOUNTS FOR @Sochi2014 #SOCHI Offi cial Twitter account for the Sochi Olympics with updates from Sochi and Krasnaya Polyana.

@NBCOlympics NBC Twitter account dedicated entirely to the Olympic Games.

@DChernyshenko Dmitry Chernyshenko, Sochi 2014 Organizing Committee President and CEO.

@SochiADM The offi cial Twitter account of the city of Sochi.

@Olympstroy The offi cial Twitter account of Russia’s state Olympic construction fi rm.

@JohnsonRussiaLi Johnson’s Russia List, a source of Russia-related analysis, including issues of state security and terrorism.

@CSISRussia CSIS Russia and Eurasia, a source of analysis, assessment and rec- ommendations regarding all the regions of the former Soviet Union.

@NCaucasusCaucus North Caucasus Caucus, providing analysis about the North Cau- casus.

@JaneMBuchanan Jane Buchanan is a lead researcher for Human Rights Watch on the Sochi 2014 Olympic Games.

@northkavkaz North Kavkaz, a source of news and analysis about the North Cau- casus.

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PROJECT TEAM

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Christopher Hartwell Olga Ivanova Maria Oshepkova Author Deputy Publisher, Marketing, Russia Layout Designer, Russia Beyond Beyond The Headlines The Headlines Sergey Markedonov Author Ksenia Smertina Project Director Timur Makhmutov Author Maria Shashaeva New Products Development Director Ivan Timofeev Author Antonina Osipova Marketing Specialist William Wilson Author Darya Karzanova Marketing Manager

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