AVAILABLE FOR SUBSCRIBERS ONLY The Sochi 2014 Winter Olympics represents an inflection point for Russia, a test of how the nation handles many challenges both domestically and abroad. The Olympic Games 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. 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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 North Caucasus. 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]. WWW.RUSSIA-DIRECT.ORG RUSSIA DIRECT QUARTERLY REPORT 1 SOCHI SPECIAL | #3 | JANUARY 2014 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 2 RUSSIA DIRECT QUARTERLY REPORT WWW.RUSSIA-DIRECT.ORG SOCHI SPECIAL | #3 | JANUARY 2014 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 Moscow 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. WWW.RUSSIA-DIRECT.ORG RUSSIA DIRECT QUARTERLY REPORT 3 SOCHI SPECIAL | #3 | JANUARY 2014 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.