Description

The combination Adler-Krasnaya Polyana highway is the most large-scale project of the Olympics. It links the Imeret Lowlands where the coastal cluster of sports stadiums are located with the alpine resorts. The two-lane automobile highway and the single railroad track pass along the river, through numerous overpasses, bridges and tunnels. Furthermore, the project includes the laying of a second railway from Sochi to the Olympic Park and construction and reconstruction of four stations.

Cost and Financing

The total cost of the whole construction is 285.4 billion rubles or $8.6 billion dollars. Of these, 264.2 billion rubles went to the alpine tract, that is, directly to Alpika Service, the combined route along the river to the resort (and the second Sochi-Adler-Vesyoloye railroad). To compare: the Olympics in Vancouver, including all the costs for the infrastructure and security, came to $9.2 billion, and the Games in Turin cost $4.1 billion.

The chief source of funding for the project is the federal budget – 241.1 billion rubles were allocated by the state as founding capital for the responsible executor of the project, Russian Railways. The remainder – 44.3 billion – come from the rail company’s own investment program’s funds.

Precious Construction Project for Precious Friends

1) Stroy-Trust, Russian Railways and a Friendly Bank

One of the two main general contractors of the road construction is Stroy-Trust, JSOC, which is one of the companies in the SK Most group.

In 2011, the holding took 8^th place among state contractors with a contract for 90 billion rubles. The most famous project of this company, besides the Olympic highway, was a bridge to Russkiy Island built for the APEC summit for 23 billion rubles. This contract was obtained without a tender, thanks to a special decree by then-President Dmitry Medvedev.

The main shareholders and owners of Most are former builders of BAM (the Baikonur-Amur Highway), Vladimir Kostylyov (37.5 shares) and Yevgeny Sur (37.5% shares), and also Putin’s friend, billionaire Gennady Timchenko (25%). Timchenko became the partner of the construction holding company only in 2012, but even before him the Most owners had powerful partners. In 2008, Kostylyov and Sur, through Bamtonnelstroi, a company in the SK Most group, bought 67.4% of Millennium Bank. This bank has long, sturdy ties with Russian Railways. Natalya Yakunina, wife of the president of Russian Railways, joined the board of directors of Millennium Bank in 2004. Furthermore, Millennium is a partner of the Center for Nation Glory of Russia (TsNSR) and the Apostle St. Andrew Foundation (FAP), whose chairman of the philanthropic boards is Yakunin.

In recent years, the affiliation of Millennium and Russian Railways only grew stronger. Russian Railways through firms it controls owns 33% of the shares of the bank, and the chairman of the board of the bank is Oleg Toni, now the vice president of Russian Railways. Furthermore, Russian Railways keeps available funds in deposits at Millennium (up to 50 billion rubles) and has signed an agreement on placement of payment terminals at 330 rail stations. Only Transkreditbank has such terms, which before 2012 belonged to Russian Railways, and then was sold to VTB.

2) Transyuzhstoir, the Ozero Cooperative and Vice President of Russian Railways

The second contractor for construction of the combined road Adler-Krasnaya Polyana is Transyuzhstroi, Ltd. The company is now 100% owned by a Cyprian off-shore firm, but according to the Unified State Registry of Legal Persons for 2009, the main owners of the company were Anatoly Antipov (65%) and Aleksandr Shevelev (15%). Now Shevelev is the general director of the company.

Antipov has long had ties with Oleg Toni, vice president of Russian Railways. They are both founders of Transstroybank, created with the participation of Rossiya Bank. The main shareholder of Rossiya Bank is Yury Kovalchuk, a billionaire and member of the Ozero Cooperative along with Putin and Yakunin.

3) Mostotrest, Rotenberg and Pensioners’ Funds

The sub-contractors of Transyuzhstroi for the first 15 kilometers of the combined road is Mostotrest. The total cost of the contract is more than 17 billion rubles. The main owners of Mostotrest are the Cyprus off-shore Marko Polo Investments, Ltd. (38.6%) and Transfingrup (26.8%); the remaining 34.6% belong to minority shareholders. The main beneficiaries of the Cyprus firm are Arkady Rotenberg and Igor Rotenberg. In his youth Arkady Rotenberg was a sparring partner of Vladimir Putin in judo, and has kept friendly relations with him ever since. Starting in 2000, the Rotenbergs’ business took off; now they are dollar billionaires and the largest recipients of state contracts. Their firms are building a pipeline for Gazprom and roads all over Russia. As for Transfingrup, 39.8% of this company belongs to the Russian Railways pension fund Prosperity; it also manages its funds. Oleg Toni is a member of the board of directors of Mostotrest.

Comparison with Foreign Equivalents

For comparison, we will look at only the alpine tract of the construction project, that is, directly at the combined Adler-Krasnaya Polyana road, without the second spur from Sochi to the Olympic Park. In calculating, we will divide the complex route into five elements: the two-lane highway, the one-track railroad, bridges, tunnels and stations – and for each we will find an analogue.

Total Road Project*

	Railroad	Automobile Road
Total length in km	48.2	45,6
Type of Road	One-Track with Two-Track Inserts	Two-Lane
Number of Bridges and Overpasses	36 pieces	36 pieces
Length of bridges and Overpasses	15.6 km	13.4 km
Number of Tunnels	6 pieces	3 pieces
Length of Tunnels	11.1 km	6.9 km
Type of Road and Tunnel	One-track	Two-lane
Length of road minus bridges and tunnels	21.5 km	25.3 km

*Construction on the last two kilometers has not been included in the calculation since there is no information about it from the contractor.

1) Automobile Road

Let us take the information from the Ministry of Transport as to cost per kilometer. The values in the table are cited without VAT and without the cost of preparation of the area (purchase of land and homes, removal of lines.)

Country	Average cost per km of traffic lane in millions of rubles	Country	Average cost per km of traffic lanes in millions of rubles
Germany	123	US	72
France	101	Finland	41
Canada	82	China	35

The average value taking into account VAT of 18% for a two-lane road is 180 million rubles/km. The cost of the preparation of the ground on average is 10-40% of the cost of the strip. We will take 15%, since in this case houses did not have to be removed and lines did not have to be moved. As a result, we get the cost of 25.3 kilometers as 5.2 billion rubles or $159 million.

2) Railroad

As an equivalent, let us take the high-speed rail, although the Sochi track will have a speed of only 160/km/hr, and the standard for high-speed rails is 300 km/hr.

Country	Average cost per km in millions of dollars
Germany	32.0
US	38.6
China	19.3

The average cost of per km of a high-speed rail is $30 million. The total cost of the railroad line 21.5 km in length is $645 million.

3) Bridges and Overpasses

Name	Country	Year Opened	Length km	Total cost in millions of dollars, 2013	Cost per km in millions of dollars, 2013
Rugen Bridge	Germany	2007	2.8	148	51.8
Bayside Bridge	USA	1993	4.3	115	26.7
Second North Bridge	Great Britain	1996	5.1	758	149.0
Rosario-Victoria Bridge	Argentina	2003	12.2	617	50.6

Average cost per kilometer of bridge is $67,1 million. The total cost of the bridge parts of 29 km is $2.0 billion¹

4) Tunnels

Cost of Railroad Tunnels

Name	Country	Year Opened	Length km	Total cost in millions of dollars, 2013	Cost of 1 km in millions of dollars, 2013
Wienerwald Tunnel	Austria	2009	13.4	494	36.9
Lötschberg Base Tunnel	Switzerland	2007	34.6	4700	135.8
Wushaoling Tunnel	China	2007	21.0	1377	65.6
Abdalajis Tunnel	Spain	2007	7.0	282	40.3

Average cost of railroad tunnel is $90.2 million per kilometer. The cost of the whole portion of rail tunnels for a 11.1 length of road is $1.0 billion.

Table 5 Cost of Automobile Road Tunnels

Name	Country	Year Opened	Length per km	Total cost in millions of dollars 2013	Cost per km in millions of dollars, 2013.
Baregg Tunnel	Switzerland	2004	3,3*	401	121.5
Zhongnanshan Tunnel	China	2007	18.0	638	35.4
Deschlberg Tunnel	Germany	2011	0.75	31.4	41.9
Somport Tunnel	France/Spain	2003	8.6	418	48.6

*Length is take from the calculation that the tunnel complex has three section of 1.1 km each

The average cost of the road tunnels is $48.6 million per kilometer. The cost of the whole area of auto tunnels at a length of 6.9 km is $335 million.

5) Cost of the railroad station Esto-Sadok and Alpika-Service (Krasnaya Polyana)

It is fairly difficult to calculate the separate cost of the rail stations (terminals) of the combined road since Russian Railways and Olimpstroi have not provided a detailed budget. Therefore we will take the cost with a reserve – 500 million rubles for one station. For reference, a new station in Bratsk cost 375 million rubles.

The total cost of two terminals is 1 billion rubles or $30 million.

The total cost of the equivalent of a whole combined road is made up of the costs of analogous structures for every batch of five and is as follows: $159 + $645 + $2,000 + $1,000 + $335 + $30 = $4.2 billion.

The total cost of the construction of the mountain area is 264.2 billion rubles or $8 billion dollars. According to our calculations, the cost of the road has been inflated 1.9 times. This calculation is approximate and helps to determine the inflation of the cost only as a first approximation.

Deadlines and Road Openings

At first the deadline for the opening of the road was April 2013. Russian Railways representatives repeatedly said that everything would be built exactly on time. For example, in May 2010, Vladimir Yakunin, head of Russian Railways, said that they were even “ahead of schedule.”

In 2012, Yevgeny Solntsev, head of the Sochi Directorate for Capital Repairs and Construction once again reiterated that there were no delays on the schedule in the first quarter of 2013. But Russian Railways was not able to keep its promise. Traffic on the combined road was opened only at the end of November 2013.

Environmental Damage

The construction of the combined Adler-Krasnaya Polyana road was accompanied by numerous violations of environmental protection legislation and caused major ecological damage.

Many parts of the road were built without government environmental studies, and a final study is still not available. Gravel was taken illegally from the River Mzymta, along which the road runs parallel, and this led to a destruction of the natural landscapes and an increase in the risk of floods and erosion of the beaches. Furthermore, due to construction waste run-off, the river was covered with white foam several times, and the fish died.

Russian Railways illegally cut down trees in the Sochi National Park which were in the Red List of Endangered Species. New trees were planted as compensatory measures, but a significant number of them died. In the outskirts of the village Akhshtyr, builders made a huge construction waste dump, to which trucks run along the only street of the town, day and night. Due to the construction, water disappeared from the village wells, and people have been choking on dust and exhaust fumes for five years.

For further information on the environmental damage caused by the construction of this road, read here (reference).

After the Olympics

Officials explain that the multi-billion expenditure is an investment in Sochi’s needed infrastructure. However the combined road is for the Olympics, and its features will be in demand only during the Olympics. The road can handle 20,000 people per hour, but the maximum capacity of all the alpine resorts per day is no more than 30,500 (for Roza Khutor, it is 10,500 and for Gazprom Alpine Skiing Complex, 8,000; for Alpine Carousel it is 12,000). Furthermore, there is a second highway, A-148. Thus, Russian Railroads has built a road for the Olympics for $8.6 billion, and these expenditures should be booked to the costs of the Olympics. After the Games are over, the technical capacities of the road and track will not be needed.

Translated by The Interpreter

¹ EDITED: Road Adler-Krasnaya Polyana

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