Still freezing

Sochi showcases sub-zero Russian investment appeal

After staging the most expensive Olympics in the games' history, Russia will find in 2014 that $50 billion doesn't buy much after all. The winter games will not pull the Russian economy out of its slump, nor will they be the public relations facelift hoped by the Kremlin when it still cared about such things.

Sochi has rich potential to backfire even if the games unfold without the show trials, crackdowns on opposition demonstrators and homophobic outbursts from elected officials that have tarred the regime's reputation in recent months. And the security forces may succeed in fending off terrorist scares. But the world will still be reminded that the Olympics bill amounts to about four times what it cost the UK to stage the summer games in London last year - to the point that even President Vladimir Putin, who should know better, has wondered aloud where all the money went. The world's media, once they are done commenting on the slaloms, ski jumps and bobsled heats, could make Sochi a watchword for Russian corruption.

Russia's growth problems are too entrenched to be much helped by the Sochi festivities. Gross domestic product will barely increase 1.5 per cent this year, and the economy minister has warned that a 2.5 per cent average growth rate is the most Russia can expect until 2030. For an emerging, oil-rich country, that's the near-equivalent of stagnation. Inflation, at an annual six per cent, remains above the target of the central bank, which has warned it is not ready to lower rates.

Capital flight remains rampant. Russia still runs a three per cent of GDP current account surplus but it will have disappeared by 2018, according to IMF forecasts. Capital flight continued unabated in 2013, to the tune of more than $50 million - equivalent to one Sochi Games. Almost every Olympics host country gets accused of wasting money, but many benefit in non-financial ways. China's games showed off its ability to corral capital into gigantic infrastructure projects, and announced its arrival into the modern age; the United Kingdom reinforced its "soft power" and creative industries. Russia may merely give the world a picture of a country to avoid doing business with - at least for as long as its ruling clique remains in place.