By Ilya Arkhipov & Henry Meyer - Mar 19, 2013 Arkady Rotenberg, the boyhood friend and former judo partner of black-belt President Vladimir Putin, already is collecting his winnings from what promises to be the most expensive Winter Olympics ever next year. Rotenbergâ€™s companies have been awarded at least 227 billion rubles ($7.4 billion) of contracts for the 2014 Sochi Games, according to figures compiled from corporate and government filings. Thatâ€™s more than the entire budget for the 2010 Vancouver Olympics, though it represents just 15 percent of Russiaâ€™s latest estimate for the Sochi event. Those contracts, which number at least 21, include a share of an $8.3 billion transport link between Sochi and ski resorts in the neighboring Caucasus Mountains, a $2.1 billion highway along Sochiâ€™s Black Sea coast, a $387 million media center, and a $133 million stretch of venue-linking tarmac that will double as Russiaâ€™s first Formula One track. â€œThis is a monumental waste of public money,â€ Stefan Szymanski, a sports economist at the University of Michigan who tracks Olympic spending, said by phone from Ann Arbor. â€œA small number of people at the top have control of resources and there is no accountability.â€ Rotenberg, 61, is among a handful of men Putin has known since childhood or from his days in the KGB or St. Petersburg government whoâ€™ve amassed riches and power during his 13-year rule. Their fortunes have come at times at the expense of men who flourished under his predecessor, Boris Yeltsin, and the consequences of the differing wealth pedigrees are on display in Putinâ€™s $50 billion push to prepare Russia for its first Winter Games. The country is considered the most corrupt of the Group of 20 economies by Berlin-based Transparency International. Oligarchs Squeezed While Rotenberg and longtime Putin associates such as Gennady Timchenko, co-founder of oil trader Gunvor, and OAO Russian Railways Chief Executive Officer Vladimir Yakunin, stand to gain from Russiaâ€™s Olympian largesse, Yeltsin-era tycoons led by Vladimir Potanin and Oleg Deripaska say theyâ€™re getting squeezed. Potanin and Deripaska, the CEOs and largest owners of OAO GMK Norilsk Nickel (GMKN) and United Co. Rusal, respectively the worldâ€™s largest producers of nickel and aluminum, have been handed projects that may not turn a profit for years, if ever. Potanin is spending $2.2 billion on the resort where most of the skiing events will take place, while Deripaska is putting $1.5 billion into revamping the local airport and constructing a port and one of two Olympic Villages to house athletes and officials. â€˜Commercially Uselessâ€™ Rosa Khutor, Potaninâ€™s facility, has missed 14 billion rubles of interest payments on loans from state development bank VEB because itâ€™s been closed to tourists for parts of three peak seasons for test competitions, Sergei Bachin, the head of the project, said in an interview in Moscow on March 12. The resort, serviced by state-of-the-art ski lifts from Doppelmayr of Austria, was all but deserted on a sunny March 7 because the slopes were cleared for a para-alpine World Cup championship. Rosa Khutor will need to spend another $130 million after the Olympics to convert the facility into a fully commercial operation, Bachin said. â€œA lot has been built for the Olympics that is commercially useless before the games and after,â€ Potanin said last month during a tour of his project with Putin and Jacques Rogge, president of the International Olympic Committee. â€œThe money has been spent and interest is accumulating.â€ The $200 million port Deripaskaâ€™s Basic Element constructed to dispatch Olympic building materials is handling as little as one-fifth of the planned volumes because freight traffic has been redirected to railways and roads, making the venture unprofitable, according to the company. Basic Element â€œIf investors donâ€™t get any return or government support and in effect lose a large part of the funds theyâ€™ve invested in the Olympics, it wonâ€™t have a positive impact on our investment climate,â€ Basic Element Deputy General Director Andrey Elinson said during a March 12 interview in Moscow. Olympstroy, the state company overseeing Sochiâ€™s transformation, declined to detail the costs of its individual projects. Olympstroy has had four general directors in six years. The bulk of Rotenbergâ€™s Olympic contracts are held by OAO Mostotrest, a Moscow-based company set up under Josef Stalin in 1930 to build bridges across the Soviet Union, according to its website. Rotenberg and partners, including his son Igor, gained control of Mostotrest in 2010, just before the company raised $388 million in an initial public offering. Rotenbergâ€™s aide said he was unable to comment on his work on the Olympics. Officials at Mostotrest didnâ€™t respond to requests for comment by e-mail and phone, nor did Stroygazmontazh, another Rotenberg company with state contracts. Putin Link Rotenberg told the Financial Times in an interview published in November that while he values Putinâ€™s friendship, heâ€™d never abuse it for personal gain. â€œI have great respect for this person and I consider that this is a person sent to our country from God,â€ the newspaper cited Rotenberg as saying about Putin. Dmitry Peskov, Putinâ€™s spokesman, said Rotenbergâ€™s success is unrelated to his ties with Putin. â€œNo friendship can grant you access to Olympics projects, which are very difficult to get because theyâ€™re hard to implement and arenâ€™t as profitable as many other construction contracts,â€ Peskov said by phone on March 15. Gazprom Pipelines Rotenberg gained his fortune by selling pipes and building pipelines for state-run OAO Gazprom (GAZP), the worldâ€™s largest gas producer. Stroygazmontazh, which Rotenberg owns with his brother Boris, built a gas link to boost supplies to Sochi for 32.6 billion rubles, five times more than first budgeted, according to Olympstroy and government data. The Rotenberg brothers are now worth $2.97 billion each, more than all but 35 Russians, Moscow-based CEO magazine estimated last month. Thatâ€™s up from $1.75 billion each in 2011. The controlling stake in Mostotrest (MSTT) that the Rotenbergs held via their 68.5 percent interest in Cyprus-based Marc Oâ€™Polo Investments Ltd. declined to 38.6 percent after the IPO, according to the company. Mostotrest â€œsomewhat disappoints investors with its annual performance forecasts,â€ said Elena Sakhnova of Moscow-based VTB Capital. Even so, Sakhnova is one of 12 analysts with a â€œbuyâ€ rating on the companyâ€™s stock, according to data compiled by Bloomberg. â€œMostotrest gets very good contracts, not without Rotenbergâ€™s help,â€ she said. Shares Rise Mostotrest shares gained 0.7 percent to 137.71 rubles at 11:39 a.m. in Moscow, the fourth-biggest increase on the benchmark ruble-denominated Micex Index. The largest single Olympic contract for the $8.3 billion rail-highway link went to state-run Russian Railways, which then hired Mostotrest and a company now part-owned by Putin ally Timchenko, SK MOST, among other contractors. Russian Railwaysâ€™ pension fund owns 25 percent of Mostotrest. Putin, 60, has fought to host global events to raise Russiaâ€™s international profile and boost growth through state and privately funded infrastructure projects, including last yearâ€™s Asia-Pacific Economic Cooperation summit in Vladivostok. The Audit Chamber, Russiaâ€™s budget watchdog, last November said it found that about $490 million of the $20 billion Russia allocated for the APEC summit was â€œimproperly spent.â€ About $506 million has been misspent in Sochi thus far, the watchdog said this month, declining to be more specific. â€˜Rough Estimateâ€™ Russia in September doubled its forecast for spending on the 2018 soccer World Cup to almost $20 billion, a figure Sports Minister Vitaly Mutko called a â€œrough estimate,â€ according to state news service RIA Novosti. Brazilâ€™s Sports Ministry last year said it planned to spend 30 billion reais ($15.1 billion) on projects linked to its staging of the 2014 World Cup. Putin, who has repeatedly vowed to crack down on corruption, last month fired the vice president of the Russian Olympic Committee, Akhmed Bilalov, saying his brotherâ€™s company, which had the contract for the ski-jumping complex, was over budget by a factor of seven and behind schedule. â€œThe main issue is to be sure nobody steals anything,â€ Putin said Feb. 6 before the announcement of Bilalovâ€™s dismissal. Three days earlier, Rotenbergâ€™s Mostotrest said it would seek to sell its Engtransstroy unit, which has at least four unfinished Olympics contracts, including the Formula One track. Bilalov, who has since left Russia, started having trouble in 2011, when organizers told him to spend what would amount to $200 million on roads and other works that werenâ€™t in the contract once held by his familyâ€™s company, according to his representative in Moscow. Bilalov denies costs jumped sevenfold, saying they only increased 60 percent, according to the representative, who asked not to be identified because of the sensitivity of the matter. Interior Ministry Police have announced one major case of financial fraud related to the Olympics. That was last August, when the Interior Ministry put out a brief statement saying investigators had foiled a plot to embezzle 8 billion rubles. No details were provided. The ministry and the Prosecutor Generalâ€™s Office in Moscow didnâ€™t respond to requests for comment on corruption in Sochi. â€œThe cost overruns are due to corruption, the clan system and a lack of competition,â€ said Sochi native Boris Nemtsov, a deputy prime minister under Yeltsin and a political opposition leader who tracks government spending. â€œAll the main contractors in the Olympics are people close to Putin.â€ Cost Overruns Sochi Mayor Anatoly Pakhomov, who defeated Nemtsov in his 2009 election with 77 percent of the vote versus 14 percent, said spending concerns are unfounded because any â€œwrongdoingâ€ is quickly discovered and halted by authorities. â€œSome people have latched onto the rising costs, but that can happen because of unforeseen circumstances,â€ Pakhomov said in an interview in his office March 6. â€œThere wonâ€™t be any witch hunts after the Olympics.â€ Money wasnâ€™t an issue later that night at the Blue Sea, a trendy Sochi eatery where vintage Louis Roederer Cristal Rose champagne goes for $1,600 a bottle and a basic crab dish can set you back $300. The seafront restaurant was packed with well- coiffed women laden with furs and gems, a reflection of the extravagance transforming this former Soviet city of 343,000. Outside, trucks full of materials continued to inch toward their Olympic destinations, spreading clouds of dust. â€˜Presidential Projectâ€™ For Gurban Babayev, though, thereâ€™s nothing to celebrate. Babayev, who operates a small fleet of motorized cranes, says heâ€™s been chasing Olympics subcontractors for $65,000 in unpaid bills for more than a year, including $6,500 from a unit of Rotenbergâ€™s Mostotrest. Even with a court ruling, seen by Bloomberg, ordering one of the subcontractors to pay up, Babayev said he still canâ€™t find anyone in authority to help him collect. â€œYou canâ€™t go against a presidential project,â€ Babayev said. â€œThis is so bitter for my soul. I earned this money with my blood.â€ Putin Buddy Gets $7 Billion of Deals for Sochi Olympics - Bloomberg How can I apply as Putin's "buddy"?