Here, amid the breathtaking mountain vistas of Europe's last slice of untouched alpine wilderness, the state gas monopoly Gazprom has nearly completed a huge new ultramodern ski base. Nearby, other big Russian corporations have been hastily building roads, hotels, Olympic sports facilities, and a press center to meet the Kremlin's timetable for the Sochi 2014 Winter Games.
Winning the bid for Sochi against stiff international competition a year ago was one of Vladimir Putin's crowning achievements as Russian president. But supervising the increasingly troubled preparations for the Games may be one of his biggest challenges as he settles into his new role as prime minister.
"Putin has made the Olympics his most important principle, and I'm sure he will never back down, whatever the problems," says Boris Nemtsov, a Sochi-born former deputy prime minister. "But the whole enterprise is in danger of turning into a black hole. There is no transparency in the way the money's being spent, corruption is rampant, and it's making Sochi too expensive for most people to live in."
Soviet-era roads and buildings
Sochi is built on a narrow, subtropical strip of lush beachfront wedged between the towering Caucasus mountains and the Black Sea. Yet for all its natural advantages, the city is hobbled by transportation bottlenecks. One narrow mountain road and a single-track railroad are all that connects Sochi to the rest of Russia. The city's only thoroughfare, Kurortny Prospekt, is often paralyzed with traffic jams. Moreover, the city's antiquated seaport cannot receive oceangoing ships. In a recent speech, Mr. Putin complained that Sochi's sewage system needs rebuilding.
"The infrastructural challenges facing us are immense, we know that," says Alexei Malkov, head of the city government's information department.
But one of the political storms the Kremlin is trying to weather as it transforms underdeveloped Sochi into a world-class venue is an outcry by ecologists over rapid development in the formerly pristine mountain region.
A decision taken last week by Putin to move several Olympic installations may force some developers to go back to the drawing boards. "In determining our priorities – money or the environment – we chose the environment," Putin told a meeting of the International Olympic Committee (IOC) in Sochi last week.
Among the sites that will need to be moved, he said, are a bobsled run that cuts close to a UNESCO-protected nature reserve, an athlete village, a road, and a water-extraction plant. Local environmentalists say they're pleased with Putin's choice, but add that more installations need to be moved further from the fragile Grushevy Ridge. "We hope the government will move all the Olympic [infrastructure] from that area, or these concessions will be just half measures," says Dmitri Kaptsov, spokesman for the Caucasus Ecological Wave, an environmental group.
Local outcry over rising prices
While environmentalists got a boost from Putin's announcement, there is palpable unrest among residents about the skyrocketing prices they claim have been triggered by an influx of Olympics-inspired speculators. Some fear their homes and livelihoods may be taken to make way for Olympic developments.
"When the authorities start an operation like this, they seldom take the interests of ordinary people into account," says Olga Miryasova, spokesperson for Autonomous Action, an anti-Olympic group that has staged several public protests in Sochi. "These Games are a political event to raise the country's prestige, but there are too many poor people to warrant these huge expenditures."
City officials insist that very few people will be displaced by Olympic constructions and those that are will be properly compensated. But trouble is already brewing on the site of the future Olympic Park, where a community of about 600 Old Believers, an Orthodox religious sect, are defying orders to leave their coastal village of Imeretinskaya Bukhta. "The authorities have told us we'll be arrested and our homes destroyed by bulldozers," says Dmitry Drofichev, a spokesman for the group. "But we are not going to give in. We'll fight".
Small-business owners add that their interests are also being brushed aside. "Big companies buying up property have driven land prices up fivefold in the past two years, which is a huge obstacle to any small entrepreneur," says Arsen Sadatierov, owner of a cafe in downtown Sochi. "The big companies are well connected [with officials] and seem to be able to solve their bureaucratic problems much more quickly and easily than I can."
A potentially Games-stopping challenge for the Kremlin is Sochi's proximity to the tense Georgian breakaway republic of Abkhazia, which has seen a wave of bombings in recent weeks. Georgia, which claims the territory, has alleged that Russia is illegally using labor and construction materials from Abkhazia and may be planning to build some Olympic facilities there. Georgian officials, cautiously backed by Europe and the US, have warned they might launch a boycott of the Sochi Games if Moscow continues its policy of aiding separatist Abkhazia.
In a report last month, the International Crisis Group, a Brussels-based think tank, warned that the spat over Abkhazia could "negatively impact" the Kremlin's hopes for an Olympic triumph. "If Moscow contributes to [escalating tensions], the IOC would have grounds to reconsider its decision to give the Games to Sochi," it said.
Still, some see the Olympic challenge and the accompanying $12 billion the Kremlin is pumping in over the next six years as a heaven-sent opportunity to drag this sleepy, Soviet-era spa town into the 21st century and also create an example for the rest of Russia to follow. "In preparing for the Olympic Games, we are getting the kind of experience that will enable us to reach world standards in many areas," says Efim Bitenev, deputy director of the Sochi Olympic Organizing Committee.