Sochi Report -- Olympic Chiefs Cut Construction Budget

Dmitry Kozak (left, with Dmitry Chernyshenko) issued a statement Wednesday acknowledging budget cuts for Sochi 2014 construction. (ATR)Russia plays down reports that a 15 percent cut in the construction budget for the Sochi 2014 Winter Olympics will impact the quality of competition venues for the Games.

Dmitry Kozak, the deputy prime minister overseeing Olympic preparations in the Black Sea resort, announced the savings to Russian Prime Minister Vladimir Putin in a meeting Tuesday. A statement released today from Kozak's office confirmed the budget cut on the overall cost of Olympic infrastructure and venues construction.

“Kozak highlighted that the number of venues and their quality remain precisely the same,” it said.

“The significant savings were reached because of the reduction of construction materials costs and the optimization of expenses. He also outlined that following a comprehensive state assessment of construction documentation, including four Olympic venues, an opportunity to reduce the planned cost of the project by 7.5 billion rubles [$206 million] was identified,” the statement concluded.

There was no confirmation about which four venues are affected by the cuts.

The IOC said the organizational budget for the 2014 Games was unchanged at about $1.8 billion.

Russia had originally planned to spend some $12 billion on developing Sochi for the Games, but earlier this month Kozak warned the Games budget would likely be slashed due to the global economic downturn that has devalued the ruble and contracted the Russian economy.

Under the 15 percent budget cut, the projected cost for the nearly 250 Olympic projects slated for completion for the Games is around $10 billion. Of this figure, 40 percent of private investment is needed to build venues and infrastructure.

During the IOC's project review meeting in the Black Sea resort three weeks ago, Putin told Jean-Claude Killy, head of the IOC coordination commission for Sochi, of the Russian government's commitment to its investment pledge for Games venues and infrastructure.

Conflicting reports surfaced this week over the interest of private companies in Olympic contracts. The Prime-TASS news agency said that Russia's Olympic authorities were extending tender deadlines for contracts due to lack of interest from companies hit by the financial crisis.

But Olympstroy, the state-controlled body in charge of the Olympics build, reportedly extended deadlines on tenders for the construction of the ice center for figure skating and a small ice Economic woes are forcing Sochi 2014 organizers to slash construction budgets 15 percent. (Sochi 2014)hockey arena because private investors have expressed interest in financing them.

Both were planned to be built with state funding. The tenders' deadline was extended until March 16, the Moscow Times reported.

The Russian economy is expected to contract by 2.2 percent this year following a decade of growth. Kozak has indicated that cost savings would be considered for all major construction projects involving government investment.

News of the budget cut comes as Sochi 2014 organizers prepare to announce their second domestic sponsor.

Rosnef, Lukoil, TNK-BP and Tatneft are said to be in the running to fill the oil category with an announcement due Feb. 21.

Last month, Russian telephone company Rostelecom and mobile carrier MegaFon signed the first tier one domestic sponsorship. The $260 million partnership was billed as the largest domestic sponsorship agreement for an Olympics.

With reporting from Mark Bisson.

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