MOSCOW // In choosing Russia to host the 2018 World Cup, Fifa brushed aside the country's pervasive corruption, racial violence and the almost complete lack of infrastructure for a global championship. It also ignored the alleged kickbacks and cost overruns plaguing Russia's preparations for the 2014 Winter Olympics in Sochi.
In a little more than seven years, world football will be able to judge the wisdom of Fifa's decision. But for now, if Sochi is any guide, preparing for the World Cup could be a rough ride for Russia. Warring gangs in the down-at-heel, Black Sea resort town compete for slices of Olympic pie as preparations lag and costs skyrocket. The Russian prime minister, Vladimir Putin, has several times replaced the head of the company overseeing Olympic construction, but the cost continues to climb.
The 48-kilometre road from the coastal town of Adler to the mountain venue of Krasnaya Polyana is costing about US$8 billion (Dh29.3bn), a sum so staggering that Esquire Russia magazine ran the numbers on the cost of luxury alternatives to tarmac. It turned out that you could coat the road with 21.9cm of foie gras or a 6cm gloss of black truffles for the same price. Vancouver put on the entire 2010 Winter Olympics for less than $2bn.
According to Transparency International, Russia ranks 154th in perceived corruption among 178 nations, down eight places from last year. Corruption in Russia has reached such levels that even at the top echelons of government, it was acknowledged in nearly the same breath as elation over winning the World Cup bid.
"Let's do it without kickbacks," President Dmitry Medvedev's top economics adviser, Arkady Dvorkovich, tweeted right after Fifa announced on December 2 that Russia would host the World Cup in 2018.
Concerns about football-related violence and the sheer scale of the work needed to host the championship also tempered the celebratory mood. Less than a week after Russia won the World Cup bid, Russian fans of Spartak disrupted a European Champions League match in Slovakia. In an incident a few days later, fans rioted by the thousands in downtown Moscow.
Football violence in Russia is often linked to racist, ultra-nationalist groups, not ideal hosts for a multi-national, multi-racial event such as the World Cup. The Moscow riot started as a rally in memory of a fan shot dead in a confrontation with a group from the Caucasus region. Some in the crowd chanted "Russia for Russians", others gave Nazi-like salutes and several passers-by of non-Slavic appearance were attacked, witnesses said.
Yesterday, some 1,500 people rallied in central Moscow to protest the wave of ethnic violence following the deadly shooting. The demonstrators chanted "Russia is open to everyone" and held up signs reading "Russia without fascism, Russia without Nazism" during the sanctioned gathering on Pushkin Square, just a few blocks from the Kremlin.
There have also been racist incidents involving black players for Russian teams. West Bromwich Albion striker Peter Odemwingie was on the receiving end of racist taunts when he played for Lokomotiv Moscow. When he left Moscow for the English club this summer, some fans displayed a banner with a banana and the message, "Thank you West Brom".
Despite racism that he once said "makes you feel sick", Odemwingie was gracious about the World Cup, saying it might be a lesson in tolerance for Russia.
"In a way, I'm happy they are taking the World Cup there because lots of nationalities will come into their country and the mentality might change," he said.
Russian officials acknowledge the problems with racism and football violence but say they are planning programmes to ensure a peaceful, hospitable World Cup. The Russian Football Union has said it will launch a "tolerance" initiative in 2012.
"It's eight years until the championship, and a new generation of football fans will grow up by that time," said Alexander Shprygin, the head of the All-Russian Union of Supporters, a leading fan organisation. He said the government had given Fifa guarantees about preventing violence in its bid to host the World Cup.
The Russia bid was also crammed with guarantees of lavish spending. By almost any standard it was the most ambitious bid of all, with proposals to spend more and build more than any of Russia's rivals (England, the United States, and joint bids from Spain-Portugal and Holland-Belgium).
Russia plans to hold World Cup matches in 13 cities spanning more than 3,000 kilometres and three time zones from Kaliningrad on the Polish border to Yekaterinburg in the Ural Mountains. It has to build 13 world-class stadiums, some of them in cities with few facilities for visitors, and renovate two others. Only one of Russia's existing stadiums, Luzhniki in Moscow, meets Fifa standards. And even there, the artificial turf will have to be replaced with natural grass. Two more existing stadiums will have to be renovated. The rest exist only on paper. Russia also has to get ready to move teams, fans and officials among the far-flung venues. Thousands of kilometres of roads and rail lines must be upgraded, along with more than a dozen airports. More flights and high-speed trains are needed as well. Russia said it will spend billions on tourist infrastructure, including 19,000 new or renovated hotel rooms. It will have to improve broadband capacity and improve its TV and broadcasting facilities.
Although the government has pledged at least $10bn, not counting expenses for airports and roads, the total cost is expected to be much more. Some estimates now go as high as $50bn or more, according to the business daily Vedomosti, and if Sochi is any guide, cost overruns could push that sum even higher.
One selling point for the Russians in what some thought was an underdog bid was its access to a vast reservoir of petrodollars, one of the few things it has in common with the other successful bidder, Qatar in 2022.
Mr Putin wasn't shy about tapping into some of the immense private wealth in Russia. He said he expected Roman Abramovich, whose fortune Forbes magazine estimates at more than $11bn, to "open his wallet". Mr Abramovich, who bankrolls the Russian national team, was a key member of the Russian delegation to Fifa in Zurich. "It's no big deal," Mr Putin said. "He won't feel the pinch. He has plenty of money." Companies such as LUKoil, Gazprom and VTB bank are also expected to become major backers.
Another factor that probably helped Russia was Fifa's desire to broaden football's already wide footprint. This year, World Cup was played in Africa for the first time. Russia will be the first venue in Eastern Europe and Qatar the first Muslim host.
Mr Putin said the World Cup will have a transformative effect on much of Russia, and not only because of the new infrastructure it will bring.
"There will be less crime, less drug-taking," he predicted this week during his annual call-in show on state television and radio.
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Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg