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Russian cities to get hollow World Cup facelift

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MOSCOW — The Russian government will have to pump billions of dollars into some of the country's crumbling cities to host the 2018 World Cup, providing a catalyst for the Kremlin's much-hyped but ineffective modernization drive.

Yet financial analysts say the effort to give some credence to authorities' depiction of Russia as a bustling, dynamic member of modern Europe is unlikely to lead to lasting changes in the economy.

"Anyone who's lived in this country knows that there are urgent challenges and a need for structural reforms, but things like the World Cup are unlikely to give an impetus to structural reforms," said Yulia Tsyplyayeva, chief economist at Moscow's office of BNP Paribas.

Even Moscow and St. Petersburg — Russia's most modern cities — would have to drastically increase the number of affordable hotels to deal with thousands of visiting World Cup fans. But the other 11 Russian cities slated to host World Cup matches need even more challenging infrastructure overhauls to make them viable sporting destinations.

Saransk, a Volga city of 300,000 some 400 miles (630 kilometers) from Moscow, only has a few hotels, an airport that can only handle short-range planes and roads full of potholes.

Yekaterinburg, the country's third-largest city, is going through a brash and hurried transformation, where modern glass-and-steel office high-rises are clumsily plunked next to single-story old wooden houses. Soviet-era buses ply the streets belching out putrid black exhaust smoke.

But these towns can expect a hollow facelift at best: Prime Minister Vladimir Putin said in Zurich on Thursday that Russia would spend $10 billion to prepare for the World Cup. Even less might remain, considering the fact that the construction and highway industries are among the most corrupt in Russia.

The respected business daily Vedomosti speculated the costs could exceed $50 billion, a price it called "too high for some of us to have a chance to see the matches and for the Russian team to get a spot in the finals."

Still, any investment is better than none, analysts said, and Russia may benefit from the investment multiplier effect.

"We can gain a lot from it because the infrastructure in Russia has been woefully underinvested, and even small investments in infrastructure produce immediate positive results," Tsyplyayeva said.

The Moscow-based UralSib bank said the World Cup will "inject a great deal more urgency — and a stricter timeline — into the government's modernization program and will provide a powerful focus for reform efforts."

Sectors that are expected to surge on World Cup spending are steel, construction, hospitality and transportation.

The need for large-scale investments into airport infrastructure will most likely result in the privatization of Russian airports, the Moscow-based investment bank VTB Capital said in a note to investors Friday.

President Dmitry Medvedev recently withdrew airports from a list of strategically important enterprises in which the government must retain a controlling stake.


Associated Press writer David Nowak contributed to this report.