Critics of Olympics say a third of budget is being siphoned off by Putin's friends.

Amid the gleaming, state-of-the-art sports arenas and hotels constructed at great expense for the 2014 Winter Olympics in Russia's Black Sea resort of Sochi is a patch of muddy wasteland where Yevgeny Mzokov's home once stood.

"I lived in this house for over 20 years," said Mzokov, "And then they started building for the Olympics."

Mzokov's father built the three-storey house in the centre of Sochi in the early 1990s after fleeing civil war in the former Soviet republic of Tajikistan. By 2012, 12 members of the extended family, eight adults and four children, called it home.

That northern spring, with the Kremlin's seven-year construction project for Sochi 2014 in full swing, local Olympic officials arrived at the family's house with some news.


"They told us that they needed to pull down our house to build a road for the Olympics," Mzokov recalled. "We told them 'Okay, pay the market price, and no problem.' They agreed."

An independent surveyor carried out an estimate on the 300 sq m house. But, in a development that human rights groups say has become depressingly common in Sochi in the lead-up to the Games, the Mzokovs received "not a single kopeck" in compensation for their home before it was flattened.

The family, said Mzokov, were "kicked out into the street"; his elderly father dragged out of his home by bailiffs. Local authorities refused to negotiate and offered the family no alternative housing.

Mzokov said that their promised compensation was embezzled by corrupt officials in the regional governor's office. He also believes that his attempts to push for justice resulted in his employer being pressured to fire him from his job , as well as police harassment.

Critics of the Government insist cases such as this are just the tip of Olympic-related corruption that reaches all the way to a small group of Kremlin-connected businessmen with long-standing ties to President Vladimir Putin.

At a cost of 31 billion ($61.7 billion), three times the price of the much bigger London 2012 summer Games, the two-week long Sochi Games next month will be the most expensive Olympics in history. Kremlin critics have calculated that they will cost more than all previous 21 Winter Olympics combined.

The facts and figures behind Russia's spending, as well as the allegations of corruption, have entered national folklore, testimony to what the liberal politician and Kremlin critic Boris Nemtsov calls the "out-of-control, absolutely immoral behaviour of the authorities".

In one case, a 50km road built for the Games cost an estimated 5 billion. The Russian version of Esquire magazine has estimated that the road could have been paved with a 6cm layer of truffles for that price.

In a damning report on the Sochi Games last year, Nemtsov and a fellow political activist, Leonid Martynyuk, stated that 16 billion of the total cost had been skimmed off by Putin's businessmen friends.

"The Games are nothing but a monstrous scam," said Nemtsov, a former deputy prime minister.

Nemtsov's accusations have been echoed by Gian-Franco Kasper, an International Olympic Committee member, who said this month that he believed that about a third of Sochi's multi-billion-dollar budget had been siphoned off by Putin and his friends.

He was rebuked for his comments by Russian officials, with Vladimir Yakunin, a close Kremlin ally and head of the Russian Railways company, calling for Kasper to be sued for slander.

One man who has benefited from the Games is Putin's childhood friend, Arkady Rotenberg, whose companies have received orders for construction projects worth 4.5 billion, more than the entire cost of the 2010 Vancouver Winter Olympics.

"Putin needs these Games to prove how great he is," said Nemtsov. "But his friends and the businessmen around him need the Olympics to improve their ratings in the Forbes magazine's richest people in the world listings."

'I have gay friends '

Vladimir Putin insisted yesterday that he is "on friendly terms" with gay acquaintances and that millions of Russians love Elton John "despite his orientation", as he sought to defuse calls from gay rights activists to boycott the Winter Olympics.

The Russian President also claimed he had seen no evidence that the event's eye-watering price has been inflated by corruption.

He shrugged off an effective boycott of the Games by Western leaders and he insisted that neither he nor his government is homophobic, reiterating his position that the law - which critics say effectively banishes discussion of homosexuality or gay rights from the public space - is simply a child-protection measure.

"If you want my personal attitude, I would tell you that I don't care about a person's orientation and I myself know some people who are gay. We are on friendly terms," he said. "I would like to draw your attention to the fact that in Russia ... being gay is not a crime. So there is no danger for people of this non-traditional sexual orientation to come to the Games."

Praising Elton John as "an outstanding person [and an] outstanding musician", Putin said: "Millions of our people sincerely love him despite his orientation."