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Russian President Vladimir Putin takes a break during a friendly hockey match at The Bolshoy Ice Dome, the part of the complex of facilities operated by the International Ice Hockey Federation (IIHF) at the Black Sea resort of Sochi, southern Russia, Jan. 4, 2014.

Alexei Nikolsky/The Associated Press

When this southern Russian city was awarded the 2014 Winter Olympics seven years ago, most of the country celebrated, feeling a burst of national pride. But Yulia Saltikova quietly cursed the television set. Life in her native city, she felt, was about to go from difficult to worse.

That premonition has proved sadly correct. Winning the Olympics has brought a carnival of construction to this palm-tree-lined resort on the Black Sea, to prepare for the most expensive Games ever, slated to cost at least $50-billion (U.S.).

As Ms. Saltikova had predicted, that redevelopment machine has brought only misery to her family and friends on Acacia Street, a tiny corner of Sochi that the Olympic athletes and spectators will likely never see.

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First, city officials demolished the only drivable entrance to their modest cluster of cement bungalows, to make way for a new six-lane highway connecting the main sporting sites with dormitories for Olympic volunteers, leaving only a potholed alleyway to enter and exit Acacia Street.

Next, the shared lavatory building – the neighbourhood is a converted military barracks – was knocked down, leaving residents with only wooden outhouses.

In September, rainwater pouring downhill from the new highway flooded the homes, forcing Ms. Saltikova and her two young sons to flee and stay with relatives for the winter. There too, the electricity sometimes blinks off when the power is turned on for test runs at the big Olympic venues.

"They tell us 'this is an international celebration and we must do everything for this international celebration.' But they're not doing anything for the people of Sochi," the 33-year-old accountant said, tiptoeing through the mud around her abandoned home. "People in Sochi still live the way they did in the 1980s. I don't know where all the money is going."

Ms. Saltikova is not the only one wondering where all the money went. The 2014 Winter Games will be the most expensive Olympics ever staged. One month before the first slope is skied or puck is slapped, upwards of $50-billion (U.S.) has already been spent overhauling this former retreat for Communist Party elites. Some estimates put the bill at closer to $60-billion, five times the original budget and more than eight times the $7-billion it cost to stage the previous Winter Olympics in Vancouver.

The Olympics will unfold amid a tapestry of other controversies as well, highlighted by Russia's newly implemented "anti-gay propaganda" law, which makes it a criminal offence to portray gays and lesbians as having normal lives. Although Russian President Vladimir Putin has promised the law won't be applied in Sochi during the Games, local authorities have denied permission for a Pride House – a gay-themed pavillion that was part of both the Vancouver 2010 Winter Olympics and the London 2012 Summer Games – to be set up in Sochi, fearing it would breach the new law.

Mr. Putin recently moved to soften Russia's image on another front, last month approving an amnesty that saw Kremlin critics, including businessman Mikhail Khodorkovsky and punk rockers Pussy Riot, released from prison ahead of the Olympics. He also lifted a ban on protests in Sochi during the Olympic period, though any would-be demonstrators would still have to seek official permission for a gathering.

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No one is going so far as to call it a boycott, but the leaders of Canada, France, Germany and the United States have all made it clear they won't be attending the Games, all planning to send only low-level officials. The U.S. delegation is notable for its inclusion of openly gay athletes such as figure skater Brian Boitano and former tennis star Billie Jean King.

There's also the war next door in Russia's North Caucasus region, where bomb blasts and shootouts pitting Islamist insurgents against Russian security forces are a near-daily occurrence. The extremist Caucasus Emirate group – which has links to al-Qaeda as well as to jihadi rebels fighting in Syria – has called for attacks on the Sochi Games.

Suicide bombers struck the city of Volgograd, about 700 kilometres northeast of Sochi, twice in late December, leaving 34 people dead and hundreds injured.

Partially as a response to such threats, participants and spectators at the Sochi Games will be subjected to extreme surveillance, with all their e-mail and telephone communications monitored and stored by Russia's Federal Security Bureau. A document signed by Russian Prime Minister Dmitry Medvedev – and obtained by The Globe and Mail – instructs communications companies to provide security services with "round-the-clock remote access" to the communications of all Sochi participants.

"This is a festival of corruption, a festival of human-rights violations, a festival of destroying the environment, a festival of destroying the only subtropical region in Russia," Boris Nemtsov, a veteran opposition politician who was born in Sochi, said in an interview.

Earlier this year, Mr. Nemtsov co-wrote a report that called Sochi "an unprecedented thieves' caper," alleging that as much as $25-billion to $30-billion of Olympic funds had been embezzled. Mr. Nemtsov arrived at the figure by taking original estimates, and applying the highest rates of cost overruns at previous Olympics. (Before Sochi, the most expensive Olympics – winter or summer – were the $40-billion 2008 Summer Games in Beijing.) Everything above that, he assumed, was theft and bribes.

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Part of the reason it has cost so much is that Sochi wasn't a major sports destination when the IOC announced the 2014 Winter Olympics would be held here. The initial $12-billion budget for the Games was later expanded with an eye to making Sochi – and the newly created Rosa Khutor mountain resort – a sand and ski holiday destination that could compete long-term with the French and Italian mountain towns now favoured by affluent Russians.

The $50-billion-plus didn't all come out of state coffers, at least not directly. Around town, various Olympic facilities are nicknamed after the entities or oligarchs that paid the bill: Locals refer to the Gazprom ski lift, the Sberbank ski jump, the Potanin slope. But Gazprom and Sberbank are Kremlin-controlled energy and banking interests, while mining magnate Vladimir Potanin is a Kremlin-friendly businessman who knows a politically smart investment when he sees one.

Mr. Putin's first prime minister, Mikhail Kasyanov – now an opposition figure – has described footing the bill for an Olympic venue as "kind of a tax" that big business has to pay to stay on Mr. Putin's good side.

Everything in Rosa Khutor is new. The Sanki Sliding Centre, which will host the bobsleigh, luge and skeleton competitions in February, was only finished in September, meaning foreign teams will never have raced on the circuit – except a few practice runs – before they race for gold.

"I don't know what it cost, but it was a lot," said Vyacheslav Shavlev, deputy director of the Sanki complex. "But it's worth it because now we have a world-class track in Russia."

Rosa Khutor's town centre looks like it has been helicoptered in wholesale from the Alps, complete with interlocking-brick plazas, a huge McDonald's restaurant and a host of five-star hotels (which were scrambling to get ready in time). Environmentalists complain that the creation of the resort – and the construction of two new highways and a high-speed rail line connecting it with Sochi – caused deforestation in parts of the 478,000-acre Sochi National Park. Construction debris can be seen along the banks of the Mzymta River that flows through the coastal and mountain Olympic sites.

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Again, no one will say precisely what it all cost, or why. But they're proud of it, especially after a thick blanket of snow fell in early December, calming worries that tropical Sochi – where average temperatures are the highest of anywhere in Russia – would host a snowless Winter Games.

"The most important thing is that everything is going well," said decorated biathlete Alexey Kobelev, showing journalists around the state-of-the art biathlon complex during a November tour and shrugging off questions about costs. The biathlon centre was decorated with "Gazprom 2014" signs in honour of its sponsor.

Despite the runaway spending, Sochi will still have to rush, and perhaps spend even more, to get ready in time. Two months before the Feb. 7 opening ceremony, the main coastal sporting complex in the suburb of Adler was still a forest of construction cranes parked in muddy ground.

Mr. Putin visited Sochi last month and let it be known he wasn't happy that the main Fisht Stadium – which was supposed to be finished by August – wasn't yet complete, leaving little time for rehearsals of the opening ceremony. His fury was apparent as he delivered the tough message that there would be no Christmas or New Year's holiday for those working on unfinished Olympic venues. "I wanted to tell you, even though it is clear anyway: For you, the New Year will be on the last day of the Paralympic Games, March 17," the President told his visibly anxious audience.

One set of pockets that was not well-lined by the Olympic cash bonanza is that of the labourers who built the new sports venues and infrastructure. Tens of thousands of migrant workers were brought to Sochi because they were willing to accept lower wages than Russians. Men from such former Soviet republics as Uzbekistan, Tajikistan and Moldova worked for $700 or $800 a month, and in many cases went home empty-handed when their employers refused to pay them after the job was done.

When the labourers began to agitate over pay and working conditions last year, the government turned on them and expelled them. Many had been brought to Sochi by middlemen and, unable to speak or read Russian, were in the country illegally without knowing it.

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Many ordinary Sochi residents are already looking forward to the day the Olympics are over. "They came in with this big project and said, 'build it any way you want.' Some people made money off of this, but not the ordinary people, not the people who have to live in this country," said Irina Kharchinko, a 54-year-old shop owner. "They just walked on people's heads."

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