MICHELE NORRIS, host:

From NPR News, this ALL THINGS CONSIDERED. I'm Michele Norris.

MELISSA BLOCK, host:

And I'm Melissa Block.

The 2014 Winter Olympics may seem a long way away, but the Russian city that's hosting the games has a huge amount of work to do. In Soviet times, Sochi, on the Black Sea, became a beach resort. When the Soviet Union broke up, Russians lost their nicest beaches to newly independent countries such as Ukraine and the Baltic states. All that remained was Sochi.

Well, now Russia has big plans to use the Winter Olympics to turn Sochi into a world-class resort. That's an expensive proposition. The Russian government is footing most of the bill, about $12 billion. And so far, foreign investment hasn't come through as hoped.

NPR's Anne Garrels takes us to Sochi.

(Soundbite of waves)

ANNE GARRELS: The opening and closing ceremonies in 2014, as well as ice competitions, will be held here next to the beach, a first for a Winter Olympics. The alpine events will be held 30 miles away in an entirely new complex being built in the mountains.

Efim Bitenev, spokesman for the Sochi Organizing Committee, says the goal is not only to prepare for the Olympics, but to turn this region into a top, year-round international resort.

Mr. EFIM BITENEV (Spokesman, Sochi Organizing Committee): Hosting 2014 Olympic Games, it will be great catalyst in this development. This is our idea.

GARRELS: But does Sochi have what it takes to be a top resort? That's not at all clear.

Anya Zhuravliova, a cashier from central Russia, gingerly walks on the rocks. That's what passes for beach - a rail line snakes along most of it.

Ms. ANYA ZHURAVLIOVA: (Foreign language spoken)

GARRELS: Anya comes to Sochi because it's convenient, it's familiar, it's Russian, and she doesn't need to get a visa. But she says most Russians believe they get more for their money outside the country, in places like Turkey or the Arab Emirates. Sochi has yet to attract foreign tourists.

SASHA(ph): (Foreign language spoken)

GARRELS: You don't need a translation to appreciate 18-year-old Sasha's amazement at meeting an American. Sochi is still the kind of place where people get excited at meeting a foreigner - that's long disappeared in blase cosmopolitan Moscow.

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GARRELS: Statues of Lenin are commonplace here. The Soviets aim to turn Sochi into a workers' paradise, ordering the construction of grandiose sanatoria, which now line the Black Sea coast. Behind the majestic facades were dreary accommodations and few facilities.

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GARRELS: Russians still come to soak in the foul-smelling, sulfuric water springs, which allegedly cure everything from infertility to arthritis. The Matsesta sanatorium is at once a palatial and somewhat forbidding complex of mineral baths. Though efforts have been made to spruce up the place, it's still rather sterile, not exactly spa-like.

A checkup by a doctor is a precondition to a course of baths because physicians here say the waters can have a powerful effect. The exact color and mineral composition of the water changes depending on various conditions. Today it's greenish-black and smells of rotten eggs. Many sanatoria are still run by state agencies and large factories, and they still offer subsidized, Soviet-style, 21-day packages for workers.

Dr. David Gunba, the deputy director at sanatorium Avangard, says the regime includes checkups, baths, massages and a ban on drinking. Dr. Gunba concedes it's not real medicine.

Dr. DAVID GUNBA (Deputy Director, Avangard Sanatorium): (Through translator) We don't take guests with serious conditions. Basically, we cater to people who want to improve their overall health and rest. We are not a hospital.

GARRELS: His sanatorium is trying to modernize and attract full-paying guests at $160 a night. Not cheap for a place with no swimming pool or tennis courts. Hoping to turn this area into a new Russian Riviera, officials are quick to point out Sochi is at the same latitude as Nice and Cannes.

Marcel Simoneau, a Frenchman who has opened a restaurant here, laughs at the comparison.

(Soundbite of laughter)

Mr. MARCEL SIMONEAU: They think that here it's like Cannes, but it's not Cannes. But they do the price of Cannes.

GARRELS: This is a problem for potential foreign investors. Joel Goldman, with hotel consulting firm Cushman and Wakefield, says Russian officials have delusions of grandeur, dreaming of rich tourists and high-end hotels. He says they risk pricing themselves out of the market.

Mr. JOEL GOLDMAN (Cushman and Wakefield): The danger is that a Rolls Royce is constructed when really what is needed is a Volvo.

GARRELS: The subtropical vegetation - a lush mixture of palm, banana and cypress trees - is stunning, but it's being eaten up by unplanned, chaotic development. Pressed up against the coastline, the city is crowded, the roads jammed, the infrastructure needs a massive overhaul.

Mr. VLADIMIR OSTAPUK (Ecological Adviser): (Foreign language spoken)

GARRELS: Vladimir Ostapuk, an adviser on ecological issues to the local government, says most of Sochi's sewage plants no longer work, so 90 percent of the city's raw waste is dumped into the Black Sea. He hasn't swum here in five years.

(Soundbite of music)

GARRELS: With its slightly tacky boardwalk, Sochi remains, well, more Coney Island than Riviera. Prime Minister Vladimir Putin wants to change all this. He vacations here in a secluded government villa. He's encouraged the country's oligarchs, who are close to the Kremlin, to invest here.

One of his billionaire buddies, Oleg Deripaska, has built the Grand Hotel Rodina, the only deluxe accommodations in town. Catering to Russia's elite, its neighbor is aptly a sanatorium belonging to the security services - the heirs to the KGB. Yelena Tumor, head of public relations, proudly shows one of the 40 rooms - this one designed by Ralph Lauren.

Ms. YELENA TUMOR (Public Relations, Grand Hotel Rodina): Yeah, it's all very unique. And we're trying to have only unique food, maybe unique wine and - for our guests, because we must be the highest.

GARRELS: At $1,000 a night, this boutique hotel better be the best. At the start of high season, it's almost empty.

So far, hopes that international hotel chains would follow, providing necessary rooms and services for the Olympics, have not been realized. The financial crisis is just one factor.

Sochi's new slogan is gateway to the future, but foreign investors are not yet convinced the future is here.

Anne Garrels, NPR News, Sochi.

BLOCK: Tomorrow, Anne reports on the development of everything, from a new airport terminal to ski slopes, to get Sochi ready for the 2014 Winter Olympics.

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