Trouble on the Black Sea.(World Affairs)(Sochi, Russia)

Byline: Anna Nemtsova and Owen Matthews

The site of the 2014 Olympics offers the hallmarks of the new Russia: big money and international intrigue.

From the dance floor of the Plotform nightclub, late on a sultry Saturday night, downtown Sochi looks a lot like Cannes. Palm and banana trees bedecked in lights glitter along the waterfront. Billionaires' yachts bob in the marina. And businessmen and politicians mix on Plotform's glass dance floor that rests on stilts above the sea. The Russian Riviera is partying hard -- and Sochi has much to celebrate.

Three years ago Russian President Vladimir Putin made the rejuvenation of this Black Sea resort his personal project, and it has boomed ever since. The Kremlin has pledged $7.5 billion to upgrade the city's infrastructure and create new ski runs in the mountains above the city. Private capital piled in behind. At this year's Sochi investors' forum, hosted by Putin, businessmen made $23.3 billion in investment deals in Sochi and the region, most of them construction and resort projects. Earlier this year the International Olympic Committee cemented the city's status by choosing it as the site of the 2014 Winter Olympics. And while it might not be as grand as St. Petersburg or Odessa -- both cities created by great Russian tsars and tsarinas centuries ago -- it has become clear, as Putin's term as president draws to a close, that part of his legacy will remain in Sochi, a monument to the prosperity and renewed Russian pride of his era.

In many ways Sochi's well-to-do facade mirrors Putin's Russia, where big deals are lubricated by petrodollars -- and the Kremlin keeps a paternal eye on the dealings of big business. The city's boom has been funded by money from Russia's rich store of commodities, but it is the Kremlin that has taken the lead in directing those cash flows to Putin's pet city. And while bureaucrats in every Russian city regularly require under-the-table payment in return for otherwise routine transactions, Sochi businessmen complain the city's new prosperity has made some of Sochi's bureaucrats greedier than most.

Putin has also chosen a risky gambit in selecting Sochi -- not least because the city is just 20 kilometers from Abkhazia, a separatist region of Georgia. Though Abkhazia broke away from Georgia in a bloody civil war in the early 1990s, Tbilisi has never recognized the rebel statelet. Low-level raids and skirmishes are a regular occurrence on Abkhazia's border with Georgia proper -- and though there's little danger of the violence spilling into Russia, an ongoing war of words, interspersed with bullets, is a headache the Olympic city doesn't need on its doorstep. Last week Georgian President Mikheil Saakashvili complained to the United Nations that Russia was "sponsoring terrorism" via Russian peacekeepers stationed in Abkhazia. In response, says Abkhazian President Sergei Bagapsh, he had "30,000 angry soldiers, all Olympic-class riflemen," ready to counter any Georgian aggression. Georgia is also objecting to a Russian oligarch's purchase of building materials for Sochi from suppliers in Abkhazia, on the ground that business deals with separatist states violate international law, and represent "a shameful beginning for ...