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CNBC: Why another Beijing Olympics may not be far off

By CNBC 24 Nov 2014

After Oslo, Norway, bowed out in early October, only two cities remain in the race to become the host of the 2022 Winter Olympics: 2008 Summer Olympics host Beijing and the considerably lesser-known Almaty, Kazakhstan.

In any other scenario, Beijing's bid would seem outlandish. Almaty is a formidable foe, as it sits at the foot of the Tian Shan mountain range and possesses a strong winter culture. Nevertheless, Kazakhstan has faced a double whammy of economic troubles, as oil prices have dropped and major trading partner Russia has run into its own problems. That could lead a risk-averse International Olympic Committee to go with Beijing's more familiar face, experts told CNBC.

Since the beginning of November, Brent crude oil futures have fallen below $85 a barrel, their lowest level since 2011. Estimates for the next year show Brent rising back to around $90 a barrel, according to Pavel Molchanov, senior energy analyst at Raymond James. But even at that level, it's down about 20 percent from 2014's high of nearly $115 per barrel.

For Kazakhstan, those numbers do not paint a pretty picture. The country has made efforts to diversify its economy, but it's still largely dominated by oil and natural gas production. As of 2012, more than 25 percent of Kazakhstan's GDP came from the oil and gas industry,according to research from Ernst and Young.

Oil also represents the focus of a great deal of Kazakhstan's foreign investment. Chevron, Exxon Mobil and Royal Dutch Shell all have stakes in at least one of Kazakhstan's three main oil fields.

"Kazakhstan is a petro-state," Molchanov said. "Falling oil prices are damaging to Kazakhstan's economy, as it is damaging to any other oil-dependent country."

Crude futures aren't the only headache for Kazakhstan's economy—the country also has to grapple with the poor economic conditions in Russia since that country became involved in efforts to destabilizeUkraine. Moody's downgraded Russia's debt rating, and inflation is becoming a bigger concern for the country in the face of sanctions from the European Union and United States. Those factors could hurt formerly Soviet Kazakhstan's image.

"A lot of people in the West see the sanctions out there and think the whole region is unstable or in flames," said William Courtney, former U.S. ambassador to Kazakhstan and the president of U.S.-Kazakhstan Business Association. "That will hurt all of the former Soviet countries, because people in the West will see them as part of that—even though they're not."

In the IOC's eyes, that could all add up to an economic gamble when it's already dealing with one as Brazil's shaky economic standing is presenting challenges to the 2016 Summer Games in Rio de Janeiro.

The IOC's most recent host selection for the 2020 Summer Olympics showed how the organization aims to hedge its future risks, according to Terrence Burns, managing director at Teneo Sports, the sports business division of advisory firm Teneo Holdings. Tokyo beat out Istanbul and Madrid, cities located in countries with far more political and economic risk than Japan.

"The IOC is in a mode of mitigating risk—not taking chances on new cities and new horizons," Burns said. "Frankly, China's less risky than Kazakhstan by any metric."

Ironically, Almaty's hope for the 2022 Winter Games could actually be helped by China. 

The world's second-largest economy has taken steps to embrace Central Asia as it tries to shore up its supplies of oil and natural gas, Courtney said. If China continues to expand its influence in the region, Kazakhstan could stand to benefit economically, which could help erase its oil- and Russia-related woes.

Beijing 2022 would also be the sixth Olympic or Youth Olympic Games to happen in East Asia since 2008—a fact that stands against the generally recognized principle of the games being held in different regions of the world during consecutive installments.

"Everyone's thinking the same things: 'Weren't the games just in China?'" said Dave Doroghy, a sports marketing executive who headed sponsorship sales at the 2010 and 2012 Olympics.

There are also concerns about Beijing's ability to host a Winter Games.An IOC report from May commented on a lack of snowfall around Beijing, meaning man-made snow would be relied upon, as was the case with Sochi in Russia. The report also said Beijing would have to build a large number of the venues for the games.

Nevertheless, that same report ranked Beijing more favorably than Almaty—meaning China's second go at Olympic glory could come to fruition next July when the IOC meets to name its next host city.

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