The palm trees are glistening, snow machines have been imported from Finland and workers are toiling round the clock as Russia races to transform its only beach resort into a venue befitting the Winter Olympics, only one year away.

Many continue to wonder just why Russia chose the city of Sochi, the country's preferred Soviet-era summer getaway, as the site of the 2014 Games. Even in winter temperatures rarely dip below 12C – a rare thing in a country synonymous with winter and snow.

Sochi is a favourite destination for Vladimir Putin, the country's powerful president, who is personally overseeing Russia's Olympic effort. Local residents decry Putin's regular visits to the city, which snarl up traffic for hours at a time as roads are closed off for his arrival. He toured some of the Olympic venues on Wednesday, having flown to the resort on Tuesday to meet with Ramzan Kadyrov, the leader of neighbouring Chechnya. For Putin the Olympics are not only about sport and glory but also about presenting a Russia that is modern and open to the world. It is a herculean effort in a country whose government maintains much of the bureaucracy and paranoia that marked the Soviet era.

Indeed, with 120,000 visitors expected to descend upon the city for the Games, Viktor Teplyakov, an MP for Sochi from the ruling United Russia party, warns that simply buying a ticket does not guarantee access. "You'll need a security check that confirms you are not a criminal or a spy," he says. "Security is No1."

Dmitry Chernyshenko, the head of Russia's Olympic Organising Committee, nonetheless insists that Sochi will be a showcase for the new Russia. "I want people to remember nothing less than the greatest Winter Olympic Games in history," he says. "I want them to have been warmly welcomed into our country and looked after … and I want them to take away a sense of the beauty and vitality of this region and our country as a whole."

One year from the Games, however, Sochi is a massive construction site, with huge piles of mud and rubble competing for space with endless lines of lorries ferrying rubbish and materials to and fro. Great cranes, outfitted in neon lights the colour of the Russian flag, rise over Soviet-era neoclassical mansions as developers rush to complete construction of high-rise hotels. Electricity blackouts regularly strike the city, as its infrastructure creaks under the weight of Olympic construction. On Wednesday Human Rights Watch released a report claiming workers drafted to build Olympic and infrastructure sites were being exploited and cheated out of wages.

Much work – and cleaning up – remains to be done around the city but nearly all the main sport venues have been built and have begun test runs. The Games will be held in two clusters – amid the palm trees at sea level for sports such as hockey and skating and in the mountain resort of Krasnaya Polyana for skiing and bobsled. Snow-making machines will ensure the resort will be kept white.

"Is it perfect? I guess not," says Dmitry Grigoriev, appointed by Russia's Olympic Organising Committee to oversee the Adler Arena, devoted to speed skating. "But there is no better ice rink in the world. There's a saying that the devil is in the details. Our task is to make sure there is no devil."

Located three metres above sea level, the arena had to be fitted, after construction began, with special ceiling materials and wall tiles after developers realised the balmy temperature outside was harming the ice. "For a sea-level ice rink, it will be fast," Grigoriev says.

He refuses to discuss the arena's budget – a topic that is among the prickliest in Sochi. Government critics have accused the Kremlin of overseeing one of the most corrupt projects in the country's history, an allegation that Russian officials deny.

Dmitry Kozak, deputy prime minister, said this week that the cost of the Sochi Olympics would reach £32.3bn, making them the most expensive ever and well above original estimates of £12bn. London pulled off the summer Olympics with a budget of £9bn. Boris Nemtsov, a former deputy prime minister turned opposition leader, and other government critics allege that billions have gone missing from the budget funds and Nemtsov claims he will release a report on the matter in the spring.

One of the most controversial projects has been the construction of a 45km road from Adler, the Sochi neighbourhood housing the so-called "coastal cluster", to the mountain cluster in Krasnaya Polyana. Its 260bn rouble budget meant that each kilometre cost $200m to build. "You could have paved this road with 5m tons of gold or black caviar and the price would have been the same," Nemtsov told RBK television.After the interview aired, Kozak responded to the issues raised over the cost of the Games. "No one should have the belief that golden rain is pouring down here, that a very expensive Olympics is being prepared – what we can count as spending on putting on the Games is around 100bn roubles from the budget, and about the same amount is coming from non-budgetary sources." He said the rest of the money, around 1.3 trillion roubles, "will be used to develop the region".

Putin himself on Wednesday warned private investors and officials that construction costs ahead of the Games must not spiral. He was quoted by Russian news agencies as saying that "the most important thing is that nothing gets stolen and there would be no unjustifiable hikes in spending."

The vast amounts of money being poured into the Olympics have not been lost on locals. "These roads are made of gold," says Arina, a hotel owner. "A bit of it all goes into the pockets of our officials."

"Probably no country but Russia could steal so much money," adds Oleg, who moved to Sochi to work on Olympic construction but took up driving a taxi after failing to get paid regularly. "Who needs these Olympics? They've ruined a heaven on earth."