The nods to Russian culture and history in Friday’s opening Olympic ceremony are said to include ballet dancers, a fleet of ships under the command of Peter the Great, and current czar Vladimir Putin’s favorite folk rock band, Lubeh. Mr. Putin wanted the Sochi Games to be a showcase of modern Russia, and he has succeeded, though not as he intended.

In its wisdom, the International Olympic Committee in 2007 awarded the winter games to the one subtropical spot in chilly Russia, which happens to sit right next to terrorist safe havens and active war zones in the Caucasus. What could go wrong?

The choice of Peter the Great to headline the opening speaks to Mr. Putin’s self-perception, but in Sochi he has been more of a latter-day Potemkin. Russia estimated the cost of converting a beach resort into a world-class ski and winter sport center at $12 billion. The final tab came to $50 billion, more than every previous winter Olympics combined and even the 2008 Beijing summer games.

The games are proving to be a case study in the Putin political and economic method. Boyars close to the Kremlin won the construction tenders, which—surprise—ran well over estimates. The road up from the coast to the Krasnaya Polyana ski resort cost $9.4 billion, or $200 million per kilometer, which according to opposition politician Boris Nemtsov makes it the most expensive road in the world. “They may as well have paved it in platinum or caviar,” he says. Mr. Nemtsov estimates some $30 billion was lost to corruption, which explains why Russians call this Olympiad the Korumpiad.

Mr. Putin has made it impossible to hold his regime accountable through free elections or media, and he’s fortunate since the billions have failed to prepare Sochi on time. Western journalists arriving this week have plastered the Internet with stories of unfinished hotel rooms, incomplete road work and the now famous photographs of two toilets in a single stall.

Sochi is also a shrine to authoritarianism. Since a flurry of anti-government protests in 2012 shook the Kremlin, the Russian leader has jailed opposition leaders and adopted laws to destroy non-governmental groups and ban “gay propaganda.” In an image makeover, he recently released a few dissidents.

But the reprieve didn’t last. Police have arrested activists in recent days and prevented others from going to Sochi. The FSB (the old KGB) is now vetting all spectators who want to attend events, presumably to prevent any surprise expressions of dissent on live television. Western leaders are wisely staying away from the games to avoid guilt by association.

The most attention has understandably been devoted to security. A local Islamist offshoot of al Qaeda in the Caucasus is threatening to attack, and dozens of people have died in terrorists strikes in southern Russia in the lead up to Sochi. Russia has deployed about double the security used to protect the 2012 London Olympics and locked Sochi down. The world has put faith in Mr. Putin’s ability to protect its athletes, yet the persistence of domestic terrorism is one of Mr. Putin’s failings.

Soon enough attention will turn to the athletes and competition, as it should. But amid the stories of Russian progress the Kremlin hopes to show the world, it’s worth keeping in mind the underbelly of Mr. Putin’s regime that the games have exposed.