SOCHI, Russia (AFP) - As Europe moans about Gazprom's monopoly over Russian gas exports, the state-controlled giant is turning a sleepy Soviet-era ski resort in the Caucasus mountains near President Vladimir Putin's summer residence into a luxury retreat.

"We call this Gazprom Village," said Yefim Bitenyov, an official in the city's bid to host the 2014 Winter Olympics -- an ambitious plan involving extensive construction that Gazprom is also involved in.

Bitenyov pointed to a fenced building site with a brand-new hotel and a cluster of green-roofed wooden chalets amid woodland at the Krasnaya Polyana resort at an altitude of 900 metres (2,953 feet) some 70 kilometres from the Black Sea resort city of Sochi.

Gazprom -- one of the top-valued companies in the world -- also owns the biggest stake in the hotel firm that wined and dined European Union delegates at a summit here last Thursday, as they complained to Putin about Gazprom's hold over Russia's vast gas reserves.

"We did all the catering," Boris Averyanov, director of Radisson SAS Lazurnaya (RSL), told AFP in his office next to the four-star Lazurnaya Hotel -- a plush, marble-lined venue set among palm trees on the coast.

RSL, whose management has been contracted out to Radisson SAS, also runs Peak Hotel in Krasnaya Polyana close to "Gazprom Village" and is planning a new 40-million-dollar annexe to the Lazurnaya Hotel.

Gazprom is no newcomer to the hotel industry in and around Sochi -- a city with a unique location between the mountains and the sea that was once a favourite resting spot for the Soviet elite and is now a booming property market for Russia's new rich.

"Oil and gas are not eternal, tourism and banks are," Averyanov said.

The company began working on the Lazurnaya Hotel in 1990 -- before former Russian president Boris Yeltsin and now Putin raised the city's profile with long stays at the presidential residence here.

For Sergei Sukhanov, Sochi's deputy mayor, the influx of Gazprom money into Sochi and surrounding region reflects good investment policies by local authorities.

"Gazprom is the biggest company and therefore the biggest investor here," Sukhanov said.

"It's good that the company is investing in the city -- a company that is known throughout the world. It's an indicator of our investment policy," he added.

The company, which controls Russia's strategic pipeline network as well as a portion of oil production, is now part of Sochi's bid to host the 2014 Winter Olympics -- bid organisers say "Gazprom Village" will host world media covering the games.

"They were there from the very beginning," said Dmitry Chernyshenko, a Sochi native who is coordinating the bid, speaking on a sleek yacht hired by organisers to cruise reporters along the coast.

For locals, Gazprom's investments in Sochi's leisure industry have been a mixed blessing.

Many here are pleased the company has helped boost Sochi and point out that the city and surrounding areas are now well provisioned with piped gas supplies, where they previously relied on gas canisters.

But activists complain that Gazprom's building projects, particularly in the wooded mountains above Sochi that slope up to the snowy peaks of the Caucasus range, have harmed the environment.

"Gazprom's activities in the Krasnaya Polyana region are a gross violation of the law and have brought colossal harm to unique ecological complexes," Andrei Rudomakha, head of the environmentalist group North Caucasus Ecological Watch, said in a written statement.

Rudomakha said the company broke the law by cutting down thousands of rare box trees -- Buxus colchica -- that were hundreds of years old and may have polluted drinking water during construction.

As for "Gazprom Village," Rudomakha said: "Gazprom had no right to build these installations since they are on the territory of Sochi National Park" -- a 57,000-hectare (15,000-acre) protected area.

Gazprom representatives could not be reached to respond to that criticism.