I mean, of all the cities in Russia, you pick just about the only one that has a subtropical climate for your Winter Games? And one so near the dangerously unstable Russian Causasus, at that?
I think Putin can be excused (as far as dictators can be excused) for trying to show muscle in that region and show he's the boss around there (although there are a lot of people who'll be trying to prove him wrong). Also, Medvedev apparently build himself a 2 billion rubles ($ 58 million) palace in the middle of a nature reserve which is officially listed as a structure that was built for the Olympic Games. And you wouldn't build that in Siberia either, now would you?
But why did the IOC choose this location? Competing cities were Salzburg, Austria and Pyeongchang, South Korea, both with good prospects for solid Winter Games temperatures, and a stable political climate. Although to be fair, Salzburg and Pyeongchang are both expecting around 40F/5C on Febr 7th; Salzburg with rain. Still, it only adds to the allegations of corruption in the IOC. There must have been some form of bribe for members to choose such a location. Makes you wonder about London (2012), Rio (2016), and Tokio (2020). Pyeongchang has won the bid for 2018, so maybe they found some more money somewhere.