Putin Sends Gambling To Siberia
Once a grim thoroughfare allowing apparatchiks to speed to Moscow's western suburbs, in recent years the Novy Arbat has been transformed into a Slavic version of the Las Vegas Strip. The facades of casinos such as Korona, Mirage, and Cherry shine in flashing red, blue, yellow, and orange neon. Near the entrances, big Mercedes, Range Rovers, and Volkswagen jeeps stand on glittering pedestals, alerting passersby to tempting prizes on offer. Once past the beefy bouncers patrolling the doors, you'll find everything from two-cent slot machines and dollar-a-throw roulette wheels to exclusive poker games with minimum stakes of $4,000.
Moscow's high-rollers could be in for a shock. Under an anti-gambling law proposed by President Vladimir Putin and given key parliamentary approval on Dec. 15, the city's casinos will have to close by June 30, 2009. Instead, Russia will create just four special zones nationwide?similar to Las Vegas or Atlantic City?where gambling will be allowed. And in the meantime, casinos will face tougher size and capital requirements aimed at driving out smaller operators.
he crackdown will change the face of Moscow. Though gambling was all but banned in Soviet times, it quickly caught on among Russia's nouveaux riches in the 1990s. Now, it's spreading to the wider public, thanks to slot machine arcades that stand on virtually every street corner. The slots have helped swell the total size of the gambling market to as much as $6 billion in revenues annually?double the level of two years ago, according to industry estimates.
Putin's draconian move reflects a political and social backlash against the industry. "This is a serious problem, and it has to be dealt with like the spread of alcohol," the President declared when he unveiled his plan in early October.
Driving Casinos Underground?
Casino and arcade operators say the change reflects little more than political pandering as the nation gears up for elections for parliament next year and for president in 2008. International intrigue may also be a factor. The law was introduced after the shutdown of several Moscow casinos owned by Georgians, just days after Georgia expelled Russian military officers for alleged spying. The law "is connected to politics and has no economic basis," says Evgeny Kovtun, vice-president of Russia's Gaming Business Assn.
Kovtun predicts gambling revenues could fall by as much as 70% by next summer due to the change. "All it's going to do is drive casinos underground, increase corruption, drive more money to organized crime, and take away all the taxes" from the industry, says Michael Boettcher, a British entrepreneur and president of Storm International, which owns seven Moscow casinos. It will also cost 500,000 jobs, he adds.
Until the final stages of the law's preparation, the biggest unanswered question was which areas would be selected to become Russia's answer to Las Vegas. Regions across the country were lobbying for the privileged status, but Moscow officials said they weren't interested in remaining a gaming mecca?doubtless because gambling is increasingly unpopular with voters.
On the Borders
Russia's lawmakers also agree that Muscovites should be shielded from temptation. To the industry's dismay, the parliament has selected four remote regions: Altai in Siberia, Primorsk in the Far East, the Kaliningrad enclave, and an area between Rostov and Krasnodar in the far south, as Russia's exclusive gambling dens. Such locations on Russia's borders are aimed at luring foreign tourists, while discouraging all but the most committed Russian gamblers.
Investors in the industry will be discouraged, too. Ironically, the passage of the law comes just weeks after South African leisure concern Sun International Group revealed plans to build a large casino and tourism complex, reckoned to be worth up to $1 billion, in the town of Ramenskoye, 17 miles southeast of the capital.
But it's doubtful whether anyone will now want to pump that kind of money into Russia's fledgling gambling resorts. "I'm not going to risk all my money in one of these zones when the Duma's going to change next year, the President's going to change the year after that, and they might change it all back again," says Boettcher.