Gambling On Russia
Russia’s gaming business is in a state of upheaval: It has come under massive attack simultaneously from two flanks: federal agents and Moscow city authorities. The RF State Duma and the Moscow City Duma have drafted two bills placing serious constraints on the gambling industry. By far the greatest controversy has been caused by a joint proposal from Aleksandr Lebedev and Andrei Samoshin, both members of the United Russia faction in the State Duma, that gaming establishments be completely removed from city limits in Russia. The battle is going to be fierce since the stakes are as high as can be: the colossal profits of casino and gaming arcade owners, the psychic health of Russian citizens, and billions of rubles in tax revenues. Perhaps it’s a good time for some bets.
Pensioners Need the Jackpot
“Do you want my opinion?” A young security guard at a gaming outlet outside the Tulskaya metro station took me aside and whispered into my ear: “It would be better if all of these slot machines were blown up. I have already lost one car. Now I am saving up for another.”
Ivan, a 40-year-old factory worker from the city of Bryansk, basically shares this view. He was completely absorbed in the process of pushing five-ruble coins into a slot machine near the Kolomenskaya metro station. He replied to my questions very briefly, refusing to be distracted from his principal preoccupation. It turned out that he started playing four weeks before. Several days ago he won 5,000 rubles, prior to that losing 3,000. “I agree that it would be better if the slot machines were removed from the city,” Ivan said. “Otherwise, as soon as I get a tenner (approx. $0.35) in my pocket, I immediately come here.”
“We have a babushka regularly coming to our place. She makes the sign of the cross over a slot machine and touches it, saying: ’Okay, my dear, let’s go now.’ Then she wins about 500 rubles, kisses the banknotes, and leaves — until next time,” Larisa, a cashier at the Tornado gaming club, told this reporter. “Recently a woman came who needed money for an operation — 70,000 rubles in all. She already had 40,000 rubles and she decided to win 30,000 by playing roulette. In the end she lost the whole 40,000. Later she often returned, always in a fit of hysterics, demanding that her money be returned.”
Game-mania has hit the country like a tsunami, without warning, sweeping it under. Still, it could have been predicted with a fairly high degree of probability: In 2002, the federal center took the authority to issue gambling licenses away from regional administrations (which had been regulating the industry haphazardly) and gave it to the State Sports Committee. Over the past three years the latter has rubber-stamped about 6,000 licenses, which resulted in an all but uncontrollable proliferation of ’one-armed bandits.’
Moscow stands out among other cities for its ostentatious neon-lit casinos and gaming clubs. Almost every other baker’s has acquired its own slot machine with whole chains of dubious gambling facilities mushrooming outside metro stations. As a result, the number of slot machines has reached 63,000, while the number of casinos in Moscow has grown from 36 to 56. The situation came to a head when Moscow Mayor Luzhkov exclaimed recently: “What is going on in the city is utter depravity, perversion, and moral corruption.” This exclamation marked the beginning of an active phase in the anti-gambling campaign.
Making Casinos Off-Limits
The Moscow town hall decided to reduce the number of gaming arcades from 15 to four per city district, limit the number of casinos to 30 and reinstate the power to regulate the gambling industry. Members of the United Russia faction in the State Duma, however, went one better, proposing that licensing costs be multiplied and gaming establishments removed at least one kilometer outside population centers.
“Yesterday I was driving along Leninsky Prospekt and I counted 38 gaming signboards which terribly vulgarize the city,” Aleksandr Lebedev, a State Duma deputy and sponsor of the draft law on pari-mutuel and gaming establishments, told this reporter. “But more importantly, it is a huge shadow business with an annual turnover of between $2 billion and $5 billion. What is even worse is that this money is being made on people from low-income groups who hope to get rich by gambling. This is an absolute disgrace the like of which does not exist anywhere else in the world, where people have to go out of town to play, not spread the plague around.”
According to Lebedev, all talk to the effect that the gaming business generates substantial budget revenues and creates jobs is hogwash: “What jobs? Drug trafficking also creates jobs, but surely we do not encourage it.” He is undaunted at the prospect of litigation with owners of gaming establishments: “So what if they have licenses? This is what ruling authority is for in the first place — to uphold a righteous cause.” By way of a positive example the deputy cited the case of Belgorod whose authorities banned the gambling business, moving it beyond the city limits.
Lebedev is reassured by the fact that his draft law has received support from both the Kremlin and the State Duma leadership. By now copies of the draft law have been sent to the Federation components. The bill’s authors hope that it will be considered in its first reading before July 9. “If it is postponed until fall, the situation will get much worse,” they say. Lebedev said that as soon as word about the draft law got out, dozens of deputies whose relatives or acquaintances were involved in the gambling industry approached him in the Duma lobbies. Not so long ago he started receiving threats. Asked whether he was not afraid, Lebedev quoted Ostap Bender (the principal character in Ilya Ilf and Yevgeny Petrov’s satirical novels Twelve Chairs and The Golden Calf. — Ed.): “There was a time when I could be frightened in a dark gateway by means of a Finnish knife.”
Closer to Magadan
Meanwhile, the gaming business does not seem prepared to put up with the expected constraints. Samoil Binder, deputy executive director of the Russian Association for the Development of the Gaming Industry (ADGI), describes the Lebedev bill as “populist” and economically unfeasible: “In the context of Moscow, beyond whose limits out-of-town settlements and villages come one after another, this bill in fact proposes pushing the gaming business at least 100 kilometers beyond the Outer Ring Road. But what if the authorities in the Moscow region adopt a similar law? Then a person would have to go play closer to the sunny city of Magadan.”
The main trumps held by the gaming community are taxes and employment. In the ADGI’s estimate, in 2004 alone, Russia’s gaming business paid $1 billion into Russia’s federal treasury. “This is nothing to sneeze at,” Binder states. “We could lose all of this. Some 550,000 people currently employed in the gaming industry could lose their jobs, which is, incidentally, 1 percent of the able-bodied urban population.”
There is one thing both sides agree on though: They admit that the gaming business has gone out of control. The measures proposed by the lawmakers, however, confound the business community. “These proposals have not even received expert appraisal,” Stanislav Bartnikas, marketing director at the Ritzio Entertainment Group, says. “For example, they violate Article 55 of the RF Constitution on the right of free enterprise. This is to say nothing about the fact that both bills are restrictive. International experience shows that such measures push business into the shadows, while those who have been operating illegally continue to operate illegally.”
According to the ADGI, more than 10 percent of all slot machines are unregistered and therefore untaxed, while the number of machines that have been tampered with is impossible to estimate. “Of course the entire gaming business could be removed from the cities,” Samoil Binder says. “But what is to be done about Internet casinos or Internet slot machines? Their servers are based someplace on the Balearic or Virgin Islands. And what about cellphone casinos and slot machines? Are we going to take all cellphones and computers from the people and ban the Internet?”
In the prevailing situation, however, it makes little sense for the gaming business community to quarrel with the lawmakers: Should gaming establishments really be ordered out of town, the business’ viability will be jeopardized. This, however, will be the least concern for the ordinary citizen whose interests should be the primary concern for the lawmakers.
Natalya Alyakrinskaya
The Moscow News