Russian casinos forced out

Casinos and slot-machine halls have been given a deadline to move out of Russia’s cities and urban areas, if new legislation passed yesterday by the Russian Lower House of Parliament is signed into law. Though that seems almost certain after 428 out of 450 deputies gave the bill its support.

Casino operators will have until mid-2009 to leave cities such as Moscow and St. Petersburg and set-up in the remote regions of Kaliningrad, Primorsky, Altai and Krasnodar-Rostov. These regions were designated as legal gambling zones last month after a draft law was approved by the Duma State Economic Policy, Business and tourism Committee. Furthermore, operators will also need assets worth more than $23 million to be allowed to continue to run their business.

Gaming companies said the tough new regulations spelt disaster for the £3 billion industry.

"These are repressive measures - essentially they amount to a ban," said Yevgeny Kovtun, vice president of the Association of Gambling Businesses.

The problem for the industry lies in the fact that the four new designated gambling zones are highly inaccessible and will require people jumping on a plane to visit these casinos.

"In the U.S. people know about Las Vegas from childhood, but in Russia gambling tourism doesn't exist,” Kovtun said. “Before, a person would pop into a casino or slot-machine hall between the metro and his house. Now, the gaming companies will have to entice him to the Pacific coast."

The new zones have drawn parallels with Las Vegas but many industry insiders doubt it can mimic the success of the Nevada gambling town.

"It is easy to fly to Kiev or Minsk, but nobody will go to Altai. There won’t be a Russian Las Vegas," said Boris Belotserkovsky, vice-president of the Russian Gambling Association.

The legislation is also likely to force small casino operators out of the industry, a situation that many fear could lead to destroying legitimate businesses and creating an underground element of gambling.

"These four regions where gambling will be allowed have very small markets and I don’t believe anything significant will be built there," said Belotserkovsky.

"Instead, there will be illegal operations all around the country," Belotserkovsky added.

The Russian government have said they would be willing to set aside billions of dollars to build the infrastructure required for the four new gambling zones, but so far not a single casino operator has said that are interested in the project.

"From the point of view of business, it’s inefficient for the government to invest. These are very large amounts of money that could be spent on social projects that are desperately needed in Russia," said Lavrentii Gubin, a spokesman for Strom International, which operates six casinos across the country.

Thousands of casinos and slot machine halls now look certain to be doomed as Russia takes an almost mirror-image stance on gambling to that of the U.K, Spain and Italy. They have preferred a more discerning approach of regulating the industry, understanding that you cannot push gaming under the carpet and forget about it.

Editor, - 2006-12-21 12:20:25

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