Critics Fear Rise in Illegal Gambling Under Casino Ban
By Galina Stolyarova
Staff Writer
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Alexander Belenky / The St. Petersburg Times
The law is aimed at regulating Russia’s vast and chaotic gambling industry, and eventually at creating Russian versions of gambling Meccas like Las Vegas.
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Tuesday sees the last day of legal operations for all casinos and gambling centers in Russia. The Kremlin has launched a reform that involves setting up four large gambling zones in the Primorye region, Altai region, Kaliningrad Oblast and Azov region (the area connecting the Rostov Oblast and Krasnodar region). According to the federal law aimed at regulating and putting in order Russia’s vast gambling industry, all casinos in the country must close as of July 1, 2009 and reopen in one of the specially designated areas. For St. Petersburg, this means closing down a total of 109 casinos. According to official statistics, the city’s gambling industry employs between 10,000 and 12,000 people. The gambling industry has been a modest contributor to the city’s coffers. In 2008, tax revenues reached around 3.5 billon rubles. “We are talking about one percent of the city budget,” said Lidiya Mamon, head of City Hall’s department of state-controlled entrepreneurial activities, adding that in the first half of 2009, tax revenues from the industry decreased — totaling 1.2 billion rubles — as some casinos closed down ahead of the start of the reforms, while others have changed their businesses and invested elsewhere. “We are hoping to see cafes, restaurants, shops and other attractive places in the vacant spots,” said Mamon. “Rental revenues from this retail space will compensate for the loss of the gambling money.” Casinos and gambling centers occupy 127,000 square meters of commercial space in St. Petersburg. But not all casinos appear to be willing to leave. Instead, they are disguising their premises as lottery centers. The Russian law on lotteries is at present full of loopholes and so vague that it does not even contain a consistent description of what constitutes lottery facilities. Some businessmen are using this lack of legal clarity to their short-term advantage, classifying slot-machines and other facilities as lottery systems. Critics speculate that the law will only result in a massive boost of illegally operating private gambling houses. They say few businesses will risk relocation during the instability of the crisis, nor would they find it worthwhile investing far from their hometowns. Furthermore, it is argued that few Russians would find it appealing to travel to gambling zones and would rather seek a local underground venue. Sergei Shatalov, deputy Finance Minister of Russia, said the allocated zones are not yet ready to receive an avalanche of gamblers and gambling businesses. They are suffering from the economic crisis, and there is no infrastructure in these areas to facilitate the smooth transfer of hundreds of casinos. Until the zones begin to function as intended, Russia will find itself in a situation where no legal gambling businesses will exist. Shatalov refused to estimate how long such a period could last. Nationwide, it is expected that the gambling industry reform will leave over 400,000 people out of a job. The reform’s key ideologist is Prime Minister Vladimir Putin, who signed the law back in his tenure as Russia’s president. The idea was to give Russia’s vast and chaotic gambling business some kind of frame and structure. Ultimately, the plan aims to create Russian versions of international gambling Meccas, such as Las Vegas and Monaco. Governments of the regions that are due to host the gambling zones have put a brave face on the matter and speak optimistically about the future, while emphasizing that they rely heavily on state support. Alexandra Smirnova, the economic minister of the Kaliningrad region, said that “the initial skepticism that existed in regard to the plan to create a gambling zone on the Baltic coast has vanished.” “The federal authorities have convinced both the regions and businesses that the project is highly attractive and is bound to be a real success,” Smirnova told Interfax news agency. The Kaliningrad gambling zone, tentatively titled Yantarnaya, has ambitions to take advantage of Kaliningrad’s winning location — the Russian exclave is surrounded by EU states — and attract international visitors. Smirnova said the city administration is working with the federal government to develop a series of proposals that would facilitate the visa regime with the EU states for tourists traveling in order to gamble.
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