Russia plans casino destination in Crimea

As the world watches the standoff between Russia and Ukraine, plans move ahead to establish a gambling zone on the annexed peninsula of Crimea. Russia is not wasting any time to proclaim dominance over the territory with a casino destination set to become a vibrant tourist hotspot.

The idea won swift support from Russian President Vladimir Putin and a draft bill has already made its way to the State Duma, the lower house of Russian parliament. Terms of the bill outline Russia’s fifth special economic zone, with the size and location to be determined by the new Crimean government. Under Russian law, gambling zones cannot be built on government funds; so special tax incentives and favourable business conditions will be used to lure investors.

Crimea is expected to run a deficit of 55 billion rubles (US $1.5bn) this year and could receive $2.8bn in emergency subsidies, which Moscow has said it will cover. However, that obligation comes during an economic downturn in Russia and as the country faces a myriad of Western sanctions. A new gaming sector would be part of an overall economic stimulus plan intended to boost tourism in the region, create new jobs and fuel the local economy.

“As a result of entering Russia, not a single citizen of Crimea should lose anything, they need only to benefit from it,” declared Russian Prime Minister Dmitry Medvedev, who is urging Russian state companies, ministries and private corporations to send their employees to the peninsula for holidays at subsidised airfares. “Citizens need to understand that they’re citizens of a powerful country.”

Crimean authorities proposed the idea originally and are convinced of its commercial success. Crimean Prime Minister Sergey Aksyonov recently expressed his support, professing, “Crimea should have a gambling zone. Now we are looking for a place for it.” Deputy Prime Minister Rustam Temirgaliev told local news agencies that Crimea “stands a good chance of becoming a competitor to such sophisticated territories as Macau, Monaco and Las Vegas.”

At first it was proposed that designated gambling zones should be limited to areas close to 5-star hotels in the city of Sevastopol. However, Russian Deputy Prime Minister Dmitry Kozak believes the zones should be in less densely populated areas and segregated from established resorts. Kozak, who has been tasked by the Russian government to turn Crimea into a special economic zone, also assured that the sector would obey Russia’s current gambling zone laws.

If approved, the plan could come into effect rapidly as Russia looks to assert its power on the international stage. Since Russia and Ukraine outlawed casinos in 2009, an influx of illegal casinos throughout both nations is proof of a potentially substantial market. In fact, the major reason behind closing Russian casinos was that gambling started to spread like wildfire after the collapse of communism.

Russia has setup four designated gambling zones in Krasnodar, Kaliningrad, Altay and Primorsky, however only Azov City, in the coastal Krasnodar region, has opened casinos. The zone’s three casinos brought in 120 million rubles (US $3.9m) in taxes last year and are seeing annual turnover increases of around 30pc. Due to the sheer size of Russia, it is hoped that Crimea would not act as direct competition, but instead bring the gambling spotlight back to the nation. 

While the other zones were essentially built from scratch, Crimea is already a popular destination amongst tourists from central parts of Russia. The region has several air- and sea- ports and according to the Regional Development Ministry, hosted about 3 million visitors annually prior to the Russian annexation. The Ministry predicts a casino hub would attract another 600,000 tourists each year and add over 1 billion rubles (US $28m) to state coffers.

Until Ukraine followed Russia’s lead to ban gambling five years ago, effectively making casinos illegal overnight, Crimea contained a fruitful gaming market with more than 250 venues. Crimean authorities had since contemplated reintroducing casinos in the peninsula and submitted a bill to the Ukrainian parliament in 2011, which was overlooked by lawmakers.

But new facilities in the peninsula are not expected to generate an instant windfall, as major infrastructure and transportation links are needed. Two motorways currently exist between Crimea and Ukraine, and Putin has commissioned a new bridge built from Russia. Nestled between the two countries on the northern coast of the Black Sea, Crimea is heavily dependent on tourism and will require time to become a globally recognised gambling region.

Time is also needed for conditions to stabilise before casino developers risk investment. While local Parliament has declared the territory part of Russia and some 95.5pc of Crimean voters have supported joining Russia, the Ukraine, EU, UN and US have all declared the referendum invalid. But as the Crimean spotlight dims, Russia keeps hold of the territory and continues its development plan.