Casino Colonies
// Russian Las Vegases wins big
Russian President Vladimir Putin created a revolution in the Russian gaming industry yesterday when he introduced a draft law into the State Duma that would close down all gambling businesses outside four “Russian Las Vegases” and several regional “gaming zones.” Russian gaming operators expect their business, which has a turnover of $5.5 billion per year, to be redistributed among large international companies.
The lobbying war over the draft law to limit the development of the gaming business in Russia ended yesterday unexpectedly. Duma speaker and leader of the United Russia faction Boris Gryzlov returned from a meeting of the faction leaders with Russian President Vladimir Putin on “domestic and foreign policy issues” with a several-page-long document that turned out to be the draft law “On the Gaming Business in the Russian Federation,” which, Gryzlov said, the president would be introducing for consideration. The details described by Gryzlov were a shock. The president was proposing to place the country's gaming business in four reservations – two in central Russia, one in Siberia and one in the Russian Far East. All of the ground gained by industry lobbyists in the last year was instantly lost. That type of state regulation of the business had not been discussed before.
Only the president, Gryzlov and members of the presidential administration know the exact contents of the draft law. Kommersant was only able to learn the outlines of the document from a member of the legal department of the presidential administration.
The bill would reform the gaming business in two steps. The first step would last until July 2007 and would entail a ban on establishments with less than 50 slot machines and other measures to concentrate the business. The second step would last until January 1, 2009. By that time, all gaming establishments in Russia, including bookmaking, electronic casinos and Internet gambling, should have either moved to one of the four federal gaming zones (which are not specified in the draft) or to a gaming zone set up by local authorities. Nothing is known yet about the number of local zones or conditions for opening them.
“Compared to the strict rules in force in a umber of European countries, the draft law looks moderate,” commented Vadim Vinogradov, a department head at the Ministry of Justice's Russian Legal Academy. “Here, unlike Austria or Italy, no state monopoly is been introduced. The draft is somewhat similar to the Italian model, where the gaming business is prohibited everywhere except in four zones. But in Italy casinos are municipal.”
According to information obtained by Kommersant, three alliances of supporters of regulations concepts had formed in the Duma and administration. The first was represented in the Duma by Igor Dines, who proposed placing limits on small casinos and on slot machines. Insiders thought that he was supported by the Finance Ministry, Interior Ministry and a number of large chains of slot machine operators, including Oleg Boiko's Ritzio Group, which operates under the names Vulkan, Million, Desperado and others. The second group was represented in the Duma by Vladimir Medinsky. He is thought to have been supported by the Ministry of Economic Development and Trade and chief economist of the presidential administration Arkady Dvorkovich. Their idea was to create advantages for casinos and ban slot machines. Head of the legal department of the presidential administration Larisa Brycheva took a third position and regularly scuttled draft laws from lobbyists of the first two groups.
The large gaming businesses are taking a close interest in the draft law. President of the Union of Gaming Business Associations Oleg Zhuravsky told Kommersant that head of the International Game Technology Co., the world's leading maker of one-armed bandits, and former governor of the U.S. state of Nevada Bob Miller met with Duma members this summer. Kommersant has also learned that representatives of William Hill, SportingBet and GPEC have held consultations on the draft law with the Ritzio Group and the owners of the Krokus Group.
Nonetheless, Duma source say that none of the three lobbying groups had a hand in preparing the draft law. “It is the president's personal impromptu,” one Duma member involved in the struggle explained. So far, the president's proposal suits only Krokus, the Belaya Dacha Group and Sun International Group. They are building a $2-billion gaming center in the city of Ramenskoe, outside Moscow, which fits the idea of a “reservation” perfectly. The Ramenskoe complex was presented to Moscow Region Governor Boris Gromov yesterday as one of the four reservations.
The gaming business, literally shaken by the president's unexpected proposal, is divided into two groups. The first thinks that the gaming business will be forced underground by 2009. The second group thinks that it will die.
Boris Belotserkovsky, president of Unikum Goup suggested that “Naturally, the gaming market won't go away, but it will go into underground parlors, and there will be lots of those. It will be much harder to put the business on a legal basis again.” But a source in the administration of a large gaming chain told Kommersant that this was “the murder of the business.” “Putting gaming zones in Siberia and other uninhabited territories is the same as banning them. Everyone is rushing to sell their slot machines now. There are being sold in Moscow now for next to nothing, when they are really worth $3000-4000 a piece.”
Mark Bottcher, president of the Storm International Group of casinos, thinks that not everyone will lose. “Implementing that idea gives foreign giants with unlimited possibilities to enter the market and export all the profits from the country,” he opined. Igor Dines also thought the new law would “close the business down completely.”
Chairman of the board of ZAO Jackpot German Goglichidze was fatalistic when he spoke with Kommersant yesterday. “We are law-abiding people and we will follow the law if it is passed. I hope they give us some time to move our outlets,” he said. His gloom was shared by others. At the Golden Palace holding, which consists of five Moscow casinos, the only commentary they had was “Moving casinos is complicated and very, very expensive.” Vladimir Medinsky is sure, nonetheless, that the new law will receive “a standing ovation” in parliament. “I am sure the Duma will give it 100-percent support. the Duma wanted to do something like that but the lobbyists interfered. What the president has given voice to was originally the idea of United Russia. In their souls, the Duma members wanted that but they were afraid to suggest it.”
Now, obviously, the struggle over state regulation of the gaming business will depend on what territory will be chosen for the four reservations and a few urban gaming zones. Yesterday, other information on potential reservations appeared about the reservations besides that at Ramenskoe. The others are Kaliningrad, Khabarovsk, Ivanovo and, of course, Moscow, the Nagatinskaya Plain specifically.
Dmitry Butrin, Olga Pleshanova, Yulia Kulikova, Alexander Voronov
All the Article in Russian as of Oct. 05, 2006
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Photo: Alexander Potapov
