“Black zero”: how Russian gambling business survives first decade of ban

How it all began

The activity of casinos and gambling dens except for special zones were banned in Russia 10 years ago. A corresponding law On State Regulation of Activity of Organisation and Operation of Gambling Activities and Introduction of Amendments to Some Legislative Acts was adopted as early as in December 2006. However, it came into force only on 1 July 2009. Regions decided not to wait for the introduction of the new law and closed casinos by the D day. It was supposed at first that only four gambling zones would operate in the country: in Altai (Siberian Coin) and Primorsky Krai (Primorye), Kaliningrad Oblast (Yantarnaya), on the border of Krasnodar Krai and Rostov Oblast (Azov-City). Then Crimea was added on the list, and the Kuban zone moved closer to Sochi.

Moreover, the operation of bookmakers’ offices and totalisators was permitted outside gambling zones. But the organisation of gambling activities “with the use of information and telecommunication networks” (first of all, it refers to the Internet) was prohibited. Lotteries and exchanges weren’t sanctioned.

According to the law, a juridical person can hold at least 600 million rubles of net assets in the gambling zone, organisers of gambling activities in dens with fruit machines and in casinos and no less than 100 million rubles in bookmakers’ offices and totalisators. The installed average win of a fruit machine has to be no lower than 90%. The number of gambling machines in the den can’t be less than 50 on an area of at least 100 square metres. A casino has to have no less than 10 tables on the area of no less than 800 square metres.

The gambling zones were supposed to be the point of attraction for investors and tourists.

Four “Russian Las Vegases”

Azov-City became the first gambling zone — the seashore of Taganrog Bay in the Sea of Azov. The resort city of Yeisk is located 50 kilometres far from this “Kuban Las Vegas”. Kazan businessman, director general of Royal time group Rashid Taimasov began to build his facilities right there. In fact, the first casino Oracle (belonged to Royal time) opened there in 2010. Shambala CJSC became another resident.

Moreover, the gambling zone was first built on the border of Rostov Oblast and Krasnodar Krai. However, the Rostov part closed later. Then federal authorities adopted new amendments to the law according to which a gambling zone could be located only on the territory of Olympic venues. On 31 December last year, Azov-City stopped existing by order of Russian Prime Minister Dmitry Medvedev. Krasnaya Polyana in Sochi with three gambling facilities runs there today in Krasnodar Krai.

Siberian Coin is situated 288 km far from Barnaul, on the border with Turquoise Katun SEZ. The area is 2,300 ha. Altai Palace hotel and leisure complex (built by Alti company from Kemerovo) opened here in 2014 where a casino with 15 tables and 20 machines was located. A concert and leisure complex for 300 seats opened here last year.

By the way, the above-mentioned Royal time group from Tatarstan tried to register in Siberian Coin. The resident showed up in 2014 with a casino project for 1 billion rubles, but the construction didn’t begin. In the end, the government of Altai Krai terminated the agreement with Taimasov’s structure.

Primorнe is considered the most successful project of the four today, as it showed the biggest net profit of the operator (1,3bn rubles a year). It is on the seashore of Ussuriysk Gulf, 50 km far from Vladivostok. 16 hotels with a casino, a yacht club, a skiing resort, a shopping mall and other facilities are to be built by 2022 (in three stages). The first complex with the casino Tigre de Cristal opened in the gambling zone in autumn 2015. In 2018, the tourist cluster Primorye appeared in 2018 after the merge of Primorye resort and Warm Sea hotel complex.

G1 Entertainment, Melco International Development Limited, Diamond Fortune Holdings Prim from Russia and Naga Corp Ltd from Cambodia are the major investors of the project. Royal time Primorie LLC, which is part of the mentioned Royal time group, was one of the investors. However, the company didn’t manage to build the resort Fenix with a casino, restaurant, VIP halls and a concert stage, and the agreement with the company was terminated. Shambala, the former resident of Azov-City, became another investor of Primorye in 2018.

The zone Yantarnaya is located on the shore of the Baltic Sea 50 km far from Kaliningrad in Zelenograd District. A hall with gambling machines Magic Crystal (for 150 machines) opened here in 2016. The first casino Sobranie began its operation in 2017. The government of Kaliningrad Oblast intends to include the project New City with hotels, health centres, water parks, spa complexes in the big project.

Neverland and Uni management (the latter was registered in Kazan by Taimasov) are the key investors of the Baltic Las Vegas. In 2014, STK GC, a subsidiary of Royal time group, became the first resident of the gambling zone. But the company left investment projects two years later.

The Crimean gambling zone will be located in the settlement of Katsiveli (the south shore of the peninsula). However, according to its first plant, it was to have opened next to Yalta, close to the Swallow’s Nest castle, but the government of Crimea refused this idea. The venue is due to open in late 2019. According to the head of the Republic of Crimea Sergey Aksyonov, the investor is ready to invest 8 billion rubles.

Out of game

Nature abhors a vacuum. If gambling venues in other cities officially closed, “online clubs”, “lottery offices”, online casinos, bookmaker’s offices appeared instead, both legal and illegal. And some owners of gambling clubs went underground. Messages about how field investigators nailing a club appear in the mass media from time to time. At the same time, law enforcement officers help such underground businesspeople. As Realnoe Vremya said, former head of the Administration of the Ministry of Internal Affairs of Russia in Izhevsk Aleksandr Nikitin was arrested in March, he was accused of “committing crimes as defined by Section 5 Article 33, Part 3, Article 171 (complicity in organisation and operation of gambling activities with gambling equipment outside the gambling zone) and Part 1 Article 285 (abuse of power). Our newspaper also wrote about the case of an IT expert from Chelny who was suspected of creation of Azino777 online casino.

By the way, a Las Vegas was to have opened in Tatarstan, too, in Kamskiye Polyany settlements where a nuclear power plant was to have been built. In 2006, the republic adopted the law On Location of Gambling Establishments. And casinos began to open 200 km far from Kazan (they totalled 16), and some infrastructure began to develop until the federal law was adopted. In 2009, Kamskiye Polyany was on the list of monotowns of Russia, got 1,7bn rubles to build an industrial park, a medical centre. Despite all the effort, the settlement still has the highest unemployment level in Tatarstan.

As for the mentioned Royal time group, now the company is declared bankrupt. Rashid Taimasov’s holding had claims equal to more than a billion rubles. Royal time group is one of the most noticeable people involved in the bankruptcy case of Tatfondbank and its affiliated company.