Russia exiles casino industry – and its seedy image – to Siberia

MOSCOW – There were big empty spaces on some of Moscow's trendiest streets Wednesday, where the glitziest symbols of post-Soviet freedom – gambling halls – had done a roaring business until they were closed down by a strict new law, literally at the stroke of midnight.

The law, promoted by former president and current Prime Minister Vladimir Putin and in the works since 2006, was aimed at shutting down a controversial business that a majority of Russians consider "immoral" and damaging to the country's image.

About 500 major gaming establishments have been forced to close their doors, including some truly palatial casinos in downtown Moscow that were frequented by many in the country's elite. Also shut down by police are countless hole-in-the-wall joints in grocery stores, train stations, and street kiosks that had featured a few slot machines or one-armed bandits and catered to just about anybody who passed by.

Gambling operators say up to 400,000 people have been tossed out of their jobs and the state has lost up to $1 billion in legal tax revenues, while the lucrative gambling industry will probably thrive anyway – but underground, in the hands of organized crime.

"A casino is a necessary service, like restaurants and theaters," says Vadim Bereslavksy, who managed the Hotel Cosmos casino in Moscow for the past 15 years, and was responsible for around 800 employees. "Many of the people who worked with me will have a hard time now; we'll try to find them jobs in the industry outside of the country."

Fast and loose post-communist frontier?
But many conservatives have chafed for years at Western depictions of Russia as a fast and loose post-communist frontier, run by mafia thugs and anything-goes capitalists.

For many of them, the huge neon-lit casinos that have dominated Moscow's post-Soviet downtown nightscape were a symbol of national decay.

"Practice has shown that this business is socially destructive," says Yevgeny Fyodorov, chair of the State Duma's committee on economic policy. He says it caused large numbers of people, including vulnerable groups like pensioners, to become "addicts" and led to serious damage to families and communities.

"Gambling is neither acceptable for the authorities, nor for society. Here we have absolute support," he says.

A survey released this week by the independent Profi Online Research agency found that 72 percent of Russians support the law, while 19 percent oppose it.

Moscow mayor tackles remaining exceptions
From now on, gambling in big Russian cities like Moscow and St. Petersburg will be limited to lotteries, bookmakers, and licensed "poker clubs" where card games will be treated as a form of sports.

But Moscow Mayor Yury Luzhkov, a stern opponent of gambling, says he's already moving to crack down on those exceptions.

"We've approached the government for a decision of poker clubs and Internet gambling for cash, which is pretty much the same as the gambling business," Mr. Luzhkov told the official Itar-Tass agency. "Poker clubs? How can you call that sport?"

Officials seem unconcerned about the loss of tax revenues and the sudden spike in unemployment, despite the fact that Russia is gripped in economic crisis.

"We'll lose tax money, but the costs incurred by people who became addicted to gambling were so much higher that we'll actually save," says Alexander Krutov, a Moscow Duma deputy.

"And I'm not in the least concerned about the casino personnel," he adds. "They have good manners, they tend to speak English, and they're mostly young. They'll adapt and do fine."

Four new gambling zones
The Russian government has proposed four remote districts where gambling will be permitted, which it says can be transformed into Las Vegas-style tourist zones.

One is in Russia's far east, near the border with North Korea. The others would be in the Baltic enclave of Kaliningrad, a remote southern spot near the Sea of Azov, and in the mountainous Altai republic in Siberia.

But industry specialists say nothing has been done to develop the zones, and they are too far off the beaten track to attract serious investment.

"These four areas are not a real project, and they will never work because they can't generate any income in those places," says Boris Belotserkovsky, chairman of the Unikum Group, Russia's biggest producer of gambling equipment.

He says the ban on gambling is "like prohibition on alcohol. It will just drive the business underground."