_770.jpg "Casinos in Crimea: to be or not to be?")
The creation of the gambling industry in Crimea attracts a great deal of interest from local authorities, experts, skeptics, and, of course, players. So, will it be a gambling zone on the peninsula or not? Let's face it.
History of Gambling in Crimea
Crimea has been known since ancient times as a health resort. Thus, some documents indicate that in the third century BC, Greek healers and physicians highly valued the healing properties of mineral springs, salt, and mud baths in Crimea, and recommended that their high-ranking patients visit them. In the 19th century, Crimea became a premier Russian resort for high society. Members of the royal family and court nobility, as well as the Russian elite, including artists, musicians, writers, patrons, merchants, and officers, were treated there.
In other words, during the holiday time, high life flourished there. In clubs, dancing evenings were organized, and gambling rooms were available for an extra fee, where visitors could play cards or billiards. The most enterprising owners of Crimean restaurants attempted to establish legitimate casinos. Still, in those days, such entertainment was considered to be "immoral" and official permission to open a casino was not given. At the same time, a fine for organizing gambling games was three thousand rubles, and repeated violations were punished by imprisonment.
Due to these reasons, the first official casino in Crimea was not opened until 1909, in Yalta. The Society of Resort Entertainment organized it. This casino was situated in a two-story building adjacent to the City Council and featured a restaurant, a theater hall, and a small gaming room that was not large enough to accommodate all visitors. Therefore, the Society of Resort Entertainment planned to construct a large casino on Quay Street. The project for the new casino building had already been approved, but these ambitious plans of the Society were interrupted by the outbreak of war in 1914.
At the same time, two more casinos were operating in Crimea. One of them was located in the exclusive resort of Suuk-Su, near Gurzuf. Suuk-Su competed for luxury and popularity with the leading resorts in Europe: terracotta doors and windows, tiled halls, marble stairs and window sills, ceiling molding, antique mahogany furniture, and Bohemian chandeliers. The highlight of the casino was a massive picture of Surikov's "Sadko visiting Sea King", measuring five to eight meters, which the great artist drew in 1911, located in the Suuk-Su. Luxury prices skyrocketed, and the Russian elite left a substantial amount of money behind.
The second casino was located at the Gurzuf restaurant "Venice", where gamblers could play roulette, blackjack, or bridge. The casino was so famous that the owner of the restaurant, Praskofya Tikunova, wanted to connect her restaurant with Genoese rock via an aerial lift. However, plans remained on hold due to the outbreak of the First World War.
After the Bolsheviks came to power in 1917, casinos and gambling games were prohibited entirely, carrying the penalty of criminal liability. Casinos in Crimea reappeared only in 1941, after the occupation of the peninsula by Nazi Germany. At large restaurants, gambling halls were established, where visitors could play games such as blackjack, poker, and bridge. The casino in the Dintzer mansion was considered the largest. Previously, the chess and checkers club had been located in this building.
After the war, gambling games in the Soviet Union were also banned. But let us recall that Crimea was the "all-union health resort", where millions of holiday-makers rushed every year. Because it was pretty difficult at that time to go abroad... Therefore, officials and artists from Moscow, gold miners and oilmen from Siberia, black-marketeers from Leningrad, and tangerine traders from Georgia visited Crimea. And they wanted not only to swim in the warm, gentle waters of the sea, but also to do so at least once a year to recharge after exhausting, monotonous work, "catch the adrenaline." Lying on the sand all day was boring, so cardsharps were waiting for such "suckers."
They first offered bored travelers the chance to play durak, fueling excitement, and then offered to play preferans on small bets or play blackjack or seca. In the evening, the game continued at gambling dens called "catrans". Of course, there were no roulette or slot machines, but anyway, such a gambling den was a prototype for future casinos. This period in the history of gambling is depicted very well in the books of the journalist Anatoly Barbakaru, who was a professional gambler in the 80s.
Then came the 90th, and the Soviet Union collapsed. In Crimea, as well as in Russia, dozens of casinos were opened. Many of them were controlled by bandits. The level of the gambling houses was different. The bulk of casinos had 5 - 6 tables for roulette, blackjack, and poker. For example, the biggest casino in Yalta, called "Oreanda," had 8 tables in the main hall and 3 tables in the VIP hall.
Ukraine has banned gambling activities since July 2009. At that time, there were 283 casinos in Crimea. But three years later, it became clear that due to the ban on gambling, the country was losing huge sums of contributions to the budget. Therefore, the Ukrainian authorities considered legalizing casinos. Plans to create a gambling zone in Crimea had existed even before it became part of Russia.
After a record season in 2012, a project called "Crimean Antalya" was being developed in the government of Ukraine. It was planned to build modern entertainment centers, such as a Casino Resort, in the west of Crimea, between Saky and Eupatoria. It was discussed that $8 billion of foreign investment had to be attracted by 2020. And in the south of the Kerch Peninsula, a luxurious resort complex called "Cimmeric City" was planned. The government was going to allocate 500 ha near Opuksky Nature Reserve.
However these plans were not realized - in the spring of 2014 Crimea became a part of the Russian Federation.
The fifth gambling zone in Russia
July 23, 2014, was a memorable day for the gambling industry in Russia: President of the Russian Federation Vladimir Putin signed a law on the establishment of the gambling zone in Crimea. The boundaries and location of the gambling zone will be determined by the executive authorities of the Republic of Crimea by this law. The Russian Government suggests solving the problem of filling the budget of Crimea using the newly created gambling zone.
"According to estimates of experts, the budget of Crimea can receive from the gambling zone up to 25 billion rubles (about $727 million) per year. In addition, an increase in the flow of tourists to the region, development of the hotel business and catering industry can be expected", - said the First Deputy Chairman of the Russian State Duma Committee, Anatoly Karpov.
Experts of the Russian tourist market also believe that the opening of Crimea-Vegas will have a positive influence on other factors. Prices and demand for real estate will increase significantly; the holiday season will extend for several months, or even become year-round.
The decision to create a gambling zone in Crimea aroused great interest among everyone who has something to do with the gambling market, and therefore Crimea Gaming Congress was held in Yalta on the August 22, 2014, which brought together representatives of the Russian and Crimean authorities, leading experts of gambling and tourist industry, investors, international experts, developers, owners, bookmakers, delegates of other gambling zones of Russia.
Exactly, the Crimea Gaming Congress started the real work on creating a gambling zone. The issues of licensing and taxation of gambling activities in Crimea, potential investments in the gambling zone's infrastructure, and attracting investors with a worldwide reputation were discussed during this Congress. Various options for the location of the gambling cluster were considered. Representatives of the bookmakers shared their plans about the number of betting offices. The speech of the Chief Executive of JSC "Shambhala," Maxim Smolentcev, was fascinating. He spoke about the specifics of the gambling area in Russia on the example of Azov-City.
Where to Build Casinos in Crimea?
The territory of the gambling cluster is one of the key issues of the gambling zone. Currently, the Crimean authorities are working on a project to create a gambling zone in Crimea. They promise to finish the project before the New Year. It is still unclear where exactly the gambling cluster will be located. There are several variants of Crimea-Vegas.
In July, Sergey Aksenov, the governor of Crimea, reported that experts from Macau, Las Vegas, and Monaco, working on the project for the gambling area, insist on placing a gambling zone in Greater Yalta. However, the public immediately became opposed to this location, arguing that many sanatoria, children's health centers, and Young Pioneer camps are located on the southern coast of Crimea. The member of the Public Chamber on the Safety of Citizens, Georgy Fyodorov, said: "I don't support the creation of gambling zones in Crimea. Crimea is not just a resort. There are many Young Pioneer camps for children there".
Some specialists have offered to build a casino in the undeveloped areas of Crimea, where there are no tourists, such as in Northern Crimea or on the territory of the Kerch Peninsula. They originate from the construction practices in Las Vegas, where the development of a gambling zone is expected to stimulate the growth of these areas. Nevertheless, the experience with other gambling zones showed that Russia was not America, and the remoteness of the casino from major tourist centers and traffic had a significant impact. Therefore, such "extravagant" offers were rejected.
Parliament Vladimir Konstantinov told reporters on November 12 that the gambling cluster might be located on the west coast of Crimea, as the region of Saky and Eupatoria conforms to generally accepted global standards concerning the accessibility of the airport: "The question for Greater Yalta is not yet closed, but there are many nuances that do not conform to the generally accepted rules of gambling industry. International standards require quick connections to the airport, up to half an hour. An hour to Greater Yalta is unacceptable".
However, this option is also not so perfect: for example, Eupatoria is a recognized health resort for children, where there are more pensions for children than in Greater Yalta. The Head of Administration of Eupatoria, Andrei Filonov, said the following when he learned about the plans for accommodation of the gambling cluster there: "Eupatoria, as a future All-Russian children's health resort, is not a place for gambling. I think that all authorities understand this."
The possibility of constructing a gambling cluster in Feodosia is being considered. The Head of Administration of Feodosia, Dmitry Schepetkov, fully supports this choice: "Is it appropriate? In my opinion, yes, because our city does not such a resource as health resorts on the southern coast of Crimea or in Eupatoria. A gambling zone would solve this problem, making Feodsia a year-round resort. This would surely be beneficial. We support the development of such a zone..."
There are also other options, and multiple gambling clusters may emerge. Alexey Cherniak, who is the Chairman of the Standing Committee of the State Council on Sanatorium and Resort Complex and Tourism, confirms this: "We consider three areas, and the major one is in Greater Yalta. The areas in the Razdolnensky district and under Koktebel are also being studied. All these options are discussed. Several areas where gambling is allowed may be created in Crimea".
In general, there are many options, and we will see shortly which one is chosen.
Crimea Gambling Investors
Potential investors who wish to conduct a gambling business in Crimea will be required to invest a minimum of 500 million rubles in its development. This sum is mentioned in the bill, which is designed in the Ministry of Economic Development of the Russian Federation. This is a very, very modest financial threshold for gambling tycoons, and seemingly now investors have to stand in line for licenses. But everything is not like that.
"Excitement in the investment offers is not observed" - the speaker of the Crimean Parliament, Vladimir Konstantinov, described the present situation with investments in such words.
Let's discuss why.
The Minister of Crimean Affairs of the Russian Federation, Oleg Saveliev, told reporters:
"The interest of investors in Crimea is huge, and the major deterrent is, of course, not the presence of the international sanctions, but the confusion in these sanctions, because the investor can not understand what he can do and what he can not".
According to the Minister,
"The first investors with whom we spoke were European investors and almost all of them mention the pressure of their Ministries of Foreign Affairs, and in case of several countries - the US embassies".
So, sanctions. Investment in gambling is actually considered to be a risky thing, and now it is necessary to invest in the territory that is deemed to be occupied worldwide.
Although there are also courageous investors, thus, the Deputy Prime Minister of Crimea and Plenipotentiary Representative of Crimea to the President of the Russian Federation, Georgi Muradov, said:
"Chinese, Indian, Turkish, and Israeli partners visit us. Even the brotherly Catalan government, which is fighting for its independence, is willing to make an agreement at the level of the Catalan government. And they are not afraid of possible sanctions".
Among European and Asian investors, the most motivated and active are Chinese investors who are willing to invest their money in the gambling and hotel business, as well as housing management and infrastructure of their projects.
"They are interested in infrastructure - roads, communications, housing management, and disposal of MSW. They are very interested in Crimea as a transit corridor for the supply of goods to Europe. It is calculated that the distance for transportation decreases to 2,000 kilometers", - explains the President of the Crimea's Chamber of Commerce, Alexander Basov.
The Crimean authorities are trying to do everything possible to attract investors by offering them various benefits. So, currently, the regional law on the gambling business in Crimea is being developed, which will provide investors with benefits. This was reported by the Chairman of the Standing Committee of the State Council on Sanatorium and Resort Complex and Tourism, Alexey Chernyak,
"We can register additional benefits for investors in the regional laws on gambling to enable them to develop their business faster. These questions we have already discussed".
And, of course, the federal authorities are also doing everything they can. The Federal Law No 377-FZ "About development of the Crimean federal district and the bonded economic area in the territories of the Republic of Crimea and the city of federal value of Sevastopol" was adopted to attract investment to the Crimean region on November 29. The law provides for the establishment of a bonded economic area for a period of 25 years. The representatives of the Administration of the President report:
"The federal law is aimed at ensuring sustainable social and economic development of the Crimean federal district by attraction of investments in the development of existing and creation of new industries, the development of transport and other infrastructure, tourism, agriculture and health resort areas, as well as increasing the level and quality of life of citizens".
Bookmakers
Currently, six bookmakers have received licenses in Crimea. They have already started operating and have opened 18 betting offices. Given the high activity of bookmakers, local authorities decided to amend the tax scheme, which previously provided a minimum tax rate for gambling. In this regard, the Crimean parliament adopted a law on the maximum tax rates permitted by the Tax Code of the Russian Federation on November 12. As of 1 January 2015, bookmakers will be required to pay 125,000 rubles per month for each processing center and 7,000 rubles for each betting office.
What was the reason for this decision? The Chairman of the Crimean Parliament, Vladimir Konstantinov, said that the decision was made taking into consideration the high profitability of gambling:
"Taking into account that gambling is a highly profitable activity and in order to prevent the minimization of tax the bill on the establishment of the maximum tax rates on gambling in the territory of Republic was developed".
But the First Deputy Minister of Finance of Crimea, Irina Kiviko, was more frank and clarified:
All business entities entered the Crimea market from the Moscow region, and they are accustomed to high tax rates. Therefore, by adopting the law, we will be able to tax them at the high rate, but not at the minimum rate from January 1.
Long-term Prospects
Many specialists believe that it is advisable to rely on offers from major investors in the next few years, as the risks are too high. The current geopolitical situation surrounding Crimea does not provide an incentive for investment.
"The creation of gambling zones will be an extra advantage for resorts, but results will not be seen immediately. It takes time to develop all that. The time is required to start building casinos, to make an advertisement of them and to attract visitors. In any case, this will last two or three years", - explained the president of the company "Multitur" Alex Vysokanov.
According to preliminary estimates, the complete construction of the gambling cluster in Crimea will cost at least $3 billion. The maximum amount the Russian Federation is willing to invest is 1 billion. It was assumed that the bulk of the necessary funds would be obtained from selling licenses for gambling, but in such a situation, their price was supposed to be extremely high.
Investors know how to count money and will not work without profit. Therefore, it is likely that we'll have to wait a few years for the opening of the gambling zone in Crimea, despite the efforts of both federal and regional authorities to create a favorable investment climate.
Crimea Vs. Sochi
After the State Duma introduced a bill to create a gambling zone in Crimea, an unexpected decision was made to amend it in order to establish a similar gambling zone in Sochi. Why is it unexpected? - Because such offers have already existed - after all in Sochi there is infrastructure that is necessary for the conduction of gambling activities and it is idle after the Olympic Games. Forty-nine four-star and five-star hotels, as well as a variety of restaurants, shopping centers, and clubs, were built there. Everything tourists need for entertainment is available. Frankly speaking, sports facilities can also be attributed to the gambling industry, because sport is a great reason to bet.
But in February 2014, the President of the Russian Federation, Vladimir Putin, did not support this idea:
"We have invested a lot of money not for the elite who may spend hundreds of thousands of dollars playing in casinos".
Now, however, Crimea and Sochi resorts compete with each other, so it was decided not to provide Crimea with an advantage in the form of a gambling zone. It was also taken into account that Sochi will host matches of the 2018 FIFA World Cup. Therefore, a large influx of tourists is expected, and casinos will provide an additional advantage in the entertainment structure.
In any case, a law that allowed gambling in Sochi was adopted in July 2014. And if the development of the gambling industry in the Crimea appears more promising in the long term, the first casino in Sochi is expected to open in the spring of 2015, at the beginning of the season.
Most likely, the gambling cluster will be located in Krasnaya Polyana, within the complex "Mountain Carousel," where the "Gorky Gorod" is situated. This complex encompasses residential and commercial real estate with a total area of over 600,000 square meters, including the "Olympic Village" for media.
"Developing these areas for the gambling establishments will be cheaper than the area for the restaurant, - says the Deputy Director for CBRE hospitality industry development, Stanislav Ivashkevich. - So the idea of the construction of the gambling zone seems appropriate to me".
Sochi hosted the exhibition-forum Russian Gaming Week Sochi on November 5-6, which was attended by leading operators in the gambling industry, including Casexe, Belatra, Login Casino, Casinopool, and Octavian. A new line of games, gambling equipment, and slot machines was shown at the exhibition. The gaming network "Paris Match" presented a self-service terminal that is its new product.
The Forum with the participation of specialists of the gambling industry allowed discussing several pressing issues: a gambling zone Sochi from the point of view of the authorities; bookmakers - changes in legislation; the experience of real casinos and operating gambling zones; forecasts of experts about the development of the gambling zone in Sochi; innovations in online gambling.
Speakers at the event share the opinion that Sochi has excellent potential as a gambling zone and will be able to attract many tourists from neighboring countries, particularly Turkey, Azerbaijan, and Iran, who currently visit the Georgian city of Batumi to gamble. The Vice President of the Russian Tourist Industry Union, Barzykin, stated that the opening of the first casino in the Sochi gambling cluster could take place in the spring of 2015.
Making a summary, we can draw the following conclusions. There is no doubt that gambling and tourism in Crimea have considerable potential. However, it is too early to say that the gambling zone on the peninsula is about to start operating. It will require significant time and financial investment to create high-quality infrastructure and services that meet international standards. Only then can we expect a massive influx of tourists and thus fill the budget of Crimea. The short-term prospects of the gambling zone in Sochi are more attractive. Sochi has a good chance of becoming the first full-fledged gambling zone in Russia.
Update
Since 2022, the prospects for the gambling industry in Crimea have been largely overshadowed and negatively impacted by the ongoing full-scale invasion of Ukraine by Russia. While Russia had long-standing plans to develop a gambling zone in Crimea, the current geopolitical reality presents significant hurdles.
Here's an overview of the modern prospects since 2022:
- Heightened Instability and Isolation: The full-scale war has dramatically increased the instability of the region. Crimea, being an occupied territory and a key logistical hub for Russian forces, is subject to ongoing military activity and an increased risk of attacks. This significantly deters any major foreign investment and makes it an unattractive destination for international tourism, which is crucial for a thriving gambling industry.
- Continued Sanctions and International Non-Recognition: The international community, including the European Union, continues to condemn Russia's annexation of Crimea and has extended restrictive measures, including prohibitions on infrastructure or financial investments and providing tourism services in the region, until at least June 2026. These sanctions make it virtually impossible for legitimate international gambling operators or investors to participate in any projects in Crimea without facing severe legal and reputational consequences.
- Infrastructure Challenges: Even prior to 2022, there were reports of significant infrastructure challenges in developing the "Zolotoy Bereg" gambling zone in Katsiveli, particularly concerning water supply and sewage systems for luxury buildings. The ongoing conflict likely exacerbates these issues, diverting resources and making large-scale construction projects more difficult and less prioritized.
- Focus on Domestic Russian Tourism: With international tourism severely limited due to sanctions and safety concerns, any potential gambling establishments in Crimea would largely cater to Russian domestic tourists. While millions of Russian tourists still visit Crimea, the economic downturn in Russia and the perception of risk associated with the region could limit the spending capacity and willingness of even domestic visitors.
- Ukrainian Stance on Occupied Territories: From Ukraine's perspective, any gambling operations in Crimea under Russian control are illegal. Ukraine's gambling regulator, KRAIL, has explicitly stated that gambling activities are prohibited in temporarily occupied territories under martial law. Furthermore, Ukraine has actively worked to sever ties with any gambling entities linked to Russia and has sanctioned individuals and legal entities related to Russian gambling businesses since the invasion began. This underscores the complete divergence in legal and operational frameworks for the gambling sector.
- Uncertainty of Future Development: While Russian authorities might reiterate plans for developing gambling in Crimea, the practical implementation remains highly uncertain. The focus of Russia's resources and attention is heavily directed towards the ongoing conflict, making large-scale, long-term economic development projects in occupied territories a lower priority and significantly harder to realize.
In essence, since 2022, the modern prospects for the gambling industry in Crimea are severely constrained by the ongoing conflict, international sanctions, and the precarious legal and political status of the peninsula. Any development is likely to be insular, limited to Russian domestic initiatives, and fraught with significant risks and challenges.
