Gambling Industry Explodes In Russia

By Peter Finn
Washington Post Foreign Service
Sunday, June 26, 2005

MOSCOW -- The new Casino Angara on Moscow's neon-flooded Novy Arbat street is the latest bet that this country's love affair with gambling is a sure thing. The casino, which opened in February, has 32 tables and 69 slot machines on a floor that is aiming for a 19th century gentleman's-club atmosphere with its red carpeting, dark wood paneling and lamp light.

The VIP rooms behind heavy brown curtains, where the minimum bet is $200, are called the "The Study" and "The "Library." The casino also stages cock fights and arm-wrestling.

"Nice place. Not bad," said Mikhail Kustanovic, 33, a self-described high roller who favors blackjack and poker. "But in Moscow there is so much choice."

Gambling has exploded in Russia in the last three years, particularly in Moscow. A $5 billion annual business, it draws punters to ritzy establishments like the Angara, but also to the one-ruble slots in small arcades that increasingly dot city neighborhoods.

There are 58 casinos, 2,000 gaming rooms and approximately 70,000 slot machines in Moscow, according to city officials. In 2002, before the laws governing the licensing of gambling places were changed, there were 30 casinos and 20,000 slot machines.

"This business has just started to grow," said Yulia Drynkina, marketing director of the Angara. Another luxury casino is slated to open on the Arbat next year, and a new arcade opens in Moscow almost every day, according to city officials. Analysts say that at the current rate of growth, the number of slot machines in the city could rise to 100,000 in the next two years.

It is all driven by profit margins that can reach 40 percent, according to analysts. The return on one slot machine is between $700 and $1,000 a month, according to industry analysts.

The industry's almost unrestricted development, especially the proliferation of slot machines in residential areas, has begun to trouble lawmakers and even some in the gambling industry who fear that a public backlash could lead to a ban. "This is total debauchery," said Moscow Mayor Yuri Luzhkov, in a television interview this month. "I am for any radical solution to this problem."

In 2002, the lower house of the Russian parliament, the State Duma, gave a federal agency responsible for the development of sports and culture the right to issue gambling licenses, removing that authority from city or regional governments. In the last three years, the agency has issued at least 4,000 licenses in Russia. The licenses cost about $50 each and allow their owners to open multiple casinos or arcades anywhere in the country, according to city officials and a gaming industry trade group.

"It exploded like a cancer," said Samuel Binder, vice president of the Russian Association for the Development of the Gambling Business, a group that represents larger operators in Russia. "There are machines in markets, shops, stations, even in apartment buildings. It's spoiling the image of gambling. That's why most people hate us."

City officials believe criminal groups are involved in the gambling industry but do not entirely control it.

The area around the Kiev railway station in Moscow exemplifies the surge in betting. Three years ago, there were four arcades in the area; today there are close to 50 gaming rooms, many of them operating around the clock.

"These machines are all over the place, it's hard to walk around without being tempted," said Andrei Chimkovsky, 29, a construction worker and frequent slot player. "I've lost 1,500 rubles in one day, which is a lot of money for me." That's equivalent to about $53.

The Duma and several regional parliaments, including Moscow, are considering new legislation that would limit or effectively ban the industry. A bill before the Duma would bar gaming within about 500 yards of a residential area, which would force operators out of all urban areas in the country. One lawmaker suggested the gambling industry consider creating its own Las Vegas, north of the Arctic Circle.

Lobbyists for the gaming industry have beaten back federal legislation before.

But a bill in the Moscow state parliament, which many people see as viable, would fix the number of gambling establishments in each of Moscow's 120 districts to four, with eight allowed in the city center. The Russian Supreme Court recently upheld the right of another Russian region to limit gambling even if operators have already received a federal license. Moscow legislators are confident that they can also push through new regulations.

"Moscow is the capital of our country and I don't think there are many who would like to rename it Las Vegas," said Andrei Metelsky, deputy chairman of the Moscow city parliament, at a news conference last week. "Moscow is being destroyed. Its young generation is being destroyed. This should not be allowed."

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