Putin orders casinos to cash in their chips as Russian gambling law takes effect

Putin tells Russian casinos to cash in their chips

MOSCOW — Nearly two decades after the Soviet collapse set Russia’s roulette wheels spinning again, Prime Minister Vladimir Putin is calling in the chips on the gambling industry — a symbol of the glitz and excess of Russia’s oil-fueled boom.

It’s all part of a Kremlin crusade to clean up a country that has long had a fascination with games of chance — and to rein in an industry seen as a breeding ground for corruption and organized crime.

The government ordered the closure of all casinos and gambling halls Wednesday — confining gambling to four special zones in far-flung regions of Russia, most thousands of miles and half-a-dozen time zones away from Moscow.

There is a downside, though. It deprives the federal budget of billions of dollars a year in taxes, while leaving more than 400,000 people without work amid the country’s economic crisis.

“They’ve killed the industry overnight,” said an embittered Michael Boettcher, the British founder of Storm International, a casino group that includes the gaudy Shangri-La in central Moscow.

“It’s like closing all the five-star restaurants in London because you’re eating too much, and saying that if you do want to have them, you’ll have to relocate to North Wales,” he said. “Who’s going to go? Nobody.”

More than once Russia has seen officials announce sweeping reforms, only to later back down. So when the gambling law was introduced in 2006, many wondered whether the Kremlin would actually follow through on its threat to pack the $3.6 billion a year gambling industry off to Siberia and other obscure locations.

Many casinos and hole-in-the wall slot machine parlors stayed open until the last possible moment, while the owners of a few gambling dens took the opportunity to expand their business abroad.

“For Rent” signs are up on Moscow’s premier tourist boulevard, the Novy Arbat, where the biggest casinos were open for business just days ago. On glitzy Tverskaya Street — Moscow’s Fifth Avenue — the Shangri-La was one of the few casinos still doing a brisk trade as customers placed their final bets.

Gambling has exploded in recent years in Russia. Following the 1991 collapse of the Soviet Union, casinos mushroomed across the country, especially in the capital, drenched in oil wealth. Slot machines quickly spread beyond gaming halls to shops and malls across the country.

As gambling grew, so did the problems. The Russian casino culture quickly became synonymous with ostentatious displays of wealth and organized criminal activity. Compulsive gambling wreaked destruction on players and their families.

The evils of playing the odds are penned into Russia’s collective consciousness. Fyodor Dostoevsky wrote “The Gambler” in a desperate race against time to pay off mounting debts run up at the roulette wheel, vividly depicting a gambler’s rollercoaster ride from exultation to despair.

When Russian lawmakers signed the casino closure law in 2006, the move was in step with the image Putin wanted to project: that of a clean-living, tee-totaling and workaholic president. But equally, say analysts, the government saw an opportunity to weed out the criminal element in the casino business.

Gambling was also seeping into every corner of Russia’s public life, moving Putin to assert that the vice “was as addictive as alcohol in this country,” according to the Itar Tass news agency. Slot machines were everywhere: grocery stores, railway stations, bus stations and clinics.

“You could buy slot machines for $100 each. It was ludicrous, and something had to be done,” said Boettcher.

Russia’s diplomatic relations, meanwhile, soured with neighboring Georgia over a damaging spy scandal. With a large percentage of the gaming industry controlled or overseen by Georgians — much of it rumored to be mafia-linked — the government appeared to be sending a message that it was cracking down on organized crime.

Many casino owners say they’d sooner take their business to nearby Belarus and Kyrgyzstan than relocate to the zones.

Bettors, meanwhile, are expected to turn in their thousands to online gaming or poker, which is classified as a sport.

Moscow Mayor Yury Luzhkov, a prominent critic of the gambling industry, said Tuesday he would now turn his attention to Internet gambling and poker halls.

“We’ve approached the government for a decision on poker clubs and Internet gambling for cash, which is pretty much the same as the gambling business,” Luzhkov told Itar Tass. “Poker clubs — how can you say that’s a sport?”

Starting Wednesday, casinos and slot machines will be allowed to operate only in Kaliningrad on the Baltic Sea, the Primorsky region on the Pacific coast, the mountainous Altai region in Siberia and near the southern cities of Krasnodar and Rostov, host to the 2014 Sochi Olympics.

It could take five years before some of the outposts are ready to open their doors. In two, not even the location has been settled on.

In the meantime, gambling will go underground, critics fear, creating a breeding ground for corruption and organized crime.

“It could very well turn out to be Russia’s Prohibition,” said Chris Weafer, a strategist at Uralsib Bank in Moscow, referring to the U.S. drinking ban in the 1920s that rapidly proved unenforceable and ushered in organized crime. “People are not going to give up their gambling fix that easily.”

Associated Press Writer Nataliya Vasilyeva contributed to this report