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Putin’s Crimean Gamble

Fancy sidling up to the craps table amid the balaclavas and Kalashnikovs?

by Galina Stolyarova 24 April 2014

While Russia faces intense international pressure over the annexation of Crimea, Vladimir Putin appears calm. Not only is the president adamant about the legal basis for the occupation, he is also vigorously pushing forward with ambitious commercial plans for the newly seized territory.


The formula the Kremlin has seized on for invigorating the Crimean economy sounds like a Freudian slip. The peninsula that became the object of a dangerous political gamble – and an armed takeover – is now being touted as Russia’s answer to Monte Carlo.


Crimean “Deputy Prime Minister” Rustam Temirgaliev told news agencies on 21 April he believed there would be strong support from investors to develop the prospective gambling zone. In his view, the peninsula already has an infrastructure suited to further tourism development.


“The gambling center stands a good chance of becoming a competitor to such sophisticated territories as Macau, Monaco, and Las Vegas,” Temirgaliev said. 


The idea won swift support from Putin, who sent a bill to Russia’s parliament aimed at enabling Crimea’s transformation. It also received immediate backing from the Russian Regional Development Ministry, which projects that an entertainment and tourism complex would bring Crimea – which in peaceful times sees about 3 million vacationers annually – an additional 600,000 visitors a year, worth roughly 1 billion extra rubles ($28 million) to the region’s budget.


However bizarre the idea may seem outside Russia, it is clear that the Russian authorities wish to lose no time in stamping their mark on the newly acquired territory. They are sending out the message that there will be no withdrawal and that they know what they are doing.


The Kremlin’s confidence over its Crimean gamble is rooted largely in Russia’s massive stock of oil and gas. However much EU members may protest, the view goes, Russia, as a huge supplier of fuel to the rest of Europe, ultimately has its critics over a barrel.


While Russians may be willing to pay some kind of price for Crimea, the plan to turn it into a new casino mecca suggests that the Kremlin itself is not quite certain why it wants Crimea back or what it wants to do with it. The plan looks particularly questionable in light of the recent fruitless launch of a Las Vegas-style resort in Sochi after the Winter Olympics. 


Support for the Sochi plan is said to have been lukewarm both among Russians and on the international tourism market. The complex’s projected prices would have approached those charged by some fashionable European resorts, and there was doubt over whether enough visitors would be willing to pay up. In the end the idea of a gambling palace was rejected as clashing with the kind of high-end resort Sochi aims to become.


So the Kremlin has recycled the plan for Crimea. Never mind that the outside world has yet to accept the legality of the March referendum, in which the residents voted overwhelmingly to join Russia. Even putting the politics and ethics of the Crimea annexation aside, the gambling zone idea appears to have dubious economic prospects.


Gambling has been banned in Russia since 2009, except in four specially designated zones in the regions of Primorye, Altai, and Azov (the area connecting the Rostov Oblast and Krasnodar region) and in the Kaliningrad Oblast. 


Almost five years on, only the Azov city gambling center has begun to emerge. Facilities in the other three areas are still under construction and are struggling to attract investors’ interest. And with travel and accommodation costs hampering the growth of domestic tourism, few Russians are likely to want to travel to far-flung gambling zones. Many would rather run the risk of patronizing illegal underground gambling dens closer to home.


So the designated gambling zones are largely empty of high-rollers, and they are unlikely to see an avalanche of visitors or gambling businesses anytime soon. These zones are suffering from the countrywide economic downturn, and there is no infrastructure in these areas to support hundreds of casinos. There is nothing to suggest that the Crimean gambling zone – if it ever took shape – would be any different.


Crimea does have an existing tourism infrastructure and has hitherto enjoyed a stable flow of visitors, giving it a clear advantage over the other four designated gambling zones. But it will be the brave investor who is willing to get mixed up with a project on an annexed or occupied territory at the center of an international scandal.


Just recall the impact of international sanctions and campaigners against the apartheid regime in South Africa in the 1980s. Or consider the case of Northern Cyprus. That territory, seized by Turkish forces in the invasion of 1974, contains some of Cyprus’ most beautiful sites. But 40 years later it has attracted little tourist development or investor interest, however appealing a holiday there might sound.


Russian politicians who expect a steady flow of enthusiastic investors to the embattled, annexed area of Crimea are living in a fantasy world. The Kremlin may have the military clout to deter foreign intervention, but it does not have the power to force tourists to drop in for a carefree holiday as though nothing had happened.

Galina Stolyarova
is a writer for the St. Petersburg Times, an English-language newspaper.
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