In Russia’s Far East, a Fledgling Las Vegas for Asia’s Gamblers

In Russia’s Far East, a Fledgling Las Vegas for Asia’s Gamblers

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Under Mr. Putin, Moscow has poured billions of dollars into the area, paying for huge bridges, a new university campus and other costly state-directed projects. But despite ever closer relations between Moscow and Beijing, said Artyom Lukin, an international studies professor at the Far East Federal University, “Russia has realized that free Chinese money is not coming.”

Tigre de Cristal, the lone casino in what the authorities hope will become a vast “entertainment zone” near Vladivostok.

Credit
James Hill for The New York Times

Chinese gamblers are arriving, however, if only because gambling is illegal in their own country, except in Macau on the southern coast near Hong Kong, and because the forest northeast of Vladivostok offers the only accessible casino for the more than 100 million Chinese who live in provinces just across the border from Russia.

Li Yunhui, a 45-year-old businessman and gambler from Mudanjiang, a Chinese city about 150 miles from Vladivostok, said the Russian casino lacked the amenities and service of established gambling centers like Macau, but added: “At least it is close. And the air is clean.”

He said he had visited Vladivostok regularly since the early 1990s and could not fathom why Russia had lagged so far behind China in building its economy. “It feels like a developing country here. This is how China was decades ago,” he said. He added that he had tried to set up a small business in Vladivostok but had despaired at all the red tape: “What you can do in a day in China takes weeks here.”

The gambling venture is itself a showcase of how slowly things gets done. Government officials began pursuing the idea nearly a decade ago. They enlisted a well-connected local businessman, Oleg Drozdov, to build the hotel and casino complex now housing Tigre de Cristal. But Mr. Drozdov was arrested in 2013 on corruption charges after the ouster of the Primorye region’s disgraced former governor, Sergey Darkin.

Summit Ascent, the Hong Kong company that now owns 60 percent of the casino venture, took over the concrete shell left by Mr. Drozdov’s builders and, after investing $200 million with other investors, finished the construction and opened the casino at the end of 2015. The company, which reported a modest profit for last year, now plans to invest an additional $500 million to build a second luxury hotel, a golf club, extra gambling rooms and other facilities in the same entertainment zone.

Chinese tourists in Vladivostok. One Chinese visitor said of the new gambling area: “At least it is close. And the air is clean.”

Credit
James Hill for The New York Times

Four other casinos planned by other companies, due to be open by now, are far behind schedule. Empty plots of land with scant signs of construction dot the forest. A Russian court recently canceled the casino project of a Russian developer because it was too slow in getting off the ground.

Eric Landheer, Summit Ascent’s director for corporate finance and strategy in Hong Kong, said that his company had “first mover advantage and a monopoly,” but that it did not want to be alone in the forest for long because gamblers preferred a more vibrant cluster of casinos.

Gambling has a long and often troubled history in Russia, where attitudes have been shaped by the Orthodox Church, which opposes casinos as the devil’s work, and by the writings of Fyodor Dostoyevsky, a gambling addict who explored the allure and perils of addiction in his novel “The Gambler.”

A champion of traditional Christian values, Mr. Putin banned casinos and slot machines in 2009, complaining that too many Russians “lose their last penny and pensions through gambling.”

Having Chinese and other foreigners lose their money, however, is apparently not a problem. Indeed, their losses now cover the salaries of around 1,000 Russians working for the Tigre de Cristal casino and provide a badly needed source of income for the Primorsky region around Vladivostok, a city that, aside from corruption-addled, state-funded infrastructure projects, has struggled to attract outside investment. Closed to foreigners during the Soviet era, the city now has regular flights to and from Harbin, Beijing and other Chinese cities, and can also be reached by road and train.

Practicing for a Russia Day performance. Vladivostok is home to the Russian Pacific Fleet.

Credit
James Hill for The New York Times

To make the fleecing of foreigners and a restricted number of Russians possible, Moscow gave permission for the establishment of four special gambling zones. The westernmost of these, in Kaliningrad, targets gamblers from neighboring Poland, while the others are in the resort town of Sochi and in the Siberian region of Altai.

Russians are also allowed to gamble at the Tigre de Cristal, so long as they show their passports and register. This has not gone down well with Russian priests and those who see casinos as a poor substitute for healthy economic development.

“Anyone who has read Dostoyevsky knows all the problems that gambling brings,” complained Andrei Kalachinsky, a veteran journalist in Vladivostok. “The spread of prostitution will definitely create jobs, but what kind?”

Transportation infrastructure has been another problem. A new highway connecting the casino area to the Vladivostok airport turns into a mud track in the final stretch. A winding road to the center of Vladivostok, around 35 miles away, is so clogged with traffic that Yuri Trutnev, Mr. Putin’s envoy for the Russian Far East, proposed opening a ferry service to speed up the journey to the casino.

The authorities have also been sluggish in delivering on a promise of visa-free entry for visitors from China and other selected countries. Despite the delay, Chinese can still obtain visas relatively easily if they sign up for a tour, and their numbers visiting Vladivostok and the surrounding Primorsky last year more than doubled to around 300,000.

A seaside cafe in Vladivostok. The city has struggled to attract outside investment.

Credit
James Hill for The New York Times

Yuri Kuchin, an opposition member of the Vladivostok City Council, said local bureaucrats usually hindered rather than helped foreign investments, dragging their feet on most issues unless there is a financial benefit for themselves. While a bitter critic of the government, he said he supported the foreign-led casino project as a source of jobs and a good way to squeeze out illegal gambling dens in the area, which he said were often protected by corrupt officials.

The Primorye Development Corporation, the government agency now responsible for the project, declined to say what was being done to combat illegal clubs or explain how the casino project fit into the region’s overall development strategy.

A number of foreign projects in Vladivostok have fizzled, including two five-star Hyatt Hotels that were supposed to have opened for business five years ago but are still under construction. Yet the Tigre de Cristal casino, though delayed by various mishaps like the arrest of a local business partner, is now not only up and running, but is making a profit.

Lawrence Ho, Summit Ascent’s chairman and son of the Macau gambling tycoon Stanley Ho, acknowledged in a report to investors that the “year has not been without its challenges” but said, “Over all, I am very optimistic about the potential of our investment in the jewel of the Russian Far East.”

The most lucrative sources of business at the casino are Chinese high-rollers recruited by so-called junket operators, agents who find gamblers, provide credit, make travel arrangements and manage private V.I.P. rooms at the casino. For these services, the casino pays the junket operators a chunk of what it wins from their clients — more, Mr. Landheer said, than the 40 percent to 50 percent paid to them in Macau.

All the same, Tommy Li, a junket manager from northeastern China, complained that Vladivostok offered few of the attractions of Macau and was far too cold in winter. Its only real appeal for Chinese gamblers, he said, is its proximity.

One of his main gripes is that there are not enough prostitutes, who he said were far more readily available, and cheaper, in Macau. Mr. Landheer, the corporate finance director, said his company was not in the business of providing prostitutes and would “like to see all illegal activities eliminated.”

But, he added, there “are many other service providers” in Vladivostok ready to satisfy all the gamblers’ needs.

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