For several years, things were looking up for Viktoria Mityushkina and her family in this southern village on the shores of the Azov Sea — mainly thanks to the gamblers flocking to the barren steppe just up the road.
Mityushkina, 37, worked for one of the three casinos at Azov-City, which opened in 2010 under a Kremlin initiative to establish a handful of Las Vegas-style hubs for gambling while banning it everywhere else.
The stated aim of the move, which eliminated casinos and slot halls that sprouted up seemingly everywhere in Russia following the Soviet collapse, was in part to inject economic life into far-flung, underdeveloped regions.
“I became the chef’s assistant for the buffet, worked with clients, cooked for them at a live station,” the mother of two told RFE/RL’s Russian Service in a recent interview.
Mityushkina’s husband stayed home with the children while she worked. Men in this town in Russia’s Krasnodar region often leave for itinerant work to pay the bills. But Mityushkina didn’t want the family separated, and she earned enough at the casino to support them.
But the whims of officials and powerful business interests have now pummeled Mityushkina’s employment prospects — and those of an estimated 2,500 others in the area who relied on the local gambling industry for their livelihood.
Russian Prime Minister Dmitry Medvedev in October sounded the final death knell for Azov-City, ordering it to be liquidated as one of Russia’s designated gambling zones by December 31, 2018.
The move was not entirely unexpected. In January 2014, the CEO of state-owned lender Sberbank, German Gref, had proposed establishing a gambling zone in a ritzier area of Krasnodar — the Black Sea resort of Sochi, which hosted the Winter Olympics the following month.
While Russian President Vladimir Putin initially voiced his opposition to bringing gambling to Sochi, saying it would hurt the city’s “family atmosphere,” he proceeded to sign a July 2014 law paving the way for casinos in the Olympic town.
Under Putin’s original gambling law, no region could have more than one designated gambling zone. And in May 2016, he signed a law liquidating Azov-City as of January 1, 2019.
Government officials said gambling in Sochi would help state creditors and private investors recoup the money they poured into the resort town for the Winter Olympics, Putin’s pet project that was plagued by cost overruns and allegations of corruption and cronyism.
In August 2016, Medvedev issued a decree ordering the establishment of a 165,000-square-meter gambling zone in Sochi.
Despite the ban on more than one gambling zone in a single region, Putin had made allowances for Azov-City to continue working until its ordered closure. Casino owners there — and locals — had hoped that officials would ultimately let them stayin business for good.
“We didn’t look for work beforehand, because even our managers didn’t believe that they would close the casino,” Mityushkina told RFE/RL.
Those hopes proved to be in vain. On December 29, Azov-City was officially shuttered.
“When I found out that they were likely going to shut us down, I simply burst into tears,” Mityushkina said. “It was a tragedy for me. Two children, and neither I nor my husband have jobs.”
‘Hit The Jackpot’
The rise of Azov-City began in 2006, when Putin pushed through the law banning gambling nationwide aside from special gambling zones to be set up in the far-eastern Primorye region, the Altai Republic in Siberia, the western exclave of Kaliningrad, Krasnodar, and the Rostov region, whose permission was later revoked. (In 2014, Putin added Crimea, the Russian-occupied Ukrainian peninsula, to the list.)
Putin painted the move as a means of bolstering budgets of economically struggling regions while protecting citizens from the dangers of gambling, including retirees who “lose their last kopeks, their last pension” to jackpot fever.
The ban on gambling beyond the new zones took effect in July 2009 as the authorities shuttered slot halls and casinos, including the flashy, high-rolling hauntsof central Moscow. Plans for Azov-City were already humming along.
“Today we see that the government has created all the necessary conditions for successful business,” then-Krasnodar Governor Aleksandr Tkachyov said while attending a presentation of the infrastructure established to service Azov-City. “Soon investors and gamblers will come here, and each will have a chance to hit the jackpot,” the Kommersant newspaper quoted him as saying a day after the ban went into effect.
The first casino at Azov-City — the Oracle — was up and running six months later. The locals preferred the slot machines, while higher-rolling city folk from Krasnodar and Rostov-on-Don played roulette and cards.
Built on vacant land 1 kilometer from the seashore — and located hours away by car from the nearest major cities — Azov-City wasn’t exactly Monte Carlo. Ultimately, just three casinos — including the nine-story Shambala — were built at the site, and investment ground to a halt over the project’s uncertain future. Residents in the string of villages near the complex, however, benefited greatly not only from the jobs, but also from the estimated 1 billion rubles ($15.2 million) the regional government spent on roads, gas, and electricity for the project.
“They built everything from scratch, on an empty field,” said Anna, a Shabelskoye resident who says she worked at Azov-City until its final day.
Anna, like several other locals, spoke to RFE/RL on condition of anonymity due to fears that publicity could hurt their job prospects. She said she worked for six years as a senior cook at one of the casinos but is now unemployed.
“They invested huge amounts of money in our district, the casinos brought in stable proceeds — how could someone just close it down after everything was built and working? No one believed in such nonsense,” Anna said.
The head of Krasnodar’s Shcherbinsky district, where Azov-City was located, said last year that the district’s consolidated budget totaled more than 1 billion rubles ($15.2 million) at the end of 2017, mainly thanks to gambling-related taxes. That, he said, was up from 600 million rubles in 2010 ($9.1 million under the current exchange rate, but $19.6 million at the time).
“Azov-City provides work to 2,500 local residents. I don’t know a single major employer in the north of [Krasnodar] that could provide so many jobs,” Sergei Tsirulnik told Kommersant in August.
Opponents of the push to close Azov-City argued that there was no reason it could not coexist alongside Sochi gambling establishments — other than the statute forbidding more than one gambling zone in a single region.
“Both platforms have their own clientele, don’t compete with one another, and together deliver considerable proceeds to the state budget,” Maksim Smolentsev, the CEO of one of the two companies that operated casinos at Azov-City, wrote in an August 2017 Facebook post.
Azov-City attracted primarily locals or visitors from nearby cities within several hours’ drive. Since the January 2017 opening of its first casino, the Sochi gambling zone, known as Krasnaya Polyana, has been visited by more than 850,000 people from 146 countries, according to the lone casino operator currently working there.
Krasnodar authorities say gambling in Sochi brought in 291 million rubles ($4.1 million) in tax revenue for the regional budget last year. In 2018, a total of 570,547 people visited Sochi gambling establishments, while 483,046 visited Azov-City’s, according to official data.
Smolentsev, who has filed a 3 billion-ruble ($45.7 million) lawsuit) against regional authorities to recoup some of his company’s losses, has said the decision to launch the Krasnaya Polyana gambling zone “looks like lobbying by private investors at the expense of the government.”
The ownership of two key entities involved in the Sochi gambling zone remains opaque. The only casino owner currently operating there is a Russian firm called Domein, whose ownership chain runs through offshore firms beginning in Singapore and leading to Cyprus. Available corporate records in both countries do not indicate the ultimate beneficiary.
The Russian company Kurort Plyus, which owns the all-season resort where two of Sochi’s three casinos are located, is owned by another Russian firm, Biznes Kurort, that is wholly owned by a Cypriot-registered firm called Casterton Holding Limited. Records from the Cyprus corporate registry also do not indicate Casterton’s ultimate beneficiary.
Kurort Plyus was established in September 2015, just weeks before Sberbank auctioned off a company that owned the resort, known as Gorky Gorod. It was the only participant in the auction, agreeing to buy 96.9 percent ownership in the asset for Sberbank’s starting price of 35 billion rubles ($533 million). The doors opened for gambling in Sochi 14 months after the auction.
An inquiry sent to an e-mail address associated with Kurort Plyus about the firm’s ownership went unanswered as of publication time.
After Kurort Plyus’s acquisition of the resort, the Russian version of Forbes Magazine quoted two unidentified “federal officials” and “two sources familiar with the details of the deal” as saying the company was close to Tkachyov, who while serving as Krasnodar governor had predicted in 2009 that investors and gamblers would flock to Azov-City to hit the “jackpot.”
Tkachyov, who was serving as Russia’s agriculture minister when Kurort Plyus won the auction, has not publicly commented on those purported links. The agricultural holding for which Tkachyov currently serves as board chairman did not respond to RFE/RL’s request for comment on whether he or his relatives have links to companies active in Sochi’s gambling industry.
Much of the employment that Azov-City generated wasn’t related to dealing cards or dishing out buffet fare at the casinos. The improved financial fortunes of many locals were built on the ancillary economy that rose around the complex.
Inna, a resident of the nearby village of Molchanovka, had previously worked at a youth camp that provided a stable income until it closed after Azov-City was built. Scrambling to make ends meet, she and her family opened a village store in 2012 and a hotel two years later, both of which catered to Azov-City visitors.
“When they closed the casinos, the girls — waitstaff and managers — gathered here in the store, said their goodbyes, and cried,” Inna, who asked that her last name not be published, told RFE/RL.
Inna lives with her husband, their two children, and her elderly mother in Molchanovka, a village with an official population of 38 people. She and her husband now drive regularly to the town of Shcherbinovsky (population: 1,738) an hour away in search of odd jobs.
Since the casinos closed, Inna said, “absolutely nothing is going on” in Molchanovka.
“It’s nowheresville, and there’s no work,” she said. “The people who indirectly depended on the gambling zone won’t get any compensation. A person opened a hotel or a store, or sold honey to visitors. If there are no more clients for the casinos, there aren’t any for us either.”
Another area resident whose client base has largely disappeared is Igor Chernyshov, a 43-year-old taxi driver from Shabelskoye who says he spent the past eight years ferrying gamblers to and from Azov-City.
Chernyshov, who says his wife and daughter had casino jobs, now picks up fares primarily from friends and acquaintances traveling between villages with little or no public transport.
On a recent afternoon behind the wheel of his car, Chernyshov drove past the shuttered Azov-City complex and looked out over a snow-covered field.
“This used to be farm country, there was work,” he said. “Farms, fish farms, canneries. And everything closed. Where should the young people from the casino go to work now? To the collective farm? That was closed, too. There used to be more than 1,000 jobs there, and now there’s just a small private collective farm with 50.”
Back in Shabelskoye, a town of more than 2,000 people located 17 kilometers from Azov-City, the locals can walk down the street and point out the homes where former casino employees live. They say every third home is occupied by someone whose work was connected to the gambling zone.
Several small grocery stores, as well as a housewares shop and a hair salon, populate the town’s central square. Newly built brick homes line the small roads leading to the seashore. The locals became accustomed to steady incomes during Azov-City’s eight-year lifespan, taking out mortgages and consumer loans. Now many face potentially crippling debt.
Viktoria Mityushkina, the mother of two who worked as a chef at a casino restaurant, told RFE/RL that she and her family would like to move from Shabelskoye. But they built their home using a federal subsidy for mothers that dictates strict conditions under which it can be sold.
“There are dozens of other homes like that here,” Mityushkina said. “It’s simply a disaster for the villages. What happens next? People just drink themselves to death? (RFERL)