A decade ago Sochi was just another dilapidated holiday destination but the 2014 Winter Olympics transformed the Russian resort, which now hopes to become the Monte Carlo of the Black Sea.

The plan to bring gambling to Sochi is a surprise addition to Russia’s move to allow casinos in Crimea: the peninsula, annexed by Russia in early 2014, experienced an economic crash and officials hoped that casinos could help with recovery.

Sochi is also looking for money to pay the bills from its Olympic makeover and the state-owned Sberbank – which has a 92% stake in one of Sochi’s proposed gambling zones Krasnaya Polyana – had been lobbying for a gaming license to help recoup tens of billions of roubles it invested in the city for the winter games.



The Russian president, Vladimir Putin, who had originally opposed gambling in Sochi, had a change of heart and approved the new gambling zones earlier this year.

Russia cracked down on the industry in 2009, restricting casinos to four far-flung areas: Yantarnaya in Kaliningrad, Altai in central Siberia, Primorye in the far east, and Azov City in Krasnodar.

The 2009 restrictions had created an opportunity for Georgia to establish itself as a gambling hub, buoyed by the fact that gaming is prohibited in neighbouring Azerbaijan and Turkey and restricted in Armenia. But just as it starts to make solid contributions to Georgia’s struggling economy, it faces a challenge.

Sochi could be the largest threat to Georgia’s industry since 2013, when parliament introduced a bill to ban gambling. The Orthodox Church, the country’s most influential institution, is also opposed to the spread of casinos.

But Georgian MPs understand the significant contribution casinos make to the state’s coffers. In 2013 Georgia generated nearly 105.26 million lari (£36m) in 2013 from gambling taxes, about two percent of the the state budget, according to the State Revenue Service.

For the past nine year the Black Sea port of Batumi, 370km south of Sochi, has been the centre of gambling in Georgia, as the operating costs are lower than in the capital, Tbilisi.

Casinos in Tbilisi face one of the highest annual license fees in the world: 5 million lari. By contrast Batumi casinos only have to pay 250,000 lari. Anyone building a 100-room hotel with a casino is offered a 10-year freeze on annual license fees. The port has five casinos, with two more slated to open next year.

Russian high-rollers go to Macau or Monte Carlo

Mehmet Esen, finance director of Batumi’s Peace Casino, said he was not concerned about the competition as Russians only make up a small percentage of Georgia’s gamblers. Most come from Turkey or Azerbaijan, and there is a growing number from Iran. “Russian high-rollers go to Macau or Monte Carlo,” he said.

If Russia were to become serious competition for Batumi, it would have to implement a sound gaming law and somehow change its negative gaming reputation, he added. Gambling is largely unregulated in Russia and has a reputation of being connected to organised crime.

At a two-day gambling industry conference in Sochi, Mustafa Yilmaz, a director at Princess Casinos International, which operates casinos around the world, said the Russian resort could attract some of Georgia’s Azerbaijani and Turkish clients. Turkey currently enjoys a 30-day visa-free regime with Russia. Azerbaijanis can stay in the country for 90 days visa-free.

Batumi’s tourist season lasts only a few months in summer but Sochi attracts visitors in both summer and winter, Yilmaz added.

But a lack of strategy for Sochi’s gambling sector leaves Yilmaz and other casino investors with more questions than answers: nobody knows whether the planned gambling zone will be at the Olympic Park media centre, 30km from the city centre or the Olympic alpine site of Krasnaya Polyana, 67km away.

Conference attendees also said they are still unclear about the tax rates, the number of licenses that issued and how the casinos will be regulated.

“It’s a big if; a big blank. We don’t know anything,” Yilmaz said.

Ultimately, whether or not Georgia’s gaming industry suffers from Sochi casinos depends on the scale of investment and services there, said Ian Livingston, managing director at the Casino Adjara in Tbilisi: “If Sochi were to develop to such a degree as to be a mini-Vegas, then we feel it might draw some of our foreign players from surrounding areas,” he said.

Gambling experts agree that this will not happen soon: “you need a few years just to start and it will take them one year just to figure out the legal questions,” said Darren Keane, chief executive officer of Storm International, a major gaming-industry player which operates in Tbilisi and Moscow.