Cambodian casino company NagaCorp has suspended the development of its casino resort project near Vladivostok, Russia. Although the operator cited “various uncertainties” for its decision and did not directly point out Russia’s invasion of Ukraine or the resulting business and financial sanctions unveiled by many governments, analysts believe this is exactly what has provoked the gambling company to do so.
Last week, NagaCorp issued a filing with the Hong Kong Stock Exchange to make its decision public. The gambling operator invoked a force majeure clause that was included in its investment agreement for the Vladivostok casino project with the Russian authorities. At the time, NagaCorp said that the development of the project would be suspended indefinitely until the circumstance that had pushed the company towards such a decision is clearer.
The aforementioned sanctions are likely not the only difficulties faced by the Vladivostok casino project, which was set to take advantage of a location in close proximity to the border between Russia and China, and only a short flight away from Japan and South Korea. Currently, casino gambling is illegal in mainland China and Japan and remains largely restricted to foreign visitors of South Korea.
The travel restrictions associated with the Covid-19 pandemic have already made things difficult for Tigre de Cristal and Shambala, the two already existing casinos in the special gambling zone where NagaCorp was planning to establish its Vladivostok casino.
Apart from that, 142 people were arrested by Chinese police in October 2021 following allegations that they had been breaking laws by channeling casino patrons to Tigre de Cristal. Soon after that, the then Chairman of Summit Ascent Holdings, which owns Tigre de Cristal casino, was taken into custody in Macau and faced charges with links to criminal organizations, illegal gambling and money laundering.
Financial and Business Sanctions Following Russian Invasion of Ukraine Create Uncertainty
According to some market experts, NagaCorp may be using the Russian invasion of Ukraine as a convenient justification for using the force majeure clause and withdrawing from the Vladivostok casino project.
Tim Shepherd, a director of Fortuna Investments Worldwide who has been investing in other gaming projects in Cambodia and neighboring countries, noted that decisions that had seemed good 5 years ago no longer worked for the company. He also described the Vladivostok project as a “headache” for NagaCorp, so the war in Ukraine came as the perfect excuse for the company to get out of the massive commitment it had previously made to the project.
Some market analysts believe the suspension of the Vladivostok project makes sense because operating in Russia brings a lot of uncertainty right now because of the ongoing sanctions following the invasion of Ukraine.
NagaCorp has taken a more gradual approach since it signed the investment agreement for the Vladivostok project in 2013, making a promise to invest about $350 million in the development of the proposed casino. So far, the targeted opening dates have been changed several times, although in its last yearly report the company confirmed that the project was still on track to start operating in 2022. In 2021, a contractor building the project revealed that about $84 million had been spent on the project to that date.
In February, NagaCorp updated its shareholders on the ongoing construction progress, saying that the gambling group remained sure that the investment project in Vladivostok would enhance the earnings and revenue growth of the company in the longer term.