Controversies in Ukraine surrounding the lottery companies “Patriot” and M.S.L.,which are owned by Russians, are ongoing. Just over a year ago, they were hit by sanctions, but may be taken off the sanctions list in 2018.
Sanctions against a number of Russian and Ukrainian companies instituted by Decree of President of Ukraine Petro Poroshenko on 15 May 2017 are due to expire on 15 May 2018. Last year a number of procedures and ratifications were necessary to extend sanctions and add new entities to the list. First, the Cabinet of Ministers of Ukraine approved on 26 April the proposal for a sanctions list and adopted the corresponding decree. Next, the National Security and Defense Council of Ukraine (NSDC) made the decision to impose sanctions on 28 April. The NSDC decision also contained the date of expiration, setting it at one year from the date of enforcement. After roughly three weeks, the sanctions were introduced by Presidential Decree to take effect on May 15. As mentioned earlier, the list included the limited liability company M.S.L. and the open joint-stock company “Patriot”.
Information that “Patriot” and M.S.L. have Russian beneficiaries (actual co-owners) was first made public by Minister of Finance Oleksandr Shlapak in August 2014 during a briefing in the presence of the press.
“There are 112 different lotteries held in Ukraine (all data quoted in this article is from August 2014),” said Shlapak. “80 lotteries of those, i.e. 71% of the market, belong to M.S.L. LLC, which is owned, according to our data, by the minority shareholders of Alfa Group. 25 lotteries, i.e. 23% of the market, belongs to “Patriot OJSC”, which is owned through offshore companies by a Russian national.”
The remaining market share belongs to the Ukrainian National Lottery (UNL), whose beneficiary and owner is the businessman and investor Michael John Foggo, who has been doing business in Hong Kong, Macau, China and other countries in Asia as well as Ukraine for more than 20 years.
According to sources in the lottery business, Foggo is considering conducting negotiations with the American corporation International Game Technology PLC (IGT) (until recently known as GTECH) about joining the Ukrainian UNL company. However, in any case, this is impossible at the moment in Ukraine. The fact of the matter is that the issue of licensing operators of the lottery market is long overdue. Current operators work in accordance with the law on state lotteries, but their licenses expired in early 2014. The Ukrainian government has already developed new licensing conditions, but it is dallying in adopting them. In turn, this delays the process of selling licenses to interested companies. Evidently, until the lottery market has been completely regulated by the State, its growth and investment inflow from the West will remain in stand-by mode.
IGT has been present on the Ukrainian market for quite some time, as it has been the strategic partner of UNL for the supply of lottery technologies since the late 1990s. Therefore, American investors are quite familiar with the Ukrainian market and understand UNL’s activities. And this comes as no surprise: UNL is a member of the European Lotteries (EL) and World Lottery Association (WLA).
In turn, IGT is known for owning such well-known lottery operators as Camelot in the UK, Francaise de Leux in France, ONCE in Spain, Veikkaus from Finland, Westdeutsche Lotterie in Germany, the Polish Totalizator Sportowy, and a number of lottery operators in the USA (for example in the states of Texas, California, Florida, New York and New Jersey).
The Russian connection of “Patriot” and M.S.L. were the reason for imposing sanctions on these two lottery companies in 2015. They have been extended regularly along with all the other entities on the Ukrainian sanctions list. In autumn of 2016, there were desperate efforts in the corridors of power to prevent these companies from being included in the next version of the sanctions list. But they were kept on it. So no wonder there are delays with the new sanctions list.
Optimists argue that the delay is due to the fact that the government is supplementing the previous sanctions list and harmonizing with the sanctions introduced a month ago by the US against Russian companies and individuals. One way or another, there will be many new entities on this list – in accordance with the newly introduced sanctions by the US. However, it remains unclear whether old entities will remain on it.