In the wake of Russia’s invasion of Ukraine and amid Beijing’s refusal to condemn the invasion, the state of China and U.S. relations remains in a “parlous state,” however, recent events are probably neutral for Macau – unless things suddenly deteriorate even more between China and the U.S., according to political and corporate risk expert Steve Vickers.
Recently, China’s foreign minister Wang Yi called Russia its “most important strategic partner” following China’s refusal to condemn the war, despite growing pressure from the U.S. and the European Union.
Wang Yi said Chinese ties with Moscow constitute “one of the most crucial bilateral relationships in the world.”
Previous reports have indicated that the U.S. has urged Chinese officials to help avert war in Ukraine, with the U.S. presenting China with intelligence on Russia’s troop build up, hoping that President Xi Jinping would step in.
Rather, China has broken with the U.S., Europe and others that have imposed sanctions on Russia.
Questioned by the Times whether the deteriorating China-U.S. relations could affect – at some point – the existing American operators in the city, and whether the concession licenses of these operators are at risk, Vickers said that a risk may rise in regard to the involvement in Vladivostok casinos.
Just recently, hotel and gaming operator NagaCorp halted its plans of building an integrated resort in Russia despite already starting the construction of its development in the city of Vladivostok.
“A real risk might relate to revelations of involvement in Vladivostok (Russia) casinos by Hong Kong or Macau gaming entities or concealed investments by Russian interests in such businesses,” Vickers, CEO of Steve Vickers and Associates (SVA), told the Times.
“The national security situation is very clear in Macau and has been well telegraphed. A national security violation can result in loss of a licence. It’s that simple,” he added.
Vickers had already warned that the amendment on the gaming law places an emphasis on national security, therefore posing heightened political risk to foreign investors.
The risk expert had previously suggested the primary factor which the Chinese and Macau authorities consider when evaluating concession renewals and new regulations is clearly the national security criteria.
An example would be whether the capital flight can be contained – particularly when linked to U.S. operators seeking to repatriate dividends.
Stable until black-swan event surfaces
As crackdown on junkets is now sweeping the world’s largest gaming hub, Vickers said that junkets and associated triad societies have swum in “very murky waters” and many are under investigation, with the Macau police recently naming some of them as “triads.”
However, “American casinos denied for years that triads were involved with junkets,” said Vickers.
It can be recalled that last month, Local 501, a U.S.-based union, called a coordinated U.S. federal investigation into the gambling junket operator Suncity Group and its historical relationships with U.S. gaming companies.
The group noted that the government had flagged an incident in which local casino officials discovered USD5.6 million in cash stored in a Suncity high-roller room – an event that “set money-laundering alarms ringing” at the casino.
Amid the ongoing uncertainty in the city’s gaming sector and the turmoil in the junket business, the city’s industry will remain stable “if no additional black-swan event surfaces,” said Vickers.
In a former statement, Vickers warned firms to monitor in real time the developments in relation to sanctions as well as to be mindful of disguised ownership. The use of proxies, front companies or trusts to disguise ownership is widespread across Asia and in Russian funds.
He also warned to increase the “clout” compliance of representatives at board level.
Deep trouble without China
The invasion of Ukraine has irrevocably changed the geopolitical framework, which is now posing major threats to international business – no matter how far away from the firing line they may be.
For Vickers, who is also a specialist in international asset tracing work, the recent deeper alignment between China and Russia is of concern to the U.S. and western allies.
Without China’s agreement, or at least acquiescence to cooperate with Russia economically, the expert said that Russia would be in deep trouble.
“From China’s point of view, whilst the Ukraine situation is deeply unsettling, it is not without opportunity for China to pick up energy and related resources at bargain-basement prices, as well as to send a message to the western world,” Vickers explained.