Swissotel in Moscow Closes Doors Due to Sanctions on Turkey

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Translated by Ollie Richardson for Fort Russ

7th January, 2016


“Swissotel Red Hills” from December 30th will not reserve rooms. The building is managed by the Turkish company Enka. As was explained to RBC,  the break is due to the sanctions against Turkish businesses in Russia

A Temporary stop

As was discovered by RBC, “Swissotel Red Hills”, situated on the Kosmodamianskaya embankment, 52/6, near the metro station “Paveletskaya”, on December 30th, did not book or sell rooms. A member of staff confirmed this, noting that guests who booked their rooms until a specified date, may be occupied, all services will work. According to him, services have been suspended “in accordance with the decree of the government”.

Director of public relations at Swissotel Hotel & Resorts in the European region, Eva-Maria Panzer, said that the hotel, its restaurants and bars as well as catering service have temporarily ceased to provide services in connection with the additional constraints of Turkish business in Russia, adopted on 29 December.

“We are now trying to clarify with the authorities the impact of economic sanctions on our operations,” said Panzer, noting that at the moment we can’t provide a more detailed review of the company.

The representative of the holding company Enka in Istanbul forwarded the correspondence of RBC to the Moscow office, but as of January 6th, a reply has not been received.

The conflict with Turkey

Sanctions against Turkey came in response to the Turkish military aircraft on the Syrian border downing the Su-24 Russian bomber. The incident occurred on 24 November 2015.

The President of the Russian Federation Vladimir Putin on November 28 signed a decree on the introduction of sanctions. But a month later, on December 28, he clarified that the ban applies not only to Turkish companies, but the company, controlled by Turkish nationals.

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It included the banning of the importation into Russia of a number of Turkish goods and a ban on the provision of certain types of work by Turkish companies in Russia. Russia also unilaterally suspended the visa-free regime with Turkey,  also banning Charter flights between Russia and Turkey and the sale of tours to Turkey. Finally, a ban on the recruitment of Turkish citizens was enforced too.

The government in December released a few clarifying points. The list of prohibited import goods, which includes vegetables, fruits, poultry, meat and salt, was published on the 1st December. While the regulation containing the list of activities prohibited for Turkish companies in Russia was signed by Prime Minister Dmitry Medvedev on December 29th. The list, in particular, focused on construction, tourism and hotel business.

On the 4th January, Turkey began the preparation of materials for submission to the WTO, taking the form of a complaint against the introduction of Russian sanctions. “We will defend the rights of all who have suffered [because of the sanctions], in international courts,” — reports Daily Sabah, viaTurkey’s economy Minister Mustafa Elitas.

Sole owner

The 34-storey “Swissotel Red Hills” was opened in 2005, becoming at the time the tallest hotel in Moscow. LLC “Moscow-Red Hills” — the owner of the building was created as a joint venture between the Moscow government and the Turkish company Enka, acting as the developer.

The hotel is managed by Swiss company Swissôtel Hotels & Resorts, who is owned by the international holding company Fairmont Raffles Hotels International, with its headquarters being in Toronto.

In 2012, Enka had consolidated 100% of OOO, which in addition to Swissotel, belonged to the business centre Riverside Towers. Now, using data from SPARK, owners of the “Moscow-Red Hills” are the Swiss Enka Holding Investments (55,31%) and Dutch Enka Holding BV (44,69%).

The hotel consists of 233 rooms, with prices starting from 13.5 thousand rubles. According to the Deputy Director on development of the industry of hospitality at CBRE, Stanislav Ivashkevich, the monthly revenue of a hotel may be 30-40 million rubles, of which about half is the operating profit.

“See no problem”

RBC surveyed-lawyers believe that the suspension of operations at Swissotel can be considered as reasonable reassurance from the management company in a difficult situation. “If we consider the reception of each new guest as a new contract for the provision of hotel services, this explains why the booking ended after the entry into force of the decree,” said the partner of legal firm Goltsblat BLP Vitaly Mozharovsky. “If a management company has Turkish beneficiaries, then, as a result, it falls under the decree. But if  there are no Turkish beneficiaries, then, purely legally, I don’t see any problems”.

According to Mozharovsky, the presence of the Turkish company Enka as the owner of the building does not mean that the company is engaged in the hotel business. “Legally I see no problem for Enka, but, as a practitioner, and knowing the characteristics of Russian officials, I understand that the company may encounter difficulties,” he concludes.

According to Ivashkevich, another big hotel with “Turkish roots” opened in May 2015 in the North-East of Moscow, four star “Dedeman Park Izmailovo”. Its opening is “a symbol of friendly relations between Russia and Turkey,” according to the website of the Turkish Dedeman Group.

“Dedeman” continues to take new guests by phone, with the representatives of the hotel explaining that they have a Russian owner who is not subject to anti-Turkish sanctions. According to the federal list of tourist companies, the owner of the hotel is “Hotel on the Park.” According to SPARK, this company is owned by citizens of Russia — Ahmad Gubaru and Denis Kolesnikov.

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