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Russia's tourism industry hit hard by sanctions war

Tens of thousands of Russian tourists stranded abroad have become the latest victims in the sanctions war between Russia and the West while violence continues to rage in Eastern Ukraine. Meanwhile, a Russian airline has been forced to suspend all flights as a result of EU sanctions.

MOSCOW: The latest Western sanctions have taken their toll on Russia's tour agencies, with a succession of major market players being forced to declare bankruptcy and halt all operations in the height of the summer tourist season.

One of those that went under was Labyrinth, a big player in the Russian tourism market. With inflation already high and the ruble increasingly weak against the dollar, Russia's Interior Ministry advising its four million employees not to travel was more than what these companies could take.

Russia's government is now trying to encourage Russians to holiday within Russia and Crimea by promising cheaper fairs on the country's expensive train and plane networks. The government hopes it may help the ailing Crimean economy, which is already exerting strain on Moscow's purse.

Evcenii Kudelya, Krasnodar Krai's Minister of Resorts and Tourism, said: "For example in Yakutsk, someone would say 'I can afford to go on holiday at the resorts of Krasnodar Krai (where Sochi is) or Stavrapol Krai for my four person family, but I can't afford the flights there and back.' Because of that, he hasn't been anywhere for ten years. Therefore, the solution to this problem is of course is to give additional incentives."

But Russia's attempts at cheaper airfares have encountered difficulties. Russia's low-cost airliner Dobrolyot has been forced to suspend flights just a couple of months after starting operations after its leasing contracts were annulled following the latest EU sanctions against Russia.

President Putin has announced that Russia will retaliate to sanctions, a marked switch from previous insistence from officials that Russia would not adopt sanctions of its own. Tourism officials did not rule out a role in their industry in levelling these sanctions.

Oleg Safonov, Acting Director of Russia's Federal Agency for Tourism, said: "If sanctions have been adopted, then you probably need to suppose that some measures will be adopted in response. And that response probably won't be very pleasant either. But I hope that nonetheless all the governments that have adopted sanctions will acknowledge that these actions lack prospects and lead to dead ends, and they will probably start to rescind the sanctions that have been adopted."

President Putin said any retaliatory steps must not harm Russian consumers. But Vedomosti, a Russian daily, reported that Russia may be closing off Siberian airspace to European airlines. State-owned Aeroflot, which is reported to get around US$300 million a year in fees paid by foreign airlines flying over Siberia, saw shares tumble to their lowest close since April. 

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