Since Russian president Vladimir Putin invaded Ukraine in February 2022, the United States has seized several superyachts belonging to Russian oligarchs. It was part of Washington’s tactic to seize the assets of Russian billionaires, believed to be Putin’s cronies, in order to put pressure on Moscow to end the war in Ukraine. But the confiscation of the luxury yachts was not a walk in the park.

 

For example, Hong Kong’s chief executive John Lee has laughed off the U.S. attempt to seize US$500 million “Nord” superyacht allegedly owned by Russian billionaire Alexey Mordashov. The West’s sanction does not apply in Hong Kong, says Mr Lee, who is one of several Chinese officials who were sanctioned by the U.S. in 2020 for cracking down on demonstrators.

 

Mordashov – the largest shareholder in the steelmaker Severstal and the third-richest man in Russia – has been sanctioned by the United States, the European Union and the United Kingdom in response to Russia’s invasion of Ukraine. The U.S. could only watch and warn that Hong Kong has damaged its own reputation for refusing to seize the yacht.

The vessel eventually left the city in late October 2022 and was due to dock in Cape Town, South Africa on November 9. However, during its journey, Nord stopped transmitting its location and mysteriously disappeared, only to appear in the Republic of Maldives. The country does not have extradition treaties with the U.S., making it more difficult to confiscate the vessel.

 

Another yacht – US$325 million Amadea – was not so lucky when a high court of Fiji allowed the 350-foot vessel allegedly belonged to Russian oligarch Suleiman Kerimov to be seized. Even then, the U.S. succeeded because the cost of berthing the yacht was “costing the Fijian government dearly”. Amadea’s operating cost was between US$25 million and US$30 million annually.

 

The first luxury yacht to be sold since Russia invaded Ukraine was the 72.5-metre Axioma. The vessel, belonging to steel billionaire Dmitry Pumpyansky, was sold to an undisclosed buyer for US$37.5 million. However, the yacht, which features a swimming pool, a 3D cinema room, a gym, a Jacuzzi and a fully equipped spa, was not sold because of the U.S. authorities.

Rather, Axioma was sold because JP Morgan, a U.S. investment bank, has claimed that the Russian billionaire owed it €20.5 million. In March 2022, the yacht was detained by the Gibraltar government after the legal claim from JP Morgan, who then argued in the Gibraltar courts that since the Russian oligarch has been sanctioned, it means Pumpyansky cannot legally pay its loans.

 

But even if the U.S. managed to seize yachts belonging to billionaires closed to Putin, the expensive toy could be a nightmare for the government. For example, a US$120 million superyacht – Alfa Nero – has been impounded since March 2020, but has become abandoned in Falmouth Harbour, Antigua, leaving its crew to do nothing but sit around all day playing “Call of Duty”, or swim in the yacht’s infinity pool.

 

The US$81 million superyacht is said to be owned by the sanctioned Russian oligarch Andrey Guryev, the owner of fertiliser company PhosAgro. However, his lawyer has denied that Alfa Nero belonged to Guryev. In early March this year, the government of Antigua and Barbuda has been trying to auction off the vessel after the 10-day for its owner to claim it expired.

Alfa Nero, which features a 12-metre infinity pool, a Jacuzzi, a spa, a beauty room and a helipad, has been used by Guryev’s family, including his son and his son’s wife, Valeria, who studied at the London College of Fashion. According to the U.S., the 62-year-old Russian billionaire bought the 81.3-metre yacht for US$120 million in 2014.

 

However, it’s a challenge to identify the real owner due to the way ownership is hidden via numerous entities. The documents for the ships are often signed by secondary individuals and the legal process for sanctions is murky. Guryev’s lawyer said the billionaire only uses it “from time to time”, a tactic to deny, delay and complicate the process of disposing the vessel.

 

To make matters worse, the abandoned yacht is burning US$112,000 in bills per month, forcing the government of Antigua and Barbuda to make available Alfa Nero to charter at US$1 million per week. The crew has been reduced from 44 people to just 6. At least 25 crew members are suing to try and recover more than US$2 million in wages.

The skeleton crew included the captain, who sleeps in the guest bedroom whilst the crew – stuck for over a year – mostly remain below deck, leaving the five other luxury cabins on board largely unused. Nevertheless, it’s not easy to get rid of the yacht. As long as the U.S. maintains Alfa Nero’s “blocked” property status, Antiguan officials worry that the proceeds from any sale might be frozen.

 

Sir Ronald Sanders, Antigua’s ambassador to the U.S., said – “Nobody’s laid claim to it, nobody’s been paying its bills. It’s been running up money left, right and center, and it has become a risk to the harbour itself”. Tom Paterson, the dockmaster at the Antigua Yacht Club, said – “You can’t even open the doors on Alfa Nero without diesel. These boats, from the day they launch to the day they die, are burning fossil fuels.”

 

Experts said the annual maintenance for some of the yachts could cost as much as US$115.6 million a year and that the vessels could deteriorate within weeks if they were not properly maintained. For now, the Antigua and Barbuda government has to keep finding money to feed its crew as well as its maintenance without any guarantee it could recoup its expenses.

 

 

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May 18th, 2023 by financetwitter

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