Russian yachts stranded in choppy sanctions waters

Sanlorenzo SpA

01/04/2022 11:17

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Lisa Jucca
    MILAN, April 1 (Reuters Breakingviews) - It was already dark
in Trieste last month when Italian tax police seized the 530
million euro Sailing Yacht A. The colossal 143-metre vessel,
designed by star architect Philippe Starck and sporting an
underwater observation pod, belongs to Russian coal and
fertiliser tycoon Andrey Melnichenko  urn:newsml:reuters.com:*:nL2N2VF07R, who has been
sanctioned by the European Union. Impounding trophy assets is an
easy win for governments. Navigating complex sanctions rules is
more costly and complicated.
    Russian yachts are headline-grabbing targets. The country’s
tycoons have been enthusiastic buyers of luxury boats, an
industry that was worth 8 billion euros in 2021, according to
Bain & Company. They are particularly fond of larger vessels:
Russians accounted for between 30% and 40% of the market for
mega-yachts longer than 60 meters, Massimo Perotti, the chairman
of listed yachtmaker Sanlorenzo  SNL.MI , told Breakingviews. 
    Yet impounding large boats is a bigger legal headache than
seizing property or cash. Though the oligarchs are still the
legal owners, the vessels require maintenance and crew to stay
afloat. Annual bills are around 3% of the boat’s original price
tag, says Perotti. With Russian owners banned from making
payments, governments may have to foot the bill, hoping to
recoup the cost once sanctions are lifted.
    Tying the giant boats to blacklisted companies or people is
also a challenge. The vessels are often controlled by shell
companies to conceal their ultimate owner’s identity. The 38
million pound yacht Phi, impounded https://nationalcrimeagency.gov.uk/news/38-million-superyacht-phi-detained-in-canary-wharf
 in London’s Canary Wharf earlier this week and which the
British government says is owned by an associate of Russian
President Vladimir Putin, is registered to a St Kitts and Nevis
company and carries a Maltese flag.
    Italian officials are still trying to figure out who owns
the $700 million Scheherazade, which Ukrainian President
Volodymyr Zelenskiy alleges belongs to Putin or a member of his
circle  urn:newsml:reuters.com:*:nL5N2VP4TJ. Governments are likely to face legal
battles disputing seizures, or fights over costs. Meanwhile, a
ban on luxury exports to Russia means boats still under
construction are in legal limbo.
    Sanctions rules make little provision for the long-term fate
of the boats. Several U.S. congressmen have proposed a Yachts
for Ukraine Act, which would sell the assets to raise cash. But
doing so would flood the super-yacht market with second-hand
vessels. For now, governments have no choice but to navigate
choppy sanctions waters.
    Follow @LJucca https://twitter.com/LJucca on Twitter
    
    CONTEXT NEWS
    - European governments have seized super-yachts linked to
sanctioned Russian oligarchs. These include EuroChem founder
Andrey Melnichenko’s 530 million euro Sailing Yacht A, the
world’s biggest sailing yacht.  The sanctions allow governments
to seize but not to confiscate assets linked to blacklisted
entities and individuals. 
    - In 2021, the market for luxury yachts over 90 feet (27
metres) was worth around 8 billion euros, according to Bain &
Company. 
    - Russian buyers represent between 30% and 40% of the market
for mega-yachts over 60 metres, according to Massimo Perotti,
chairman of yachtmaker Sanlorenzo.
    - The draft Yachts for Ukraine Act, recently introduced by
members of the U.S. House of Representatives, would allow the
United States to confiscate frozen assets such as yachts and
sell them.

 (Editing by Peter Thal Larsen and Oliver Taslic)
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