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Russia's war against Ukraine has forced the governments of many countries to introduce sanctions against the richest Russians, including confiscating their superyachts worth hundreds of millions of dollars. But it is unclear whether they can be sold or who will buy them, leaving massive yachts stranded in ports.
"The Russian problem is becoming more and more serious," one luxury yacht broker told Business Insider at the Palm Beach International Yacht Show.
Russian oligarchs owned the second largest fleet of superyachts
Russia is one of the biggest players in the huge yacht market. In August 2021, Russians owned the second largest share of yachts over 40 meters in length. They accounted for 16% of new superyacht purchases in the decade preceding the report, and are known for splurging on extravagant interiors and unique features. For example, one oligarch ordered a large safe in the owner's cabin, in which he could store his rifles. He liked to shoot the saucers on the deck.
Now these sales have stopped, as the oligarchs have come under international sanctions. At least a dozen superyachts with a total value of more than $1 billion were affected. And no one knows what will happen to them next.
What is the problem with Russian yachts?
Sanctioned Russian superyachts are difficult to buy and sell.
The first problem is that many yachts are "frozen" and not arrested. This means that although Russian owners cannot use them, they are not technically owned by a foreign government, so they cannot be sold without special permission.
"I've had a few inquiries, but all you can tell them is that we don't know the outcome yet," another superyacht broker said at the yacht show.
And despite the broker's claims of interest in these yachts, most of the ultra-rich -- or at least their brokers -- don't want to come within ten feet of these vessels, even if the government gets legal approval to sell them.
"What will it look like if you buy a Russian yacht?" - says Julia Simpson, a broker at Thompson of Monaco. "Even if it's perfectly legal and normal, there are too many questions at stake," she says, "like how the original owner got his money and whether it could put the new buyer in a bad light."
In addition, there are potential legal ramifications as it is difficult for the government to prove who actually owns the yachts.
"Oligarchs typically structure their ownership of these expensive assets through a network of offshore shell companies and trusts designed to hide the true owner," said Joshua Naftalis, a former federal prosecutor.
And if the government gets ownership, it largely depends on the court's decision. For example, a Russian man whose yacht was confiscated by the French government gained access to his vessel after winning a legal case in 2022.
"Buying a yacht is very difficult," said Ralph Dasert, head of analytics for SuperYacht Times. "There is a big risk that the former (Russian) owner will sue you to get the yacht back."
He pointed to the Alfa Nero, an 82-meter yacht Eric Schmidt planned to buy for $67 million last year at an auction organized by Antigua and Barbuda. He abandoned the idea after various parties tried to block the sale, presumably deeming it not worth the legal headache.
"When the reason for the sanctions disappears, which may happen, the Russian owners will try to get their yachts back," Simpson said. "After all, the government is not going to pay them."
At the same time, if the sanctions are lifted, the yachts will be worth much less than when they were confiscated, because an unused vessel becomes unusable much faster than something that furrows the seas. The sanctioned Russians, who managed to maintain control of their superyachts, will have a hard time getting rid of them in the future.
Americans who try to do business with oligarchs under sanctions will have to go through many obstacles - for example, finding a bank to make a purchase, which will be almost impossible. If they succeed, and the government finds out about it, they face heavy fines and the deal will be invalidated.
Sanctions against Russian oligarchs are the main news
The EU increased sanctions against Russia after its invasion of Ukraine on February 24. In October 2022, European countries approved the eighth package of restrictions.
In connection with the sanctions, the property and assets of sanctioned Russian oligarchs associated with Putin have already been seized in several countries. Among the arrested are villas and other real estate objects, planes and yachts of oligarchs.
