Seizing a superyacht more complicated than you think
• Russian assets worth billions are likely to remain in limbo for years, at a huge cost to everyone else
Amadea, a superyacht worth $325m, has been moored in the port of San Diego since June, unused, legally bound there for many more months, probably years. Its six decks loom over a waterside park where families come for picnics and anglers for mackerel.
The US claims the owner is a Russian oligarch who’s been sanctioned. Already on board were two baby grand pianos (one hand-painted), a mosaic pool and what could be one of the last remaining Fabergé eggs, commissioned by Russia’s imperial family and worth millions of dollars. All of that is now under the care of American taxpayers.
And a superyacht requires a lot of care. It’s not possible to seize one and then leave it docked and untended until Russia’s war against Ukraine ends. It sits in a hostile environment of salt water and humidity that causes rust and mould unless the air conditioning is on. Amadea can generate its own power and desalinate its own water, and those systems must be maintained. The propellers need to be run regularly to prevent a build-up of barnacles. The yacht usually has to be washed weekly to avoid dirt accumulation that could damage the exterior and require a multimillion-dollar repaint job.
The mooring lines must be monitored so they don’t break in high winds or strong currents. Normally operated by a crew of 33, Amadea still needs about half that many — from engineers to deck hands — rotating on board, available in case of fuel spills or fires. The yacht’s insurer requires all this maintenance; paying for that policy is another mammoth expense. The docking fees for any impounded vessel in San Diego, at almost $1,000 a day, have come to more than $120,000 so far. The annual cost of keeping Amadea in port: about $10m.
When Russia invaded Ukraine in February, Russian-owned superyachts began racing around the world in search of waters beyond the reach of sanctions. Some turned off their transponders so their movements couldn’t be tracked. Amadea mostly kept its on as it sailed more than 7,000 nautical miles from Sint Maarten in the Caribbean to the port of Lautoka in Fiji. The yacht arrived on an early evening in mid-April; its crew expected to be relieved in a few days.
Instead, three FBI agents immediately confronted them and sequestered the captain and several others in an airconditioned shipping container, grilling them until early morning. The agents wanted to know why the crew was so large, why they used code names (G-1 and G-2) for passengers and why they were concealing the yacht’s true owner, Russian gold tycoon Suleyman Kerimov, whom the US had sanctioned in 2018.
The crew said it was standard for superyachts to use code names, and denied helping to hide anyone’s identity.
FBI agents intercepted Amadea’s other captain and two crew members during a brief stop in Los Angeles en route to Fiji. They were questioned for hours, too. Then the agents cancelled their US visas, cloned their cellphones for evidence and deported them.
Kerimov didn’t respond to requests for comment.
In June, after a protracted legal fight, the US government won permission from a Fiji court to proceed with its seizure of Amadea. The US Marshals Service hired a company to find a crew to sail it to San Diego, then subcontracted other firms to help manage it. There Amadea remains, beside a dock, fenced off with barbed wire and signs warning against trespassing, until the US department of justice figures out what to do with it.
“As beautiful as it is, it’s an eyesore when I’m trying to fish,” says Hugo Sanchez, a San Diego resident, reeling in a mackerel in the superyacht’s shadow.
“It kind of feels like it’s rubbing you in the face a little bit, just sitting here.”
GIGAYACHTS
If there was ever a symbol of opaque, outrageous Russian wealth, it’s the superyacht. Using offshore companies registered in tax havens such as Bermuda or the Cayman Islands, Russian billionaires have bought some of the biggest boats in the world. Some have cinemas, submarines and outdoor beds for stargazing.
Some have hammams (Turkish baths), heated pools, plunge pools and elaborate bars. Some are so big that even the word “superyacht” won’t do; those longer than 262 feet are often called megayachts or gigayachts and, according to SuperYacht Times, of the 153 in existence, Russians own about 30.
Soon after the war started, the justice department set up Task Force Klepto-Capture to hunt down sanctions evaders and go after their assets, but few expected it would chase superyachts halfway around the world. The department seized the Tango in Spain in March, and five months later, FBI agents boarded the Alfa Nero in the Caribbean nation of Antigua as part of an ongoing probe.
Other Western governments have been busy, too. Italian authorities have impounded at least four superyachts, including one the US says is linked to Russian President Vladimir Putin — a $650m vessel with two helipads and a pool that can be turned into a dance floor. They also arrested the world’s largest sailing yacht, which is worth $550m and has a main mast taller than Big Ben and a glass underwater observation pod. Germany detained the 512foot, $600m Dilbar — one of the world’s biggest superyachts by volume — because of its ties to sanctioned billionaire Alisher Usmanov, who says he rented it from a trust he doesn’t control.
Since the war began, Western governments have detained more than a dozen superyachts they’ve linked to Russian tycoons. The vessels are worth at least $4bn, according to Bloomberg News.
Going after these high-profile playthings looks like an act of justice given the death and destruction being spread by Russian troops in Ukraine. The moves are designed to destabilise the Russian elite and “demonstrate to the Russian people that they’ve been getting ripped off by their leadership for a very long time,” says Daleep Singh, US President Joe Biden’s former deputy national security adviser.
It’s been a public relations success for Western governments, but legally and, perversely, financially, it’s a total mess. Most of the ships sit immobilised, draining money. In some places that money is coming from taxpayers. It can cost 10%-15% of a yacht’s value to keep it running every year — a “vanity tax” for the wealthy is how one lawyer describes it. Yachts are less expensive to maintain when they’re not cruising at sea. But even using an ultraconservative estimate of 3% of a ship’s value, the US and Italian governments will pay more than $50m a year to maintain their fleets of arrested megayachts.
And it could take years to figure out what to do with them. Some countries may decide to confiscate and sell them. The US has vowed to do so using forfeiture, a complex process that involves proving to a judge that the asset was acquired with the proceeds of a crime. In this case, the crime would be violating sanctions. First, though, the US has to prove who the owner really is, which isn’t easy given the elaborate shell companies many Russian billionaires use. Stefan Cassella, a former federal prosecutor specialising in forfeiture, compares the challenges of establishing Russian ownership of assets to doing the same with drug lords. “Drug dealers don’t own anything. Their girlfriends own everything. So they’re going to be litigating over that for a long time.”
Europe faces an even more daunting challenge. In many countries, sanctions violations aren’t even a crime, something the EU is attempting to change. Sanctioned Russians are already trying to reclaim what’s been blocked.
The fate of the detained yachts, as well as the villas, bank accounts and even Russia’s frozen central bank reserves, has consequences for Ukraine, which is in dire need of funding. Its government estimates the cost of rebuilding the destroyed roads, bridges, homes, factories and energy grid to be $750bn. US and European legislators are trying to figure out how to deploy Russian assets to support Ukraine without undermining property rights or setting off too much legal wrangling.
When it comes to the yachts, a long legal fight doesn’t help anyone, says Glenn Weiss, an American maritime lawyer in the boat, fight over the money,” Monaco.““Don’t he says. Yachts fight need over a lot of love. They’re trying to sink every day.”
Russia’s tycoons began commissioning more extravagant vessels a decade ago as the economy rebounded from the global financial crisis. They had a role model: the late Microsoft billionaire Paul Allen. His Octopus was the largest explorer superyacht when it launched in 2003; Allen used its hidden submarine to discover shipwrecks. Many Russian billionaires hired the duo Allen had hired: architect Espen Oino, a mild-mannered Norwegian, and the German builder Lürssen.
Igor Sechin, the CEO of state-controlled oil giant Rosneft, epitomised this era. Sechin denies owning any superyachts, but he frequently used the 280-foot St Princess Olga, according to people familiar with the situation. (The boat’s name later changed to Amore Vero — Italian for “true love ”— after Sechin divorced his wife, Olga.) In 2013, he began poring over designs for an even bigger vessel, code-named Project Thunder, the sources said. The next year, after Russia annexed Crimea, the US put Sechin on its sanctions list. That didn’t stop work on Project Thunder in Europe.
Four years later, Lürssen delivered the $600m, 443-foot vessel equipped with two helipads and enough space for 18 guests and 40 crew. Owned by offshore companies, the yacht, now named Crescent, and Amore Vero freely roamed European waters until late February, when the EU placed sanctions on Sechin. Both vessels attempted to leave for safe harbours, but authorities were faster.
Amore Vero, docked at the port of La Ciotat, just east of Marseille, is so large, it’s visible from the other end of town. Philippe Bonneau, an 80-yearold retired engineer who can see the superyacht from his terrace, started an online petition calling for it to be used as a hotel for Ukrainian refugees. It’s gathered almost 29,000 signatures. “I’m angry,” he says. “It has no sense to be there without being used.”
Much around Amore Vero remains a mystery. French customs officials say Sechin is the beneficiary of the offshore company that owns it. The Marseille prosecutor is trying to prove that. Sechin denies owning Amore Vero, and lawyers acting for the company, Kazimo Trade & Invest Ltd, registered in the British Virgin Islands, say the real owner isn’t sanctioned but won’t identify who that is, according to court proceedings.
‘STRAW OWNER’
Crescent, a dark-blue vessel with a retractable helicopter hangar and movie theatre, is immobilised in Spain’s Port Tarraco, about an hour from Barcelona. Spanish customs officials could find nothing linking the ship to Sechin, who denied any connection to it. Instead, the owner turned out to be a littleknown oligarch named Eduard Khudainatov. He’s also the owner, on paper at least, of Amadea, but the US maintains he’s merely a “straw owner”, holding it on behalf of Kerimov. Khudainatov was CEO of Rosneft until 2012, when Sechin took over, and later set up his own oil and gas business. Briefly, it looked as if Spain might have to release the superyacht because Khudainatov hadn’t been sanctioned anywhere, but in early June, the EU blacklisted him for “benefiting from the government of the Russian Federation”.
As with many business dealings involving Russia’s oligarchs, what’s on paper doesn’t always reflect reality. Sechin was closely involved in the design and build of the Crescent, according to people familiar with the situation. US and Spanish authorities declined to comment on whether they believe Khudainatov once again acted on Sechin’s behalf because of sanctions. Sechin, for his part, didn’t respond to questions about previously using or overseeing the design of the vessel.
Meanwhile, Spanish maritime officials say the owner is responsible for the €15m a year it will cost to keep the Crescent at Port Tarraco. Someone is paying, but they declined to say who.
Khudainatov also happens to be the beneficiary of a nest of shell companies that owns the $650m Scheherazade, a superyacht that Italian authorities detained at Marina di Carrara in Tuscany in March, according to a US affidavit. That makes Khudainatov, who isn’t on any recognised list of the world’s wealthiest people, the apparent owner of three yachts worth almost $1.6bn, designed by Oino and built by Lürssen.
An investigation by the team behind Russian opposition leader Alexei Navalny found evidence that many of Scheherazade’s crew worked for the agency in charge of Putin’s security. At 459 feet, it’s almost as long as a naval destroyer. (The Kremlin denies that Putin has links to the superyacht. Khudainatov didn’t respond to a detailed request for comment. Lürssen declined to comment.)
For now, Italy’s state property agency is paying to maintain the Scheherazade and three other Russian-linked vessels it has blocked, people familiar with the situation say. The estimated annual cost: almost $40m.
At the end of September, some of the world’s wealthiest people descended on the Monaco Yacht Show. Prospective buyers kicked off their shoes on the concrete jetties, their Christian Dior sandals perilously close to the water’s edge. Then they hopped onto one of the 117 superyachts on display.
A relatively small one, owned by an unsanctioned Russian, contained a collection of apparently genuine paintings by Edward Hopper and Egon Schiele, protected by glass and high-powered air conditioning. The 164-foot yacht was selling for €27.5m.
Every evening at the Yacht Club de Monaco, members and guests gathered for drinks. No-one wanted to talk publicly about sanctioned Russians or their superyachts. The community, secretive in the best of times, seemed willing to pretend that Russian money from sometimes unexplained sources had never coursed through it.
But not everyone was playing along. At a port-side restaurant, someone distributed flyers splattered with fake blood and the colours of the Ukrainian flag. They were quickly removed. The flyers took aim at Burgess, a prominent broker, and appeared at the same time as a new, unconfirmed report alleging the company was selling a vessel anchored in the Maldives, owned by an oligarch who’d been sanctioned. Burgess denies the owner is sanctioned and says it operates a fully “compliant” business.
Recently, the first vessel owned by a sanctioned Russian tycoon sold at auction, but only because of an unpaid debt. The 237-foot Axioma had been stopped in Gibraltar because its owner had been unable to pay a €20.5m loan from JPMorgan Chase. An undisclosed buyer paid $37.5m, half of what was expected.
Seizing and selling a yacht because it’s owned by a sanctioned Russian is a different proposition, though. A halfdozen yacht brokers and maritime lawyers say the risk of buying a seized vessel would scare away most buyers.
What happens if a superyacht under new ownership glides into neutral waters and the Russian oligarch turns up demanding his boat back? Several muttered the words “scrap metal” when speculating on the future of the boats ensnared by sanctions.
But legislation facilitating the selling of frozen Russian assets is exactly what legislators are devising. A provision in the US National Defense Authorization Act for Fiscal Year 2023, which Congress must pass this year, would let the justice department confiscate Russian assets and use the proceeds to help Ukraine. The European Parliament is considering a directive that would ease rules dealing with confiscation.
Billions of dollars worth of Russian assets are likely to remain in legal limbo for years. The gleaming superyachts, stuck in sunny ports, polished and washed and airconditioned, will be the most tangible evidence of the West’s struggle to dismantle Russia’s elite — and punish Putin for waging war.
MOST OF THE SHIPS SIT IMMOBILISED, DRAINING MONEY. IN SOME PLACES THAT MONEY IS COMING FROM TAXPAYERS
BROKERS AND LAWYERS SAY THE RISK OF BUYING A SEIZED VESSEL WOULD SCARE AWAY MOST BUYERS