“We are afraid to approach the wrong money”

The Flying Fox superyacht, linked to Russian oligarch Dmitry Kamenshchik

It’s a seven-star resort that you can take anywhere – the epitome of freedom and luxury. But as the West attacks the assets of wealthy Russians, the industry is preparing for rough seas.

The sun is rising over the horizon from the Pacific, or perhaps the Gulf of Mexico, or perhaps the Mediterranean Sea. If you’re aboard one of the world’s multi-million dollar superyachts, luxury and adventure are never far away.

It sounds like a dream life, but the war in Ukraine has hit this world with a wave of reality. More than $2bn (£1.5bn) worth of megayachts linked to sanctioned Russians have been seized in Europe since the invasion began in February, Bloomberg estimates.

At least 16 superyachts have been seized, most of them by European authorities. Earlier this month, the Russian superyacht Dilbar – with two helipads and the largest yacht pool ever built – was seized by German authorities.

The previous week, in Spain’s Balearic Islands, the United States seized its first Russian superyacht: a 77-meter vessel called Tango, equipped with its own beauty salon, swimming pool and beach club, owned by the sanctioned ally of Putin Viktor Vekselberg.

With around 10% of the world’s superyachts owned by Russians and a growing stranglehold on the international assets of those with ties to President Vladimir Putin, industry insiders say life on the high seas could get a little restless.

And as the hunt for Russian-owned ships continues, the people who keep them afloat – designers, architects, shipyard owners and shipboard staff – may also run into trouble as their ultra-wealthy clients are sanctioned, leaving empty yachts and unpaid wages.

“I think everyone is very scared of getting too much money wrong,” said analyst Sam Tucker, who works for maritime research firm VesselsValue.

Tango Superyacht

Spanish authorities seized superyacht Tango in Mallorca this month

Although the term superyacht has no technical definition, it is generally used to describe any boat over 24 meters (79 ft), although some are four times larger.

Naval architect Greg Marshall has compared these mega-boats to “sovereign islands”. He is currently designing a 122-meter-long boat, which will feature multi-tiered waterfalls cascading from pool to pool on different decks, a 2,400-square-meter spa and a 1,500-square-meter gym.

Russians are known to love their oversized ships. The average Russian superyacht in 2021 was 61 meters long, compared to 53 meters for American yachts, according to an analysis by SuperYacht Times.

Then there are the expensive customizations. Phi, a Russian-owned ship detained in the UK last month, has an “infinite wine cellar” in the lobby of its lower deck. The Axioma, seized in Gibraltar, has a 3D cinema, a two-story lounge and an onboard waterslide, allowing guests to go from the sun deck to the seas in seconds.

But with sweeping Western sanctions making it difficult for Russians to bank, the superyacht industry could take a dive, market analyst Mr Tucker has warned.

Operating costs are typically around 15% of the yacht’s value each year, meaning annual maintenance alone can cost hundreds of thousands of dollars, or even millions.

Russian yacht owners may find it difficult to pay crews or maintenance if they cannot transfer money, although cryptocurrency is increasingly becoming a popular way to transact.

If the boats are seized in America, the government must pay for their upkeep so they don’t lose value, said Andrew Adams, who heads the KleptoCapture unit run by the US Department of Justice to tackle the assets of Russian oligarchs.

“We have to take that kind of responsibility,” Mr. Adams told Bloomberg News.

But boatbuilders, many of whom are in northern Europe, may also have to stop working on new projects for fear of facing sanctions. Mr Tucker said most people in the industry avoid doing business with Russians even if they are not on the official sanctions list because ownership is not always transparent.

In some cases, that means superyachts sit idle in ports around the world as workers in the industry avoid doing business with those on the West’s most wanted list.

“Nobody knows exactly who owns this and you can’t sell it legally. You can’t work on it. You can’t move it. What do you do? It’s kind of stuck in shipyards,” M Tucker mentioned.

Florida-based yacht broker Bob Denison agreed that most people in the industry currently avoid doing business with Russians.

“We would of course need to honor our country’s position on Russia,” he added.

These sanctions will likely affect the thousands of people around the world who work as crew members on these ships. A large ship may employ between 50 and 100 people, about half of whom should be on the ship and the other half off duty at all times.

Superyacht Solaris, owned by Roman Abramovich, arrives in the waters of Porto Montenegro

Superyacht Solaris, owned by Roman Abramovich, arrives in the waters of Porto Montenegro

Some boats may have raced to friendlier waters, heading to ports in countries that have not imposed sanctions. Former Chelsea FC owner Roman Abramovich has docked two superyachts in Turkey, according to media reports. Others have been spotted in Dubai.

Still others have been seen in the Caribbean, although Mr Tucker said those yachts may not be runaways: the Caribbean is generally a popular place for winter yachting.

Before the war, industry was experiencing a historic boom.

When Mr Marshall started building yachts over 40 years ago, he said there were perhaps a total of 24 boats over 30 meters on the water. Today, there are more than 5,000, according to SuperYacht Times.

Richard Lambert, whose yacht brokerage firm Burgess reported record sales of $2.2 billion last year, says the global yacht market has seen a meteoric rise.

Yacht sales, new builds and yacht charters are all at record highs and further growth is expected in 2022, helped in part by the pandemic, he said.

For the ultra-rich, a visit to your private floating island is one of the safest travel options, and the increased flexibility of working from home means these trips can be indefinite, with billion-dollar offers made from Caribbean blue.

As peak yachting season approaches in the summer, when boats typically sail to the Mediterranean, Mr Tucker said we will have to wait and see the economic impact.

But he also wondered if recent bad press might dampen the appeal of superyacht ownership.

“Some yacht owners are lovely philanthropists, others are horrible, wicked people.”

“Society might now think of yachts as those big things that Bond villains have, right? Do I really want to be associated with and painted with the same brush?”

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