Chasing Up Russian Yachts and Mansions Proving Pricey 

The West’s economic war on Russia is producing a massive taxpayer tab.

Photo by Gillfoto under CC BY-SA 4.0

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What’s the difference between a superyacht and a megayacht?

It’s not a trick question. A superyacht is longer than 24 meters, while even modest megayachts are about 60 meters long. But super or mega, police, investigators and agents across the globe who are hunting and freezing the assets of sanctioned Russian billionaires say these boats cost millions of dollars in maintenance fees that are often shouldered by the taxpayer.

As the West cracks down on a growing list of what it deems to be the ultra-wealthy allies of Russian President Vladimir Putin, it is increasingly learning that while it’s one thing to seize cash, crypto or gold bars, which can sit frozen in vaults or bank accounts for years without losing value amid legal battles, it is another matter entirely to freeze mansions and yachts, worth hundreds of millions of dollars, which require daily upkeep. 

One seized Russian megayacht, the Alfa Nero, raided by armed police and agents of the U.S. Federal Bureau of Investigation last year, is still sitting in the Falmouth Harbour of Antigua and Barbuda. Its crew has long since feasted their way through the vessel’s stores of lobster, Champagne and caviar and abandoned ship. The tiny island nation, unable to afford the boat’s $42,000-a-week tab in maintenance and fuel costs, attempted to push through an emergency sale of the $120 million yacht (according to The Wall Street Journal, former Google chief executive Eric Schmidt was in line to buy it, before thinking the better of it), but the sale was blocked in a last-minute injunction. 

Such are the travails of seizing Russian assets. In the case of the Alfa Nero, if the boat is not kept continuously humming, mold will spread throughout the decks, destroying the hardwood interiors and fine art (the yacht’s wares include, incredibly, a painting by Miro). As Andrew Adams, ex-director of the KleptoCapture task force, told U.S. lawmakers, “There is a market for yachts. There is no market for moldering yachts.” 

At the outset of the Russian-led war on Ukraine, the U.S. Department of the Treasury announced that a division called the Russian Elites, Proxies and Oligarchs task force was coordinating with dozens of countries, trade ministers and European commissioners to work together “to isolate sanctioned Russians from the international financial system” and seize many millions of dollars in assets. 

For the Western governments seeking to freeze and liquidate Russian assets – so the funds can be turned over to Ukraine to help rebuild the country – the legal and logistical battles are proving to be costly, with hundreds of millions of dollars in yachts stuck in ports around the world, requiring tireless maintenance, pending legal outcomes. 

Tracing who owns the yachts can be next to impossible. The Alfa Nero, suspected to belong to Andrey Grigoryevich Guryev, a Russian phosphates billionaire who the U.S. has sanctioned for links to Putin, is owned by a British Virgin Islands company called the Flying Dutchman, and managed by Opus Private. That company is based in Guernsey in the Channel Islands and represents a trust beneficially owned by Guryev’s daughter. It sued to block the sale of the Alfa Nero in a last-minute injunction, with a judicial review currently pending. The tussle is likely to drag on for some time.

Meanwhile, the search for the owner of a 450-foot yacht worth hundreds of millions – and rumored to belong to Putin himself – was seized in Italy last year, with no identified owner. The company that appears to control it is registered in the Caymans and is covering the costs of the boat, moored in the Tuscan port of Marina di Carrara, but the boat’s fate is unclear.

Uncovering which Russians own which yachts, mansions and jets has turned into a global effort, with nonprofit groups such as the Organized Crime and Corruption Reporting Project launching a “Russian Asset Tracker,” so people can share and report information online.

So far, the hundreds of criminal investigations into sanctioned Russians by the U.S. Department of Justice and cooperating nations have resulted in very few funds going to Ukraine. According to the Journal, the European Union and the U.K. have not turned over any funds, while the U.S. has only been able to deliver $5.4 million from liquidating frozen assets to Ukraine.

Once again, secretive trusts and tax shelters win.