Amadea, a superyacht worth $325 million, has been moored in the port of San Diego since June, unused, legally bound there for many more months, likely years. It’s 348 feet long, with six decks, and it looms 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; as evidence the government noted his recent purchases of a new pizza oven and superfast jet skis. Already on board were two baby grand pianos (one hand-painted), a 32-foot 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.
Listen and subscribe to The Big Take on iHeart, Apple and the Terminal.
And a superyacht requires a lot of care. It’s not possible to seize one, 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 mold 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 the buildup 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: roughly $10 million.
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 air-conditioned 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. They said it was standard practice for superyachts to use code names, according to people familiar with the investigation, and denied helping 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 canceled 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.”
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, outdoor beds for stargazing. Some have hammams, 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 the most, about 30.
Soon after the war started, the Justice Department set up Task Force KleptoCapture to hunt down sanctions evaders and go after their assets, but few expected it would chase superyachts halfway around the world. The department seized Tango in Spain in March, and five months later FBI agents boarded 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 $650 million 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 $550 million and has a main mast taller than Big Ben and a glass underwater observation pod. Germany detained the 512-foot, $600 million 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. A full search of Dilbar required more than 60 police officers. 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 $4 billion, 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 destabilize 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, 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 immobilized, draining money. In some places, but not all, that money is coming from taxpayers. It can cost 10% to 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 $50 million a year to maintain their fleets of arrested megayachts. Port officials in France and Spain say it’s not taxpayers but the owners themselves who are covering the costs of their yachts, even with sanctions in place. That arrangement seems unlikely to last as the war grinds on and assets remain frozen. (After a superyacht’s owner failed to pay a private shipyard in Spain, a Barcelona court approved its application to seize the vessel.)
In June, soon after Amadea’s seizure, US national security adviser Jake Sullivan complained about how ridiculous the situation is. “You know what the craziest thing is? When we seize one, we have to pay for upkeep,” he said on a live mic before an event at the Center for a New American Security. “Some people are basically being paid to maintain Russian superyachts on behalf of the United States government.”
It could take years to figure out what to do with them. Some countries may decide to actually 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. That effort seems to be under way; some crew members have already received subpoenas. Stefan Cassella, a former federal prosecutor specializing 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.” The Justice Department declined to comment.
Europe faces an even more daunting challenge. In many countries, sanctions violations aren’t even a crime, something the European Union 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 reconstructing the destroyed roads, bridges, homes, factories and energy grid to be $750 billion. 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. In May, European Council President Charles Michel said he supported confiscating sanctioned assets to help rebuild Ukraine.
When it comes to the yachts, a long legal fight doesn’t help anyone, says Glenn Weiss, an American maritime lawyer in Monaco. “Don’t fight over the boat, fight over the money,” he says. “Yachts need 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 Corp. billionaire Paul Allen. His Octopus was the largest explorer superyacht ever built 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 chief executive officer of state-controlled oil giant Rosneft OJSC, epitomized 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 $600 million, 443-foot vessel equipped with not one but 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 harbors, but authorities were faster. Amore Vero was frozen in France and Crescent in Spain.
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-year-old 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 currently 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. A source close to MB92 Group, the company that was servicing Amore Vero when it was first detained, says it’s being paid by a “nonsanctioned entity” to keep the boat in port, but wouldn’t say more.
Crescent, a dark blue vessel with a retractable helicopter hangar and movie theater, is immobilized 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 little-known 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 intimately involved in the design and build of 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 €15 million ($14.6 million) per year it will cost to keep 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 $650 million 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 recognized list of the world’s wealthiest people, the apparent owner of three yachts worth almost $1.6 billion, all 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 Scheherazade and three other Russian-linked vessels it’s blocked, people familiar with the situation say. The estimated annual cost: almost $40 million.
Beyond the maze of skyscrapers in Canary Wharf, London’s financial district, sits the Isle of Dogs, the old dock area where a 192-foot blue superyacht named Phi is tied up. It’s been there, on a serene inlet off the Thames River, since the end of March. The owner of Phi, Sergei Naumenko, is a Russian property developer and food importer who isn’t on any sanctions list. But soon after the war started, the UK Department for Transport adopted an unusually broad regulation allowing it to block any yacht or plane owned, operated or controlled by a person connected with Russia.
On board the vessel on a late September day were Captain Guy Booth, a New Zealander who’s worked for Naumenko for years, and six other crew members. They were busy, polishing this, cleaning that, cooking themselves lunch. By superyacht standards, the Phi is relatively modest, but it still has fluted butter-leather panels, a teak deck, wavy oak floorboards and plush gray carpet. The ship had just arrived in London for finishing touches when it was detained. Never used, it had the smell of a new car. A wine cellar meant to be viewed from above while walking along a glass-floored hallway was empty. The round lacquered dining table for 12 and even the wine glasses were still wrapped in plastic.
When it was blocked by then-Transport Secretary Grant Shapps at the end of March, he posted a video on TikTok calling the owner an oligarch and “a friend of Putin,” an assertion Naumenko denies. “He’s never met Putin,” Booth says. Naumenko plans to challenge the legality of the new UK regulation. For now, he’s paying for the maintenance and crew.
At the end of September, some of the world’s wealthiest people descended on the Monaco Yacht Show. Prospective buyers—Americans, Germans, Italians—kicked off their shoes on the concrete jetties, their Christian Dior sandals and Loro Piana suede loafers 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 €27.5 million.
Every evening at the Yacht Club de Monaco, members and guests gathered for drinks on white sofas in the nautical-themed bar. 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 colors 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. Elsewhere other brokers and lawyers were overheard discussing how to make money by servicing sanctioned Russian superyachts in Dubai and Turkey. These swirling rumors provided a frisson of anxiety at the show.
In June, the US sanctioned Imperial Yachts, a Monaco-based broker, for providing services to “Putin’s inner circle” (including many of the vessels now frozen). A US blacklisting would normally make it impossible for a company to operate, yet on a Friday afternoon during the yacht show, at least five people were working out of the company’s seventh-floor art deco office overlooking the port. Julia Stewart, Imperial’s director, confirmed in a brief phone interview that they were continuing to operate and that she’s trying to clear the company’s name. In a statement, Imperial called the US government’s accusations “false.”
“Somebody once told me that wealth is a bit like a cloud that just never disappears,” says Oino, the superyacht architect. “It just moves around the world.” He works in a glass-fronted office in Monaco—overlooking the water, of course. An aerial photograph of Amadea hangs on a wall. In a glass case is a model of Dilbar. Oino, self-possessed, sideburns graying, won’t discuss specific clients but says most are personally involved in a yacht’s design. After Russia’s invasion, he had to cancel a couple of contracts overnight, but he otherwise appears unbothered by the sanctions—though he won’t say much else about that, either.
He will talk about superyachts, especially the ones he designed, stuck in shallow water, out of reach of their owners. “They don’t like to sit still doing nothing,” he says, sounding worried. “A plane should always fly, a boat should always sail. They need to be looked after, otherwise they degrade quite quickly because of the many systems that need to run. It can be fixed, but it comes with the cost. And I wonder who’s going to pick up the tab for that?”
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 off a €20.5 million loan from JPMorgan Chase & Co. An undisclosed buyer paid $37.5 million for the yacht, only half of what was expected.
Seizing and selling a yacht because it’s owned by a sanctioned Russian is a different proposition, though. A half-dozen 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? Who would be able to sleep at night? 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 lawmakers 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 around confiscation, including where “all the evidence for a criminal offence is present, but a conviction is not possible.”
Billions of dollars’ worth of Russian assets will likely remain in legal limbo for years. The gleaming superyachts, stuck in sunny ports, polished and washed and air-conditioned, will be the most tangible evidence of the West’s struggle to dismantle Russia’s elite—and punish Putin for waging war. —With Joe Schneider and Gaspard Sebag
©2022 Bloomberg L.P.
