04/06/2022, 8:30 p.m
5 min reading time
It is said that operating a mega yacht costs between 15 to 20 percent of the purchase price every year. But who actually pays the millions when a yacht is confiscated? And what happens if you don't take care of the ships?
Alexei Mordashov brought his "Nord" from the Seychelles directly to Vladivostok, Vladimir Putin had his "Graceful" brought to Kaliningrad even before Russia invaded Ukraine. But not every Russian oligarch managed to escape to a safe harbor with his yacht. At least 13 ships with a total value of 2.25 billion US dollars are currently not allowed to leave their current berths, some have already been officially confiscated. Only last weekend it hit Wiktor Wekselberg's "Tango" in the port of Palma de Mallorca. What actually happens to the ships? And who takes care of their maintenance?
Ongoing service is essential for the preservation of mega yachts and for the environment – unfortunately also incredibly expensive. Benjamin Maltby, a yachting law expert, told Business Insider that the cost of running a ship is around "15 to 20 percent of its total value." In the case of Andrei Melnichenko's sailing yacht "A", which is being held in the Italian port of Trieste and which is said to have sold for $600 million, the estimated price is $115 million. Each year.
Governments need to care
Those huge sums come from labor costs, repairs, fuel, insurance, taxes and exorbitant mooring fees, which can easily run into the tens of thousands a month, Maltby said. This also explains why the charter fees are astronomically high if you want to use such a yacht for a holiday yourself. For example, a week on board the 107 meter yacht "Lana" costs at least 1.8 million euros.
However, if an owner is no longer able or unwilling to take care of his yacht due to sanctions, someone else would have to take care of it, the expert continues. He explains that under British law there is even a duty of care, since a seizure makes a public authority the pledgee and must preserve the value. Anything else would be "embarrassing" for the governments in his eyes.
However, it is apparently completely unclear who will pay the bill in the end. As Reuters reports, the operators of the port of La Ciotat, for example, where the "Amore Vero" was arrested weeks ago, are busy writing invoices. The ship is said to belong to Igor Ivanovich Sechin, who denies any connection to the "Amore Vero". The French government also pays nothing.
"We continue to issue invoices," Alice Boisseau, communications officer for La Ciotat Shipyards, told Reuters. When asked who will foot the bill, she said, "We don't know."
But the work still has to be done: A poorly maintained ship can become derelict "within a few weeks," explains Anna Barford, campaign manager for Canadian shipping at the environmental organization Stand.Earth. Neglect sets off a real chain reaction: the yacht's waste water can become dangerous for fish, and as soon as oil leaks, the damage to the surrounding waters is difficult to stop.
Follow oligarch yachts live: Some ships confiscated, others are on the run, a few are stuck – two in Hamburg
Yacht Name: Crescent (IMO: 9785108)Estimated Price: US$600 millionLast Seen: Confiscated in Tarragona, Spain (Data retrieved 17 March 2022)Owner: Igor Ivanovich SechinMakes money with: Oil company Rosneft
Oligarch yachts: if you rest, you rust
Damage to the ship's hull is also possible during long lay times, caused by so-called galvanic corrosion. It occurs when different, interconnected metals are surrounded by a common electrolyte (seawater, rainwater, humidity). In the medium term, this led to rust, and in the long term even to pitting on the ship's hull.
If a yacht lies in a harbor basin long enough without any care and shows corresponding damage, there is also a risk of the seaworthiness certificate being withdrawn, which in turn results in the insurance being terminated. If there was an oil spill, no one would pay to clean it up.
In order to prevent this, Barford reveals in an interview with Business Insider that the ships – like the “Dilbar” in Hamburg – should actually be put into dry dock. But that is very expensive, they say. Not only do you need a suitable place for this, you also have to clean the yacht thoroughly when docking and then store it correctly.
Hamburg is lucky
Due to this complicated situation, people in Hamburg are also very happy that Alischer Usmanow's "Dilbar" is already in dry dock at Blohm & Voss for maintenance work. A Senate spokeswoman told Stern that the legal situation was "very difficult" and the ship "cannot simply be confiscated". However, since the "Dilbar" is missing the crew anyway due to the sanctions against Usmanov and the lack of salaries and the ship is currently "not seaworthy", there is time "to deal with the situation calmly", it is said. Stern recently reported in detail on the fate of the mega yacht.
The current sanctions state that property of the Russian elite, who "enriched themselves at the expense of the Russian people" and "aided" Putin in his invasion of Ukraine, "will be frozen and blocked from use." So there is no talk of expropriation. But most oligarchs cannot take care of the ships either – many are prohibited from trading with foreign companies and from paying for goods and services with US dollars.
It seems as if one hopes that the problem will eventually solve itself. In Italy, frozen assets are administered by a publicly appointed trustee and maintenance costs are borne by the state. They must later be recovered from the owner, or the state can sell the asset to defray its costs.
In France and Spain, the running costs of a "frozen" or impounded yacht remain the responsibility of the owner. This then leads to a situation like that in La Ciotat – invoices are written, but the recipient is missing. The consequences of this, especially when the periods are getting longer and longer, are not foreseeable. Shipyards are blocked, owners are not allowed to sail, nobody pays the horrendous bills and everyone insists on their rights – a perfect storm.
Years of investigation ahead
Maltby explains the overall situation to the news channel CNBC: "We are in unexplored waters. The situations we are experiencing now have never existed before." In order to dispossess a person, you have to be able to prove a crime beyond any doubt – as well as the ownership of yachts or other investment properties, such as villas. However, since oligarchs are rarely if ever direct owners, but rather own their material assets through letterbox companies, this is also a challenge and can take years.
Until then, you can put yachts or villas on hold for investigation purposes, but you cannot sell them or use them yourself. But you have to take care of it – and that costs a lot of money. Even more so when you let a yacht go to waste and, after years of investigation, only have to dispose of a worthless pile of steel. Nobody knows who will pay for it.