Megayachts and oligarchs: ‘We’re scared of getting close to wrong money’

The Flying Fox superyacht, linked to Russian oligarch Dmitry Kamenshchik

It's a seven-star resort you can take anywhere - the epitome of freedom and luxury. But as the West goes after the assets of wealthy Russians, the industry is bracing itself for stormy seas ahead.

The sun is rising over the horizon of the Pacific, or perhaps the Gulf of Mexico, or maybe it's the Mediterranean Sea. If you're on board one of the world's multi-million dollar superyachts, luxury and adventure are never very far away.

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 by European authorities. Earlier this month, the Russian-owned Dilbar superyacht - complete with two helipads and the largest yacht pool ever built - was seized by German authorities.

The week before, in Spain's Balearic Islands, the US seized its first Russian superyacht: a 77-metre vessel called Tango, equipped with its own beauty salon, pool and beach club, belonging to sanctioned Putin ally Viktor Vekselberg.

With approximately 10% of the world's superyachts owned by Russians, and a tightening stranglehold on the international assets of those with ties to President Vladimir Putin, industry insiders say the high life on the high seas may be getting a little choppy.

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

"I think everyone is very scared of getting too close to the wrong money," said analyst Sam Tucker, who works for maritime research firm VesselsValue.

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 longer than 24 metres (79 feet), though some are four times that size.

Naval architect Greg Marshall likened these mega-boats to "sovereign islands". He is currently designing a 122-metre-long boat, which will feature multi-storey waterfalls cascading from pool to pool on different decks, an 2,400-square metre spa and a 1,500-square metre gym.

Russians are known for liking their vessels supersized. The average Russian-owned superyacht in 2021 was 61 metres in length, compared with 53 metres for American-owned yachts, according to analysis by the SuperYacht Times.

Then there are the expensive customisations. Phi, a Russian-owned vessel detained in the UK last month, features an "infinite wine cellar" in its lower deck lobby. The Axioma, seized in Gibraltar, has a 3D cinema, a two-storey salon and an on-board water slide, allowing guests to move from the sun deck to the seas below in seconds.

• The hunt for superyachts of sanctioned Russian oligarchs

But with sweeping western sanctions making it difficult for Russians to do banking transactions, the superyacht industry could take a dip, market analyst Mr Tucker warned.

Operation costs typically run about 15% of the yacht's value each year, which means annual upkeep alone can cost hundreds of thousands of dollars, or even millions.

Superyacht design, like that of the new Victorious yacht, is suited to owner's tastes

Russian yacht owners may struggle to pay crews or maintenance if they can't transfer money, although cryptocurrency is increasingly becoming a popular way of conducting transactions.

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

"We have to undertake that kind of responsibility," Mr Adams told Bloomberg News.

But boat manufacturers, many of whom are in northern Europe, may also have to stop work on new projects, lest they run foul of sanctions. Mr Tucker said most people in the industry are avoiding doing business with Russians even if they're not on the official sanction list, because ownership is not always transparent.

In some cases this means superyachts sitting idle in ports around the world, as industry workers avoid doing business with those on the West's Most Wanted list.

"No-one knows quite who owns this and you can't legally sell it. You can't work on it. You can't move it. What do you do? It's kind of just stuck in the shipyards," Mr Tucker said.

Florida-based yacht broker Bob Denison agreed that most people in the industry are avoiding doing business with Russians right now.

"We would of course need to honour our country's position on Russia," he added.

These sanctions will likely affect the thousands of people around the world who work as crew on these vessels. A large vessel might employ anywhere from 50-100 staff, with about half expected to be on the boat and half on leave at any given time.

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

Some boats may have made a run for more friendly waters, travelling to ports in countries that have not imposed sanctions. Former Chelsea FC owner Roman Abramovich has docked two superyachts in Turkey, media report. Others have been spotted in Dubai.

More still have been seen in the Caribbean, though Mr Tucker said these yachts may not be fugitives: the Caribbean is generally a popular spot for yachting during the winter.

Before the war the industry was experiencing an historic boom.

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

Richard Lambert, whose yacht brokerage firm Burgess reported a record-breaking $2.2bn in sales last year, says the global yacht market has seen a stunning increase.

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

For the ultra-wealthy, a visit to your private floating island is among the safest options for travel, and expanded work from home flexibility means these trips can be indefinite, with billion-dollar deals made from the Caribbean blue.

With yachting's high season approaching in the summer, when boats typically sail for the Mediterranean, Mr Tucker said we will have to wait and see for the economic impact.

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

"Some yacht owners are lovely philanthropists, some are awful, naughty people."

"Society might now be viewing yachts as these big things that Bond villains have, right? Do I really want to be associated and painted with the same brush?'"