Could sanctions leave the oligarchs’ super yachts dry in Spain? | Russia
Among the many stark white boats lining Barcelona’s historic port, the super yachts of the super rich stand out.
If they are less numerous than usual at the moment it is because most of them are still wintering in the Caribbean. However, overshadowing the small fry (super yachts are roughly defined as starting at 25 meters in length) are a number of lavish vessels, including yachts belonging to the King of Bahrain, Walmart heiress Nancy Walton Laurie and to media mogul Barry Diller.
Among them are three ships belonging to some of the wealthiest men in Russia. They have a combined value of hundreds of millions of dollars. Their owners could be forgiven for feeling a little nervous as Western governments ponder who to target next in a threat of sanctions against Russia in retaliation for its invasion of Ukraine.
The three yachts are being refitted in the MB92 shipyard, which specializes in the maintenance of super yachts. The largest is the 139-metre Solaris, flying the Bermudian flag, which is owned by Roman Abramovich, the man who owns 29% of mining company Evraz, as well as Chelsea Football Club.
Next is the 74-meter Aurora, owned by Andrey Molchanov, who has a majority stake in LSR Group, Russia’s largest producer of building materials, and a current net worth of 1 billion euros, according to Forbes magazine.
Finally, there is the 70-meter Galactica Super Nova, owned by Vagit Alekperov, Chairman and CEO of Lukoil, in which he has a stake of around 20%. He also owns 36.8% of Spartak Moscow football club.
Lukoil is seen as a potential target for European sanctions, given the energy giant’s importance to the Russian economy and the fact that it is already under US sanctions. It is a business of strategic importance for Russia, and Alekperov was among a gathering of business leaders summoned by Putin to a meeting at the Kremlin on Thursday.
Since 2017, Alekperov is also co-owner of Marina Port Vell, the marina of Barcelona. The old port, which dates back to Roman times, was refurbished for the 1992 Olympics and in 2010 it was handed over by the city’s conservative government to the London-based Salamanca group to be turned into a marina for super yachts.
In 2017, ownership passed to Qatari investment bank QInvest and a fund with several international investors, including Alekperov as a stakeholder, in a concession that expires in 2048. The port is investing 20 million euros ( £16 million) with the aim of becoming the largest super yacht marina in the Mediterranean.
Abramovich is one of 35 people who should face sanctions, according to a list compiled by Russian opposition leader Alexei Navalny’s organization.
The names of the 35, who range from businesspeople to media owners, government officials and politicians, were read out in parliament last week by Liberal Democrat foreign affairs spokeswoman Layla Moran. She said: “We have to start by considering the names of those identified by Alexei Navalny and his team as ‘key enablers’ over a year ago.”
Abramovich holds both Israeli and Portuguese nationality and his lawyers insist that “he is not subject to sanctions, and this has been publicly confirmed by the prime minister.” They said neither he nor Evraz “fit the description of those likely to face sanctions, as set out by the Foreign Secretary.” Alekperov and Molchanov did not respond to requests for comment.
The three businessmen are not on any sanctions list. However, US President Joe Biden and Boris Johnson have threatened broader action against business owners in sectors such as energy, mining and construction, which puts individuals such as Alekperov in the spotlight. field of those who could be affected.
“The UK’s new designation criteria allow a wide range of companies to be designated as targets of financial sanctions,” says sanctions expert Stacy Keen of law firm Pinsent Masons. “With regard to strategically important Russian companies, the regulations specify that this applies to those operating in the chemical, construction, defence, electronics, energy, extractive industries, financial services, transport and information, communications and digital technologies.”
So if such sanctions were applied, what would it mean for the yachts of the oligarchs in Barcelona and elsewhere?
“The way sanctions work is that they don’t seize assets, but freeze them, and individuals cannot use them to generate funds,” Keen explains.
“If the EU were to make a designation equivalent to that made by the UK, no Spanish or European company would be allowed to provide services, fuel to the crew, for the use of the yacht. Indeed, the yacht could not operate.
How this plays out will depend on the alignment of sanctions between the main players – the US, UK and EU. All three promised coordinated action, and while there are some differences in the actions taken in recent days, there are areas of overlap.
However, this is unlikely to have a ripple effect in the booming super yacht market, where order books have been full for at least five years. According to MB92, 185 super yachts were built in 2021, compared to 148 in 2019. Covid has led to a boom in luxury ships, which provide an ideal form of social distancing for the 1%. A record number of ships were moored off the coasts of Italy and Greece in 2021.
Long waiting lists have also boosted the used super yacht market, with some vessels selling for more than their original cost.
Business grows and so do ships, as billionaires compete to outdo each other with their floating palaces. Solaris, which cost $600 million, was built last year and can would have accommodate 36 guests in its 18 luxurious cabins as well as 60 crew members. There is a gym, swimming pool, sauna, beauty salon and jacuzzi. It is said to have state-of-the-art security, including a radar-controlled missile detection system, bulletproof windows and armor protection. The yacht was spotted sailing up the Catalan coast on Wednesday, possibly during sea trials after her refit in Barcelona, before returning to her moorings.
These yachts are not only extremely expensive to build, they cost a fortune to maintain and outfit. On average, owners have to spend 10% of the purchase price per year to keep one afloat, which means Solaris has running costs of around $60 million per year.
Solaris is just one of Abramovich’s four yachts. The 170-meter Eclipse, currently moored in the Caribbean, is the second largest in the world, after the 180-meter Azzam owned by Khalifa bin Zayed Al Nahyan, president of the United Arab Emirates. The Eclipse was at the Barcelona shipyard for a refit late last year.
Txema Rubio, commercial director of MB92, explains that the yard can work on up to 25 yachts at a time. Refitting costs on average around €900,000, although in some cases it can be as high as €20 million.
Despite their large size, some super yachts travel with a “ghost ship” that carries accessories – such as speedboats, jet skis, cars, helicopters and even submarines – that owners don’t want to clutter their showcase yacht. Renovations take a minimum of three months, sometimes much longer, during which the shipyard may have to accommodate hundreds of crew members.
Part of Barcelona’s popularity as a super yacht marina and shipyard is that the crew can spend months in one of the world’s most attractive cities while the ships are moored or in dry dock. If sanctions are imposed, the crews of the oligarchs could find themselves with a lot more free time.