#YachtWatch: What Next For The Floating Palaces?

March 23, 2022   |   Tags:
#YachtWatch: What Next For The Floating Palaces?

Authored by Alex Finely, via the Project-Brazen substack

Now that a number of yachts allegedly owned by Russian oligarchs have been detained (nine, at the time of this writing), I thought we should take a look at what may happen next, practically speaking. Spoiler alert: no one really knows, and all the players in the Yacht Watch game face big challenges. (Ed. Note: Check out Alex's first column on the big yachts owned by the oligarchs from two weeks ago.)

First up: The Authorities.

So far, Italy has detained three yachts, Spain three, and Croatia, Germany, and France one each. Now for the hard part.

The main challenge will be confirming who actually owns these yachts. Officials can detain them for a certain amount of time based on suspicion or open source reports, but eventually beneficial ownership, or the individual who actually owns the yacht (as opposed to the company listed as the owner), has to be confirmed by untangling the financial web of shell companies and management companies that shield the ultimate owner. How much time do they have to do this? Unclear. But based on government press statements, in all likelihood  authorities plan to detain the boats as long as sanctions are in place or until it is proven the owner is not on the sanctions list.

What does it mean that these boats are detained? Do they have chains wrapped around their propellers to stop them from moving? Unfortunately, it’s much less exciting than that. Customs and port authority officials will not give clearance for any of them to leave. They’ll just sit (or float) where they currently are.

Authorities also face challenges related to the yachts that have fled. It remains unclear what kind of cooperation, if any, European, American, and British authorities might get from countries like the Cayman Islands that flag these ships, or from the countries where many of the boats seem to be heading, including the Seychelles, the Maldives, and the United Arab Emirates.

But don’t worry. The oligarchs face their own sets of complications. Consider the boats that are detained.

A number of crew members for some of these boats have already been dismissed. They still have to be paid for the period they worked. Additionally, these boats require a lot of upkeep just to stay afloat, not to mention the servicing required for those  swimming pools that turn into discos and the retractable helicopter hangars. Here, European  authorities might be helping the oligarchs out: They’ve announced they will take measures to guarantee the security of the boats.

A case in point: Dilbar, the largest private mega yacht, owned by Alisher Usmanov. She’s currently sitting in a dry dock in Hamburg, Germany, and won’t be leaving anytime soon. Lürssen, the shipyard that had been refurbishing the ship for Usmanov, is reportedly paying for a small crew of five to service the yacht. For comparison, in normal times, Dilbar has a crew of between 80 and 95 people. But still, some amount of maintenance will continue.

I would imagine the shipyards are none too pleased with this arrangement. What do you do when a 512-foot yacht weighing with a volume of nearly 16,000 gross tons is taking up space that could be used by a paying client?

So, what about the lucky oligarchs who managed to yank their yachts out of waters where authorities could grab them? Where do you even go with a giant yacht? Some ports, including in the United Arab Emirates or China, might have the space for so many mega yachts, but it is not clear they have the infrastructure and knowledge to provide the sophisticated maintenance needed to keep a $600-million yacht with an anti-missile defense system afloat.

There are also more mundane bureaucratic hurdles that might stop the yachts: a lack of insurance. Lloyd’s Registry announced this week they will stop providing any Russia-linked ships the certification that allows them to be insured. In practice, this might prevent crew from operating the yachts.

Now let’s imagine these ships make it to Vladivostok, the headquarters for Russia’s Pacific Fleet. They might have more experience servicing anti-missile defense systems, but let’s not forget the Russian aircraft carrier Kutznetsov, considered the flagship of the Russian navy. She never went to sea without her own fleet of tugboats because she was always breaking down. When she went into the shipyard for repairs, a giant crane fell on her, damaging the aircraft carrier even more and destroying part of the shipyard’s dry dock. I’m not sure an oligarch would want to subject his $600-million yacht to such risks.

So, I remain as curious as the rest of you what the future of these yachts looks like. Will local authorities end up spending gobs of money to keep the detained yachts safe and secure? Will the fleeing yachts make it to Vladivostok, only to be left to rot away in corrosive seawater? Will they even make it to such a destination, or will service providers refuse to sell them fuel, as has happened to one Russia-linked yacht in Norway? Yacht Watch will remain on lookout as we navigate these uncharted waters (see what I did there?).

Tyler Durden Wed, 03/23/2022 - 03:30