- It's been two years since Russia invaded Ukraine, leading to sanctions against Russian oligarchs.
- Many of their superyachts were seized or frozen, leading industry insiders to question their fate.
- The yachts, some of which are worth hundreds of millions of dollars, remain in a state of limbo.
More than two years after Russia invaded Ukraine, the boating world still doesn't have many answers about what's going on with the very large, expensive elephants in the sea: oligarchs' superyachts.
The war prompted many governments to enact sanctions against Russia's richest, including seizing their superyachts worth hundreds of millions of dollars. But it's unclear whether they can be sold or who'd buy them, leaving ports peppered with massive boats stuck in a floating limbo.
"The Russian problem, it's becoming a bigger and bigger and bigger problem," one luxury yacht broker told Business Insider at the Palm Beach International Boat Show last week. Like many others, he requested not to be named, given the sensitive nature of the matter at hand and the generally discreet nature of the industry.
Russia has been a massive player in the massive boat market for a long time. In August 2021 — about six months before Russia's Ukraine invasion — Russians owned the second-largest share of yachts over 40 meters in length, according to a report from the industry publication SuperYacht Times.
They were responsible for 16% of new build superyacht purchases in the decade preceding the report and are known for splashing out on extravagant interiors and unique features. (One builder BI spoke to recalled a mandate from an oligarch for a large safe in the owner's cabin in which he could keep his rifles. The builder later learned he'd use them to skeet shoot on deck.)
But those sales have now screeched to a halt as oligarchs get hit by international sanctions. At least a dozen superyachts — worth well over $1 billion combined — have been affected.
And no one is quite sure what will happen to them.
Russia's sanctioned superyachts are hard to buy and sell
The first problem is that many of the yachts are "frozen" — not seized. That means that although the Russian owners can't operate or collect them, they don't technically belong to an overseas government, so they can't be sold without special permission.
Earlier this month, federal prosecutors petitioned a judge asking for consent to sell the Amadea, the 106-meter superyacht that has been docked in San Diego and costs the US as much as $922,000 a month to maintain.
"I've had some inquiries, but all you can tell them is we don't know the outcome yet" of the case, another superyacht broker told BI at the yacht show.
And despite the broker's claim of interest in yachts like Amadea, most ultrarich — or at least their brokers — don't want to go near the vessels with a ten-foot pole, even if the government does get legal permission to sell them.
"How does it look if you bought a Russian boat?" Julia Simpson, a broker at Thompson of Monaco, said. "Even if it's completely legal and normal, there are too many things on the line," she said, like how the original owner got their money and whether that could make the new buyer look bad.
There are also possible legal implications, as it's hard for the government to prove who actually owns the yachts.
"Oligarchs typically structure their ownership of these high-value assets through a web of offshore shell companies and trusts that is designed to conceal the true owner," Joshua Naftalis, a former federal prosecutor who now works for Pallas Partners, told BI.
And if the government does assume ownership, it's highly dependent on court orders. For example, a Russian whose yacht had been seized by the French government regained access to his boat after winning a legal battle in 2022.
"It's a very difficult process to buy them," Ralph Dazert, the head of intelligence at SuperYacht Times, told BI. "There is a high risk of the former (Russian) owner suing you to get the boat back."
He pointed to the Alfa Nero, the 82-meter yacht that Eric Schmidt planned to purchase for $67 million last year in an auction put on by Antigua and Barbuda. He backed out after various parties tried to block the sale, likely deeming it not worth the legal headache.
"When the reason for sanctioning goes away, which it may do," the Russian owners will try to get their boats back, Simpson said. After all, "the government's not going to pay them."'
That said, if sanctions are dropped, the yachts will be worth much less than when they were seized, as a boat not in use deteriorates much faster than one sailing the seas.
"Those yachts need to be used to be kept in shape, kept in condition," the second broker said. "Just having them sit at the dock with a temporary crew on board is not good for the boats."
And the sanctioned Russians who have managed to maintain control of their superyachts won't have an easy time offloading them in the future.
Americans who try to do business with sanctioned oligarchs would have a number of hoops to jump through — like finding a bank to process the purchase, which would be next to impossible. If somehow they did and the government caught wind, they'd face hefty penalties and the transaction would be void.
So Russia's richest have found themselves "stuck" sailing in a select few countries that will let them, like the Maldives, Montenegro, and Dubai.