SYI Town Hall: Superyachting grapples with sanctions
Superyachting is struggling to fathom the impact of sanctions imposed in the wake of the Russian invasion of Ukraine, after the seizure of several superyachts in Europe and a warning from US president Joe Biden. Speakers at Superyacht Investor Town Hall online meeting set out what we know about sanctions and how they are likely to impact the superyacht community.
Their comments followed the seizure of the 282ft (86m) Amore Vero, linked to oil company Rosneft boss, Igor Sechin, in the Southern French port of La Ciotat. The 156m (512-foot) yacht Dilbar has also been named as blocked property by the US. Which means that paying things like maintenance, hiring crew, or mooring fees, in dollars (or by US persons) are forbidden.
The actions followed president Biden’s State of the Union pledge to “go after the crimes of Russian oligarchs” by seizing “your yachts, your luxury apartments, your private jets”.
The capture of assets was not the only penalty for contravening sanctions, Paul Jebely, Withersworldwide, global head of Asset Finance, told Town Hall delegates. “The financial penalties can be very severe – reaching into the millions of dollars. But, more importantly, it can mean incarceration – particularly in view of US sanctions.”
The size and scale of the sanctions were both “staggering and remarkable,” said Jebely. “If this continues for any length of time at this the level, then the survival of the entire Russian financial system – let alone the rouble – is in serious question.” He also questioned the future of the Russian yacht market for the foreseeable future if the situation continued to “its absurd conclusion”.
Superyacht Times iQ says that Russian owners made up 9% of all superyacht owners in 2021, second only to the US. It says Russian owners are also the second largest owners of new-build yachts, with 13.2% of the market share of new superyachts between 2021-2025
“This is an unprecedented scenario and everyone needs to be on red alert at all times.” The sanctions net is cast so wide and industry professionals should beware what is known as facilitation. Primary and secondary sanctions apply not just to named sanctioned individuals but also the potential community of business professionals who work with them. That could include lawyers, yacht brokers, builders, insurers and others.
There was an equally worrying warning from Robb Maass, Alley, Maass, Rodgers & Lindsay, head Maritime Department. “It [sanctions] are going to have a chilling effect on transactions with Russians. I don’t just mean Russians who are on a declared sanctions list. The problem is the sanctions apply not just to individuals on the list but to others who might be fronting for these individuals.”
For example, Maass explained a client had recently refused a yacht deal because they strongly suspected the self-declared owner of the yacht was not the person who provided the finance. Instead, the source of the finance was a sanctioned individual.
Janine Alexander, Collyer Bristow, partner warned the effect of sanctions on all markets would be extraordinary severe. “We have already seen chaos in the oil market and the derivatives market for commodities,” she said. It was important to remember the sanctions regime had been established to cripple the Russian economy and in the words of president Biden to punish the oligarchs for their role in destabilising Ukraine, Alexander added.
“The sanctions will make it very difficult for anyone to do business with anyone Russian for as long as it carries on in most sectors,” she said.
Of paramount importance was to seek legal advice. “If a designated [sanctioned] person owns a yacht and you are involved in any business with them in any way, in any way, it is very important to get legal advice,” said Alexander. “Look at the sanctions in detail and decide what can and cannot be done.” An added complication was that the rules varied from country to country. For example the EU specified a wind down period of a few months to honour contracts entered into before February 23rd to deal with ongoing business. But no such wind down existed in the UK – although exemptions were available.
Quentin Bargate, Bargate Murray, founder & CEO, highlighted the long chain of potential repercussions arising from sanctions. When it comes to construction contracts, many suppliers to yacht builders are increasingly unwilling to supply them, if projects could be linked with Russian ownership. Bargate worried that sanction probihitions may extend beyond designated individuals to everyone of Russian or Belarusian nationality.
“If you not sanctioned you are able to do most of things a person of another nationality is able to do,” he explained. “So, it [sanctions] should not be seen as targeted against Russians or any other particular nationality. Otherwise, we are in danger of going down a very slippery slope.” Robb and Jebely also worried about how sanctions appeared to lack due process or natural justice.
Speakers also worried about the implications of sanctions for superyacht crews spread worldwide. Events are developing rapidly and close monitoring was key to react as quickly as possible, speakers agreed.
If you’d like to know more about sanctions and their impact on private jets, please check our sister title Corporate Jet Investor’s Semaphore Intel – which uses Open-Source Intelligence to protect investors’ time, business and reputation.
Meanwhile all speakers expressed sympathy for the plight of Ukraine as it suffers the consequences of the Russian invasion. Bargate, of Bargate Murray, said: “I do feel deeply sorry for the tragedy that is unfolding in that country. Everything else seems relatively unimportant.”