Yachts confiscated from Russian oligarchs affect the industry 1:07
(CNN) --
In recent weeks, superyachts have been making headlines for all the wrong reasons, as more and more vessels linked to Russian oligarchs are temporarily seized.
Some of the world's largest and most expensive superyachts, such as Sailing Yacht A, valued at more than $500 million, and the Amore Vero yacht, valued at $120 million, are languishing in ports and shipyards after the United States, the United Kingdom and the European Union imposed sanctions on Russia as part of a foreign pressure campaign for the invasion of Ukraine by Vladimir Putin.
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“We are joining with our European allies to find and seize their yachts, their luxury apartments, their private jets,” US President Joe Biden said in his State of the Union address earlier this month.
"We will go after your ill-gotten gains."
In the weeks since then, Axioma, a superyacht linked to another Russian billionaire, has been detained by Gibraltar authorities, while a group of Ukrainian sailors were seen attempting to block a yacht linked to billionaire football club owner Roman Abramovich while docked in Turkey earlier this week.
The Maldives have also become a "safe haven" for yachts at risk of being seized, and data from live vessel tracking site Marine Traffic indicates that some known vessels are on their way to the ocean island nation. Indian, or are already there.
Buyers doubts
Solaris, a superyacht linked to Russian oligarch Roman Abramovich, appears docked in Bodrum, Turkey on March 21.
Credit: Ali Balli/Anadolu Agency/Getty Images
This sudden turn of events has dealt a serious blow to the superyacht industry, which has been booming for the last two years, with demand soaring more than ever.
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Figures from Boat International's Global Order Book indicated that the number of boats in production or on order worldwide reached a new record at the end of 2021.
However, there are reports that production of a number of superyachts being built for the Russians at shipyards based in Europe has been paused, as the vessels now come under new G7 and European Union sanctions that ban the export of luxury goods to Russia.
"We've had a great couple of years in the industry," international luxury business strategist Alice C. I'Anson Widdows tells CNN Travel.
"Demand has outstripped supply. And all of a sudden we stop production halfway through."
Circumstances also appear to be having an impact on sales, at least in the short term.
Raphael Sauleau, chief executive of Fraser Yachts, says he has noticed some hesitation among Europe-based buyers in recent weeks, but attributes this to uncertainty about how events will unfold in Ukraine rather than the sanctions themselves.
"In general, some buyers, especially those from Europe, are a bit hesitant," Sauleau tells CNN Travel.
“But that has nothing to do with the sanctions that we are seeing around the world, it is more a question of them wanting to wait to see how the conflict evolves before they commit to buying a yacht.”
Although Russian-owned superyachts are estimated to only make up 7-10% of the global fleet, they are often the most prominent due to their size.
"Of course, these yachts and their owners make the headlines because they are often the largest in the business," adds Saleau.
"For now, the demand for yachting and sailing that we have seen soaring around the world in the last two years remains very prevalent."
Private yacht broker Denis Suka, who runs the popular luxury yacht-focused Instagram account @theyachtmogul, says he has stopped posting about Russian-owned superyachts altogether due to the hostile response they have received since the rules were introduced. sanctions.
Increased customs controls
The yachting industry has been booming for the past two years as demand increased during the pandemic.
Credit: Jeremy Suyker/Bloomberg/Getty Images
"The most attractive yachts for our audience were the big Russian yachts," he says.
"But all of that has been turned upside down by what's going on. No one wants to see them anymore."
Suka says he has also noticed a drop in sales over the last month as buyers grapple with unease over the conflict in Ukraine.
"Sales have been falling," adds Suka.
"I think even the biggest brokerages are affected by what's going on. I'm seeing a lot of impact in the industry. Everybody is worried right now."
In addition to the impact on sales, the turmoil has caused other changes, Saleau admits, such as an apparent increase in controls on board ships by local customs, especially in Europe.
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"If the boat is not owned by a person included in the sanctions list, the yacht can circulate freely," he explains.
"But we have seen an increase in controls in Europe."
"It can be a strain for the crew, because obviously the yacht crews are international. So it can be stressful for them to go through this situation."
"Our teams are doing everything possible to support and guide the crew of any of our yachts or people affected by the current situation."
It is believed that owners typically spend at least 10% of the purchase price on the annual cost of maintaining and running their yachts.
According to Luxury Yacht Group's online cost calculator, annual wages for workers aboard a 150-foot yacht are likely to reach $860,850.
However, the seizure of some of the world's largest yachts has left crew members suddenly out of work, and in some cases out of money.
"This is a €30 billion a year industry, providing thousands of jobs," says Widdows, who has 25 years' experience in the superyacht business.
"It is important to understand that each yacht is a business that generates income, that supports an industry of companies and families."
It also notes that many of the yacht workers and suppliers who are subject to the sanctions are not from Russia.
"Many are now left in the middle," he adds.
"There are stories of crews that haven't been able to get paid. Now everyone is interested in keeping things running and in production and people keeping their jobs."
The discretion of the owners
Amore Vero, a yacht linked to Russian businessman Igor Sechin, was seized in La Ciotat, in the south of France.
Credit: Douane Francaise/AP
The outbreak of war has also caused prices to rise.
In the United States, gasoline prices have almost doubled in recent weeks, while in Europe, where prices were already relatively high, there have also been increases.
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"There are people who complain about filling the tank in their car," says Suka.
"But filling a megayacht, that's something to worry about. The price has doubled."
The cost of materials has also skyrocketed in some parts of the world, with items such as aluminium, from which a number of superyachts are now built, reaching record levels as a result of the conflict.
Plus, there's the element of privacy.
Ownership of a yacht can be very difficult to determine, especially if the owner wants to avoid having his identity revealed.
"If the beneficial owner wants to make it difficult, it can be very difficult to find out who the real owner is," Benjamin told CNN.
Maltby, an expert in superyacht law, by email.
"Almost all large yachts are owned by companies, as they are sources of responsibility that owners prefer to delegate."
However, this level of secrecy is now proving more of a problem as clients are starting to ask more questions about the background of the yachts they hire.
"Sometimes we see that some charterers want to know who owns the ship, or vice versa," explains Sauleau.
“Owners want to know who is going to be on their boat during the summer.”
"So it's a new turn of events where we have to be very, very careful doing our due diligence on all fronts."
However, he notes that a number of Russia-linked superyachts are privately owned and not available for charter.
As for the superyachts that have already been seized, it is unclear how long they will be held for, nor what condition they will be in if or when they are released.
Maltby stresses that it is unusual for a number of yachts to be taken out of service in this way, noting that on the rare occasions that a yacht is retained, it is rather a measure to compel the owner to provide financial security to a claiming party. against him.
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unprecedented situation
"The current situation is unprecedented," Maltby tells CNN, before explaining that while authorities "can carry out basic maintenance" on yachts, they are likely to view the vessels as assets and care less about their maintenance. .
"Without intensive maintenance, yachts can quickly deteriorate, especially if left in the water, allowing galvanic corrosion to erode key metal parts," he adds.
"Regarding the long term, the sale of the yachts seems to be the most popular option within the superyacht sector."
As for the unfinished Russian-commissioned yachts currently in production, there are already reports that non-Russian buyers have made bids to take control of the projects.
“I think the yachts under construction will be bought by other players, because the Russian owners can no longer own them,” says Widdows.
“That is the biggest impact that we will record in the next two months, because if the ships cannot be delivered, that is a real headache for the sector.”
Sauleau points out that the spate of recent stories about "repossessed" superyachts hasn't done wonders for the image of a sector that has benefited from more positive coverage of late.
“There is much more to yachting than mega yachts or, as it is in the news at the moment, Russian oligarchs,” he says, stressing that any negative publicity “is obviously very, very minor compared to the terrible events in Ukraine.”
While Widdows is also aware of the damage the controversy may have done to the industry's reputation, she is encouraged by the way the boating community has come together to help those affected by the conflict.
According to Yachties United, a website that offers social support, shelter and donations to crew members in need, there are more than 600 Ukrainian yachtsmen with families in Ukraine.
"The industry relies on the strength of relationships and their ability to respond quickly in a crisis," says Widdows.
"There are several initiatives, from Palma and even Monaco, with all the nautical companies united to support the efforts and provide medical care, food and clothing for Ukraine."
"On Friday a truck left Antibes [in France] with food and medical supplies, and all of that was generated from the yacht business."
Although it is impossible to predict how the situation in Ukraine will develop, it is certainly possible that more wealthy Russians will be added to the sanctions lists, which means even more yachts could be frozen.
If this continues, the effects will undoubtedly be felt around the world.
"The sanctions for Russian residents are very strong, especially in Europe," admits Sauleau.
"So this may have an impact on the sales market and possibly the charter market in the future."
But Sauleau maintains that demand remains high overall, noting that US buyers appear to be less hesitant than residents of Europe.
"We haven't seen that [indecision] in the United States yet."
In 2020, US and Canadian buyers together accounted for 24% of all sales of new-build yachts over 40 meters to buyers whose nationality was known, according to data from the SuperYacht Times iQ intelligence platform.
Hard times
Italian authorities seized the 65-meter-long Lady M yacht in the port of Imperia on March 4, 2022.
Credit: Giovanni Romero/IMAGO/Reuters
"I think right now we're just waiting to see what's going to happen," adds Sauleau.
"One possibility is that there is some reluctance on the part of US charters to come to Europe this summer."
If this turns out to be the case, it will undoubtedly cause problems for the European market, which is still recovering from the impact of the global pandemic, and which is likely to be affected by the loss of income from those yachts that were seized or are out of service.
"This industry supports a lot of livelihoods throughout the western Mediterranean and in some of the vacation spots," says Widdows.
"I know they were affected during the pandemic. So if they don't get the income that they usually do during the summer season, it will affect their livelihood."
"And if they have another season where they don't get the usual ships, what effect will that have on their balance?"
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Although Suka has focused on the US market in recent months, he admits he is concerned about the implications for the European shipping market if the situation drags on into the summer.
"The longer it lasts, the worse it will be," he says.
"These are quite difficult times."
Although it remains unclear whether the current situation in Ukraine, coupled with the sanctions, will have serious long-term effects on the sector, there is currently great optimism about the future.
“We get charter requests from all over the world and people still want to sail,” says Sauleau.
"So I think it is something that remains to be seen if it really affects our sector to a greater extent."
"Obviously it's put a lot of stress on people in our industry, but as things stand, business is going on."
Widdows shares this sentiment, acknowledging that the yachting world has faced many difficult challenges in the past, including the most recent global pandemic, and has come out stronger.
"Depending on how the situation evolves, the nautical sector has resources. It is resilient and will recover," he adds.
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