Freezing Oligarchs’ Assets

Since the Russian invasion of Ukraine, European and American authorities have moved aggressively to freeze assets of Russian oligarchs.  They are pressuring Russian President Vladimir Putin to cease his war on the independent and sovereign nation by cutting off his money supply.

Italy has been at the forefront of this development.  In early March, Italian authorities seized in the port of San Remo, a superyacht Lena, which belonged to oligarch Gennady Timchenko.  It also impounded in the port of Imperia, Lady M, a 65-meter superyacht, which was owned by Russia’s richest man, Alexei Mordashov, a steel plant owner on the European Union’s sanctions list.  Later that month, the Italian police confiscated in the port of Trieste the yacht Sy A owned by Andrey Melnichenko, who made his fortune in fertilizer production and coal and is one of Russia’s 10 richest people.

Besides luxury yachts, Italian authorities have seized villas, condos and other assets in Sardinia, the Ligurian coast and Lake Como belonging to Russian billionaires.  Given the predominant weather in Russia and the rich coastline and beauty of Italy, it is no wonder that these Russian businessmen seek solace and retreat in il Bel Paese.

The most recent seizure was the $700 million superyacht Scheherazade in the Tuscan port of Marina di Carrara.  The Italian finance ministry announced that an investigation had established that the ship’s owner was an individual that “threatened peace and international security” and that the individual’s actions amounted to the “undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.”  It added that it could not name the individual until the European Council published it.

Yet speculation on ownership abounds.  For weeks, Italian media outlets reported that Eduard Khudainatov, a Russian oil tycoon who is not a billionaire and was not under sanctions, owned the yacht.  He is considered close to Igor Sechin, a powerful oligarch and close friend of Putin’s who is on the sanctions list.  However, the question was raised about how Khudainatov could afford to purchase one of the world’s most luxurious yachts.  Crew members and shipyard workers apparently openly discussed that the vessel unofficially belongs to, and is for the use of, Putin.  Investigators working for jailed Russian opposition politician Alexei Navalny say that the yacht’s owner is Putin himself.  They published a list of the crew who worked on the yacht, which included members of the Russian state agency responsible for Putin’s personal protection.

Most large yachts and the assets of Russia’s ruling and billionaire class are generally kept in tight secrecy.  They are registered by offshore corporations in island tax havens to obscure their ownership.  To erase their fingerprints further, owners use shareholders, directors and family members as proxies.  The Scheherazade is registered in the Cayman Islands in the Caribbean and is officially owned by a company in the Marshall Islands in the Pacific.  As the pressure mounts on Russian oligarchs, many of their targeted vessels have moved into the waters around Turkey, the United Arab Emirates and the Maldives, which have not imposed sanctions and are not seizing assets.

Freezing a yacht means that the owner cannot sell the ship, transfer ownership or provide maintenance services.  It’s one thing for a country to confiscate a yacht, but a country cannot take ownership and therefore cannot sell it at this time (if there is a secondary market).  Extensive legal battles are expected.  To take ownership of an oligarch’s yacht, governments have to show that the property was part of a crime.  It may be challenging to prove that yachts are “proceeds of illegal activity” versus purchased through legitimate business channels.

The United States Congress is considering a bill called “Yachts for Ukraine” that would allow authorities to seize Russian-owned assets of $5 million or more and would permit governments to sell the assets and send the proceeds to aid humanitarian and reconstruction efforts in Ukraine.  As President Biden addressed Russia in his recent State of the Union address, “We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets.  We are coming for your ill-gotten gains.”

This entry was posted in English, Foto, Italia, la politica, Politica, Toscana. Bookmark the permalink.

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