| Welcome to Bw Reads, our weekend newsletter featuring one great magazine story from Bloomberg Businessweek. The US went to court last week to argue that a sanctioned billionaire is the true owner of a superyacht it seized in 2022. The government is seeking to make Suleiman Kerimov forfeit the Amadea. But another Russian, who isn't under US sanctions, claims he's the owner of the boat, and he's trying to get it back. In November 2022, Stephanie Baker wrote about the Amadea, and other seized yachts like it, which present a difficult maintenance problem for taxpayers. You can find the whole story online here. If you like what you see, tell your friends! Sign up here. Amadea, a superyacht worth $325 million, has been moored in the port of San Diego since June, unused, legally bound there for many more months, likely years. It's 348 feet long, with six decks, and it looms over a waterside park where families come for picnics and anglers for mackerel. The US claims the owner is a Russian oligarch who's been sanctioned; as evidence the government noted his recent purchases of a new pizza oven and superfast jet skis. Already on board were two baby grand pianos (one hand-painted), a 32-foot mosaic pool and what could be one of the last remaining Fabergé eggs, commissioned by Russia's Imperial family and worth millions of dollars. All of that is now under the care of American taxpayers. And a superyacht requires a lot of care. It's not possible to seize one, then leave it docked and untended until Russia's war against Ukraine ends. It sits in a hostile environment of salt water and humidity that causes rust and mold unless the air conditioning is on. Amadea can generate its own power and desalinate its own water, and those systems must be maintained. The propellers need to be run regularly to prevent the buildup of barnacles. The yacht usually has to be washed weekly to avoid dirt accumulation that could damage the exterior and require a multimillion-dollar repaint job. The mooring lines must be monitored so they don't break in high winds or strong currents. Normally operated by a crew of 33, Amadea still needs about half that many—from engineers to deck hands—rotating on board, available in case of fuel spills or fires. The yacht's insurer requires all this maintenance; paying for that policy is another mammoth expense. The docking fees for any impounded vessel in San Diego, at almost $1,000 a day, have come to more than $120,000 so far. The annual cost of keeping Amadea in port: roughly $10 million. When Russia invaded Ukraine in February, Russian-owned superyachts began racing around the world in search of waters beyond the reach of sanctions. Some turned off their transponders so their movements couldn't be tracked. Amadea mostly kept its on as it sailed more than 7,000 nautical miles from Sint Maarten in the Caribbean to the port of Lautoka in Fiji. The yacht arrived on an early evening in mid-April; its crew expected to be relieved in a few days. Instead, three FBI agents immediately confronted them and sequestered the captain and several others in an air-conditioned shipping container, grilling them until early morning. The agents wanted to know why the crew was so large, why they used code names (G-1 and G-2) for passengers and why they were concealing the yacht's true owner, Russian gold tycoon Suleyman Kerimov, whom the US had sanctioned in 2018. They said it was standard practice for superyachts to use code names, according to people familiar with the investigation, and denied helping hide anyone's identity. FBI agents intercepted Amadea's other captain and two crew members during a brief stop in Los Angeles en route to Fiji. They were questioned for hours, too. Then the agents canceled their US visas, cloned their cellphones for evidence and deported them. Kerimov didn't respond to requests for comment. In June, after a protracted legal fight, the US government won permission from a Fiji court to proceed with its seizure of Amadea. The US Marshals Service hired a company to find a crew to sail it to San Diego, then subcontracted other firms to help manage it. There Amadea remains, beside a dock, fenced off with barbed wire and signs warning against trespassing, until the US Department of Justice figures out what to do with it. "As beautiful as it is, it's an eyesore when I'm trying to fish," says Hugo Sanchez, a San Diego resident, reeling in a mackerel in the superyacht's shadow. "It kind of feels like it's rubbing you in the face a little bit, just sitting here."  A Navy boat speeds by Amadea in San Diego Bay. Photographer: K.C. Alfred/San Diego U-T/Zuma Press If there was ever a symbol of opaque, outrageous Russian wealth, it's the superyacht. Using offshore companies registered in tax havens such as Bermuda or the Cayman Islands, Russian billionaires have bought some of the biggest boats in the world. Some have cinemas, submarines, outdoor beds for stargazing. Some have hammams, heated pools, plunge pools and elaborate bars. Some are so big that even the word "superyacht" won't do; those longer than 262 feet are often called megayachts or gigayachts and, according to SuperYacht Times, of the 153 in existence, Russians own the most, about 30. Soon after the war started, the Justice Department set up Task Force KleptoCapture to hunt down sanctions evaders and go after their assets, but few expected it would chase superyachts halfway around the world. The department seized Tango in Spain in March, and five months later FBI agents boarded Alfa Nero in the Caribbean nation of Antigua as part of an ongoing probe. Other Western governments have been busy, too. Italian authorities have impounded at least four superyachts, including one the US says is linked to Russian President Vladimir Putin—a $650 million vessel with two helipads and a pool that can be turned into a dance floor. They also arrested the world's largest sailing yacht, which is worth $550 million and has a main mast taller than Big Ben and a glass underwater observation pod. Germany detained the 512-foot, $600 million Dilbar—one of the world's biggest superyachts by volume—because of its ties to sanctioned billionaire Alisher Usmanov, who says he rented it from a trust he doesn't control. A full search of Dilbar required more than 60 police officers. Since the war began, Western governments have detained more than a dozen superyachts they've linked to Russian tycoons. The vessels are worth at least $4 billion, according to Bloomberg News. Going after these high-profile playthings looks like an act of justice given the death and destruction being spread by Russian troops in Ukraine. The moves are designed to destabilize the Russian elite and "demonstrate to the Russian people that they've been getting ripped off by their leadership for a very long time," says Daleep Singh, President Joe Biden's former deputy national security adviser. It's been a public-relations success for Western governments, but legally and, perversely, financially, it's a total mess. Most of the ships sit immobilized, draining money. In some places, but not all, that money is coming from taxpayers. It can cost 10% to 15% of a yacht's value to keep it running every year—a "vanity tax" for the wealthy is how one lawyer describes it. Yachts are less expensive to maintain when they're not cruising at sea. But even using an ultraconservative estimate of 3% of a ship's value, the US and Italian governments will pay more than $50 million a year to maintain their fleets of arrested megayachts. Port officials in France and Spain say it's not taxpayers but the owners themselves who are covering the costs of their yachts, even with sanctions in place. That arrangement seems unlikely to last as the war grinds on and assets remain frozen. (After a superyacht's owner failed to pay a private shipyard in Spain, a Barcelona court approved its application to seize the vessel.) In June, soon after Amadea's seizure, US national security adviser Jake Sullivan complained about how ridiculous the situation is. "You know what the craziest thing is? When we seize one, we have to pay for upkeep," he said on a live mic before an event at the Center for a New American Security. "Some people are basically being paid to maintain Russian superyachts on behalf of the United States government." It could take years to figure out what to do with them. Some countries may decide to actually confiscate and sell them. The US has vowed to do so using forfeiture, a complex process that involves proving to a judge that the asset was acquired with the proceeds of a crime. In this case, the crime would be violating sanctions. First, though, the US has to prove who the owner really is, which isn't easy given the elaborate shell companies many Russian billionaires use. That effort seems to be under way; some crew members have already received subpoenas. Stefan Cassella, a former federal prosecutor specializing in forfeiture, compares the challenges of establishing Russian ownership of assets to doing the same with drug lords: "Drug dealers don't own anything. Their girlfriends own everything. So they're going to be litigating over that for a long time." The Justice Department declined to comment. Europe faces an even more daunting challenge. In many countries, sanctions violations aren't even a crime, something the European Union is attempting to change. Sanctioned Russians are already trying to reclaim what's been blocked. The fate of the detained yachts, as well as the villas, bank accounts and even Russia's frozen central bank reserves, has consequences for Ukraine, which is in dire need of funding. Its government estimates the cost of reconstructing the destroyed roads, bridges, homes, factories and energy grid to be $750 billion. US and European legislators are trying to figure out how to deploy Russian assets to support Ukraine without undermining property rights or setting off too much legal wrangling. In May, European Council President Charles Michel said he supported confiscating sanctioned assets to help rebuild Ukraine. When it comes to the yachts, a long legal fight doesn't help anyone, says Glenn Weiss, an American maritime lawyer in Monaco. "Don't fight over the boat, fight over the money," he says. "Yachts need a lot of love. They're trying to sink every day." Keep reading: Seizing a Russian Superyacht Is Much More Complicated Than You Think |
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