Maldives harbors the yachts of sanctioned Russian millionaires

On March 9, a day after billionaire Andrey Melnichenko was sanctioned by the European Union, his luxury Motor Yacht A ceased transmitting its whereabouts while in Maldives seas, maritime data indicates.

Four days later, officials in Italy confiscated another of Melnichenko's yachts - the world's largest sailing yacht, valued at $578 million by Italian financial police.

Switching off electronics that enable authorities to track a ship's location can assist in keeping yachts out of their sights.

However, according to interviews with a dozen people familiar with internal discussions about how to respond to US and European financial sanctions, including government ministers, diplomats, and experts in the country's superyacht industry, the chances of action against the property of sanctioned oligarchs are slim in any case.

The Maldives' cautious attitude to implementing sanctions imposed in response to Russia's invasion of Ukraine has resulted in the Indian Ocean island country becoming as a desirable destination for yacht-owning Russian oligarchs.

Melnichenko's boat is one of six Russian-linked vessels that have sailed between the Maldives' atolls southwest of India since Western nations imposed sanctions on several billionaires following the Feb 24 invasion.

According to data provided by MarineTraffic, a maritime analytics service, three of the yachts concealed their actual positions, altered their claimed destinations, or entered foreign waters.

Seizing yachts is "fanciful" because the Maldives' judicial system is not solid, according to the country's chief prosecutor, Hussain Shameem, who added that police could not readily seize visiting vessels until a violation of local law occurred.

Requests for comment regarding the deactivation of Motor Yacht A's location devices and its current ownership status were not responded to by Melnichenko's spokesperson, his charitable foundation, fertiliser producer EuroChem Group, and coal company SUEK - two companies from which he resigned in March.

His spokeswoman told Reuters last month that the billionaire will contest the penalties and stated that he had no political links.

According to images given by its manufacturer, the 119-metre (390-foot) Motor Yacht A boasts crystal furnishings and three swimming pools and has been valued at $300 million in specialized boating periodicals. Melnichenko's wife has stated that she was engaged in the design of the interior.

Melnichenko's representative confirmed to the BBC in 2017 that his employer owned the sailing vessel. Both vessels were fashioned by renowned French designer Philippe Starck.

SECURE HAVEN

The scenario in the Maldives demonstrates the challenge Western powers confront in choking off the income of oligarchs targeted by sanctions over Russia's invasion of Ukraine, since various countries across the world continue to offer safe havens, according to Maldives sources contacted by Reuters.

The United States, the United Kingdom, and the European Union imposed broad penalties on Russian President Vladimir Putin, legislators, and corporate leaders in the aftermath of the invasion, which Moscow describes as a special military operation intended at "demilitarizing" and "denazifying" Ukraine.

European nations have confiscated homes and yachts, with police seizing at least six vessels believed to belong to some of the dozens of oligarchs targeted by sanctions.

The European Commission's spokesperson, Peter Stano, stated that the penalties were not binding on non-EU members or non-aligned governments such as the Maldives, however he urged all countries to abide by them.

Maldives voted at the United Nations to condemn Russia's incursion and has officially said that it will support international measures against sanctioned Russians.

In reality, officials express worry about the economic consequences of discouraging rich Russian tourists.

The Maldives, with its powder-white beaches and around 1,200 deserted islands, is a favorite resort of the super-rich.

Over the last three decades, tourism has transformed it from a backwater with little natural resources beyond tuna and coconuts to a middle-income country. It had a GDP per capita of more over $10,000 prior to the epidemic, the highest in South Asia.

Tourism contributes around one-third of the $5.6 billion economy. Russians spend more than the average visitor and accounted for the vast majority of visits in January, the final month before the Ukraine incursion, according to tourism ministry data.

Russian arrivals have decreased by 70% since then, Tourism Minister Abdulla Mausoom stated. He wishes to get that overturned.

"Our entrance policy is very open. Maldives is an open country," he said.

"NOBODY IS PERMITTED TO TOUCH THEM"

Abdul Hannan owns and operates Seal Superyachts Maldives, which provides fuel and meals to vessel owners, including those from Russia.

Hannan stated that the ships often cost hundreds of thousands of dollars per week and that around half of his clients are Russian. As with other superyacht owners, they frequently spend the winter in the Indian Ocean and the summer in Europe, he explained.

Hannan claimed he has met many Russian superyacht owners onboard their vessels since the sanctions were announced, characterizing them as "humble, regular people" going through a tough time. He did not specify if the individuals were subject to punishments.

"For the time being, they are trying to keep the yachts in international waters," where they can potentially idle for months at a time, he said.

"Then, nobody can touch them."

He declined to identify the clients, citing client confidentiality concerns.

A representative for the Maldives' customs administration, which regulates marine traffic in the country's seas, did not reply to a request for comment on the current presence of Russian-owned boats.

DIFFICULT DIPLOMACY

While Maldives' institutions would be hard pressed to ignore a warning from the US Treasury that failing to seize Russian assets would jeopardize their access to US financial markets, such a message has not been sent, according to an official familiar with Maldives international financial arrangements.

When asked about specific destinations, like the Maldives, According to Reuters, Andrew Adams, the leader of a US team tasked with freezing oligarchs' assets, Washington is witnessing cooperation "at an all-time high," even as billionaires attempt to conceal yachts, aircraft, and other movable property in nations seen to be secretive.

Forcing the politically unstable and financially strapped Maldives to make a difficult choice over sanctions, however, two Western officials said, might push the country closer to China. A previous administration bolstered ties with Beijing, however relations with the West and longtime ally India have improved recently.

"We're cognizant of the economic risks that are entailed," for Maldives if it takes a hard line, one of the diplomats said.

By fLEXI tEAM