Battle for Russian oligarchs’ possession erupts

With a built-in 3D cinema, a swimming pool with jacuzzi, a gym and twelve bedrooms, the Axioma is by no means a modest boat. The 72-meter yacht, with a catalog value of 75 million euros, came to a halt in Gibraltar in early March, after Russian owner Dimitri Poempyansky was placed on the international sanctions list.

Last August, the Axiom was auctioned. A unique event: for the first time since the Ukraine invasion, the frozen property of a Russian oligarch was definitively taken away. That was possible, because Poempyansky – owner of a large pipeline group and close contact with the Kremlin – had a debt of more than 20 million euros outstanding with the financier of the yacht, the American bank JPMorgan. Because the Russian no longer paid his bills, the bank was allowed to demand the yacht as collateral.

Also read: Rich Russian returns jet, yacht and villas

The auction house will not say how much the sale of the Axiom has yielded. But it is certainly only a fraction of the total Russian oligarch property that the West has seized in recent months. The European Union has frozen 13.8 million euros worth of yachts, villas, companies and bank assets of oligarchs. In the US it is about 30 billion dollars in assets, in the United Kingdom even 150 billion pounds.

Now that the sanctions against wealthy Kremlin loyalists have been in effect for six months and the end of the Ukraine war is far from in sight, the question arises: what will happen to all those seized assets? In the Netherlands, 26 yachts and 5 aircraft are currently on the chain; can it last for years?

If it is up to Europe, the oligarchs will soon lose their property for good. In May, the European Commission presented a proposal to take and cash in on the frozen Russian properties. The proceeds could be used to finance the reconstruction of Ukraine. “We must not let any opportunities go unused, including, if possible, the Russian assets,” said Commission President Ursula von der Leyen. Minister Wopke Hoekstra (Foreign Affairs, CDA), said he supported the proposal, although he also warned that the Netherlands considers ownership “highly important”.

A group of MEPs led by the Romanian Vlad Gheorghe (of the liberal Renew Europe) has since been investigating the legal possibilities of taking Russian property. “By freezing assets, we solved part of the problem. We now have to take the next step,” Gheorghe tells NRC. “It is certain to me that it will happen, the only question is how we can carry it out technically.”

According to the MEP, there are roughly two ways to legally confiscate frozen Russian assets. First, circumventing the sanctions can be criminalized, so that Russians who do so lose their property. Second, there may be a duty for wealthy Russians to prove that they acquired their wealth legally. Gheorghe: “Let’s face it: most didn’t invent a company like Google. They are so rich thanks to their connections to the Kremlin. If they cannot prove that their wealth has a legal origin, there may be opportunities to take it.”

The study commissioned by the Commission should lead to European legislation by the end of 2023 at the latest. According to Gheorghe, this is actually going too slowly: “We are not going as fast as we would like. Lately, we have seen oligarchs in several countries go to court to unfreeze their property. That’s a must for us wake up call to be.”

Battle at the European Court

He refers, among other things, to steel magnate Alexei Mordashov, who recently tried his confiscated yacht Lady M in Italy. getting back. Another billionaire, Alfa Bank shareholder Alexei Kuzmichov, is currently trying to sue in French court retake control of two of his yachts.

However, the biggest legal battle is at the European Court of Justice in Luxembourg. Dozens of oligarchs have since filed cases there in an attempt to regain their possessions, according to an inventory by NRC. They are trying to undo their inclusion on the sanctions list through the European Court.

Also read: Amsterdam Trade Bank, with 23,000 savers, declared bankrupt by court

One of the oligarchs who recently started a case is German Khan, according to court data. The Russian was co-owner of the now bankrupt Amsterdam Trade Bank in the Netherlands. Gennadi Timchenko, founder of the Gunvor oil company – which, according to the US government, is co-owned by Putin – has also turned to the Court. Tigran Khudaverdyan did the same; until mid-March, he was deputy director of the Netherlands-based Russian tech giant Yandex.

Court documents show that 38 oligarchs have filed a case in recent months, but that is not all, according to a spokesperson for the Court. In total, this concerns at least 50 lawsuits, some of which still have to be processed administratively by the registry.

Website Politico reported earlier that former Chelsea owner Roman Abramovich, Alfa Bank founder Mikhail Fridman and metal entrepreneur Alisher Usmanov had started a case at the European Court. Near Usmanov, the German police seized several luxury villas and his yacht worth 600 million euros – the largest superyacht in the world. According to the spokesman for the European Court, it can take a long time before these cases come to a decision: “A year is often the minimum. But it can also take much longer.”

As far as is known, no Russian oligarchs have yet gone to court in the Netherlands. More than 2.5 billion euros worth of Russian assets have been frozen in the Netherlands since February, according to the most recent letter which Minister Hoekstra sent to the House of Representatives about this. This includes 646 million euros in Russian assets, mainly with banks and trust offices. In addition, the Ministry of Foreign Affairs recorded EUR 574 million in blocked transactions.

Brand new Airbuses

Among the most valuable possessions are five aircraft: brand-new Airbuses, which flew straight from the factory in Canada to the Netherlands in 2019. The aircraft are owned by the Russian state-owned company GTLK, which has been on the sanctions list since April. Because the Russian airline that would rent the aircraft dropped out in 2019, the aircraft were parked at the airports in Maastricht (4 units) and Twente (1). Since the sanctions, the planes are no longer allowed to enter European airspace, so for the time being they have nowhere to go.

Suck away their rubles, that’s what Russian oligarchs did via Hoofddorp

Together, according to the Ministry of Foreign Affairs, the aircraft represent a value of 350 to 400 million euros. Maintenance of the aircraft is also prohibited under European sanction rules. “But nobody benefits from the fact that these devices are not kept in optimal condition. They lose their value without maintenance, you don’t want that either,” says Jan Schuring, director of Twente Airport, when NRC asks him about the device at his airport.

According to Schuring, the airport has a ‘parking contract’ with Samco, a company that carries out maintenance on aircraft. The airport company receives compensation for this, he says. “Those payments continue.” That could be against sanctions. A spokesperson for the airport could not say whether the four aircraft in Maastricht are also being maintained: “They are parked on the Samco site, we have no information about that.”

Samco director Constant van Schaik firmly denies that his company is still carrying out maintenance on the five Airbuses: “Samco does not carry out any work on these aircraft.” He does note that the devices will need maintenance again at some point: “There is an end date. After approximately 6 to 12 months, maintenance operations will be required.”

Also read: The Netherlands waited more than a month to implement sanctions against Russia. Why?

In addition, there are the superyachts. Where countries such as Italy, Spain and France froze one capital yacht after another at the beginning of March, the Netherlands remained silent in this area for a long time. This was not only because the implementation of the sanctions in the Netherlands took a long time due to internal discussions, as NRC described earlier. In the meantime, quite a few boats have been chained: by mid-June 26 yachts had been found “that affect the current sanction rules”. The joint value: 1.6 billion euros, Minister Hoekstra reported to the House. In some cases, the government is still investigating who the ultimate beneficial owner is.

It was already certain in June that two yachts belong to a person or entity on the sanctions list. These are relatively small boats, which together are worth only 1 million euros. A more interesting prey seems to be the yacht Aquamarine, formerly owned by Abramovich, with an estimated value of 40.7 million euros. Earlier this year it was in the port of Vlissingen for maintenance, at a Damen Shiprepair yard. The ship changed hands a day after the Russian invasion: it is now in the name of David Davidovich, a business friend of Abramovich who is on the British but not on the European sanctions list. Foreign Affairs does not want to say whether the Dutch government has seized the ship.

At least fifty lawsuits are pending at the European Court of Justice to get property back

Damen herself does not want to comment on individual cases, but says that “dozens” of Russian orders and boats under maintenance have been temporarily put on hold. This concerns yachts under construction and fishing vessels and tugs. The sanctions affect the company’s results, says a spokesperson: “Those yachts are not the problem. Boats are built according to standard models and later the requirements of the customer are incorporated. It is quite easy to convert a half finished yacht for a new owner. Especially in the current, over-stressed market.”

According to Damen, it is much more difficult to find a new buyer for tugboats and fishing vessels that the company built for Russians earlier. „For example, you have the crab catchers, which are used to catch crabs. That only happens in a very specific area. Or take a tugboat that has to sail through an ice sea around Russia. Also finding another owner is a difficult story.”

Two other major Dutch builders, Moonen Yachts and Heesen Yachts, say they have no Russian ships on the chain. That is remarkable, because Heesen Yachts from Oss was owned by Vagit Alekperov until the beginning of May this year, also sanctioned because he maintains close ties with Vladimir Putin. His shares were then transferred to a Dutch foundation. It is unknown whether he still exerts influence on the business operations remotely. The fourth major builder, Royal Huisman, declined to comment on whether boats belonging to Russian customers are chained.

Sanctions law specialist and lawyer Heleen over de Linden thinks that there are indeed legal possibilities to definitively take away Russian property. “Tackling Russians who cannot explain the legal origin of their assets through criminal law, for example. But it will be difficult procedures. It is also all very new, we actually did not know these kinds of issues. We are in uncharted territory here.”