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Russian-Linked Megayacht Scheherazade May Escape Sanctions

scheherazade
Scheherazade, 2019 (file image courtesy DrDuu / CC BY SA 4.0)

Published May 4, 2022 3:41 PM by The Maritime Executive

The $700 million megayacht Scheherazade may escape EU sanctions on Russia's wealthiest and most powerful citizens, despite suspicions that her true owner is Russian President Vladimir Putin himself. 

The Scheherazade, a $700 million megayacht currently located at Marina di Carrara, Italy, is under scrutiny for potential connections to a sanctioned Russian owner. U.S. officials reportedly believe that this could be Putin himself. Scheherazade was in a long drydock period at the outset of the invasion, making her a tempting (and immobile) target for sanctions enforcement. 

Ownership is often difficult to prove for high-value megayachts, which are usually titled to an offshore holding company (or several). Consistent with this pattern, Sheherazade is owned by an anonymous holding company in the Marshall Islands. However, the yacht's pattern of port calls in the Black Sea align with Putin's travel itinerary over the past two years, according to the New York Times. 

In addition, researchers working for Russian politician Alexei Navalny claim to have obtained records that suggest that half of Scheherazade's crew were employed by Putin's personal security service, the FSO. Flight records show that these personnel regularly rotated between Russia and Italy. "We can’t think of better proof that this yacht belongs to Putin. Even in Italy, thousands of kilometers from Moscow, people are working on it who are officially listed as Putin’s bodyguards and personal staff,” investigator Maria Pevchikh said in a video version of the report. 

Italian investigators reportedly believe that the beneficial owner is former Rosneft executive Eduard Khudainatov, an oil magnate and associate of Putin. Though wealthy and well-connected, Khudainatov is not yet named on any sanctions list.

Khudainatov's reported net worth has not put him among the top ranks of Russian businessmen. However, his holding companies concluded an $11 billion oilfield rights sale to Rosneft in 2020, according to the Warsaw Institute - about the same timeline as the delivery of the $700 million Scheherazade.

Khudainatov's name has also appeared in connection with the seized yacht Amadea, currently located in Fiji. Amadea's lawyers told a Fijian court that Khudainatov - not a different, sanctioned Russian oligarch - was the vessel's true owner. The court disagreed and allowed U.S. authorities to proceed with seizing the vessel.

Though the Scheherazade might be another valuable opportunity for sanctions enforcement, it may yet escape the grasp of investigators. The New York Times reports that Scheherazade is now back in the water, and may soon depart for sea trials - or leave Italy altogether. Tracking is not currently available: the vessel's AIS signal has not been received by commercial services since March, consistent with a yard period shutdown. 

Putin's name has also been associated with a much smaller yacht, the Graceful, which slipped away from Hamburg for the Russian territory of Kaliningrad shortly before the invasion.