6222
Views

Someone is Paying to Refit a Detained Russian Megayacht Worth $700M

Scheherazade
Scheherazade under way on sea trials, 2019 (file image courtesy DrDuu / CC BY SA 4.0)

Published Aug 7, 2023 10:46 PM by The Maritime Executive

The Russian megayacht Scheherazade had the misfortune to be caught in a European shipyard when Russia invaded Ukraine in February 2022. Unlike the many Russian yachts that slipped their lines and got under way, she was immobile and within reach of EU sanctions. The authorities ordered her detained on suspicion of connections to a sanctioned individual. 

That detention came with a big silver lining. Sheherazade has the good fortune to be trapped at a top-tier Italian yacht yard, where she can be maintained by expert staff. While other Russian ultraluxury yacht owners must make do without Europe's world-class repair yards, Scheherazade has everything she needs, and perhaps more. 

The shipyard in question, Italian Sea Group, told the FT that the vessel is not only being maintained - the owner is paying for the refit to continue. In keeping with the standards of the trade, the yard did not name the owner. 

The identity of Scheherazade's beneficial owner is a matter of debate. According to the U.S. Federal Bureau of Investigation, the vessel's ownership is obscured beneath multiple layers of offshore trust arrangements, as is common for vessels of this class. At the bottom of this structure, the FBI uncovered the name of a former president of state oil and gas company Rosneft, an unsanctioned oligarch named Eduard Khudainatov - who is also the listed beneficial owner of the Russian megayacht Amadea. 

Betweem Scheherazade and Amadea, Khudainatov would be responsible for $1 billion worth of megayachts and about $100 million a year in upkeep, and the FBI does not believe it. Khudainatov's reported net worth is below the top ranks of Russia's wealthiest businessmen. In court filings in May 2022, federal agents argued he is acting on behalf of someone bigger.

“The fact that Khudainatov is being held out as the owner of two of the largest superyachts on record, both linked to sanctioned individuals, suggests that Khudainatov is being used as a clean, unsanctioned straw owner to conceal the true beneficial owners of these vessels,” FBI agents suggested in a filing related to the Amadea.

The FBI has some ideas about who the real owner might be, and so do independent researchers. In the two years leading up to the invasion, the Scheherazade's pattern of port calls in the Black Sea aligned with Russian President Vladimir Putin's travel itinerary, according to the New York Times. In addition, a Russian political opposition group claims 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.

Under EU law, Italy is responsible for enforcing EU sanctions within its borders. The Italian authorities have agreed to allow the refit work on Scheherazade to continue, according to the FT, but will not disclose who is paying for the work. Italy's Finance Ministry acknowledged last year that the vessel has "significant" links to "prominent elements of the Russian government."