Two weighty reads for midweek
#1 – Fleeing sanctions, oligarchs seek safe ports for superyachts
BY MICHAEL BIESECKER — March 8 2022
WASHINGTON (AP) — The massive superyacht Dilbar stretches one-and-a-half football fields in length, about as long as a World War I dreadnought. It boasts two helipads, berths for more than 130 people and a 25-meter swimming pool long enough to accommodate another whole superyacht.
Dilbar was launched in 2016 at a reported cost of more than $648 million. Five years on, its purported owner, the Kremlin-aligned Russian oligarch Alisher Usmanov, was already dissatisfied and sent the vessel to a German shipyard last fall for a retrofit reportedly costing another couple hundred million dollars.
That’s where she lay in drydock on Thursday when the United States and European Union announced economic sanctions against Usmanov — a metals magnate and early investor in Facebook — over his ties to Russian President Vladimir Putin and in retaliation for the invasion of Ukraine.
“We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets,” President Joe Biden said during his State of the Union speech Tuesday night, addressing the oligarchs. “We are coming for your ill-begotten gains.”
But actually seizing the behemoth boats could prove challenging. Russian billionaires have had decades to shield their money and assets in the West from governments that might try to tax or seize them.
Several media outlets reported Wednesday that German authorities had impounded Dilbar. But a spokeswoman for Hamburg state’s economy ministry told The Associated Press no such action had yet been taken because it had been unable to establish ownership of the yacht, which is named for Usmanov’s mother.
Dilbar is flagged in the Cayman Islands and registered to a holding company in Malta, two secretive banking havens where the global ultra-rich often park their wealth.
Still, in the industry that caters to the exclusive club of billionaires and centimillionaires that can afford to buy, crew and maintain superyachts, it is often an open secret who owns what.
Working with the U.K.-based yacht valuation firm VesselsValue, the AP compiled a list of 56 superyachts — generally defined as luxury vessels exceeding 24 meters (79 feet) in length — believed to be owned by a few dozen Kremlin-aligned oligarchs, seaborne assets with a combined market value estimated at more than $5.4 billion.
The AP then used two online services — VesselFinder and MarineTraffic — to plot the last known locations of the yachts as relayed by their onboard tracking beacons.
While many are still anchored at or near sun-splashed playgrounds in the Mediterranean and Caribbean, more than a dozen were underway to or had already arrived in remote ports in small nations such as the Maldives and Montenegro, potentially beyond the reach of Western sanctions. Three are moored in Dubai, where many wealthy Russians have vacation homes.
Another three had gone dark, their transponders last pinging just outside the Bosporus in Turkey — gateway to the Black Sea and the southern Russian ports of Sochi and Novorossiysk.
Graceful, a German-built Russian-flagged superyacht believed to belong to Putin, left a repair yard in Hamburg on Feb. 7, two weeks before Russia invaded Ukraine. It is now moored in the Russian Baltic port of Kaliningrad, beyond the reach of Western sanctions imposed against him this past week.
Some Russian oligarchs appear to have not gotten the memo to move their superyachts, despite weeks of public warnings of Putin’s planned invasion.
French authorities seized the superyacht Amore Vero on Thursday in the Mediterranean resort town of La Ciotat. The boat is believed to belong to Igor Sechin, a Putin ally who runs Russian oil giant Rosneft, which has been on the U.S. sanctions list since Russia annexed Crimea in 2014.
The French Finance Ministry said in a statement that customs authorities boarded the 289-foot Amore Vero and discovered its crew was preparing for an urgent departure, even though planned repair work wasn’t finished. The $120 million boat is registered to a company that lists Sechin as its primary shareholder.
On Saturday, Italian financial police in the port of San Remo seized the 132-foot superyacht Lena, which is flagged in the British Virgin Islands. Authorities said the boat belongs to Gennady Timchenko, an oligarch close to Putin and among those sanctioned by the European Union. With an estimated net worth of $16.2 billion, Timchenko is the founder of the Volga Group, which specializes in investments in energy, transport and infrastructure assets.
The 213-foot Lady M was also seized by the Italians while moored in the Riviera port town of Imperia. In a tweet announcing the seizure on Friday, a spokesman for Italian Prime Minister Mario Draghi said the comparatively modest $27 million vessel was the property of sanctioned steel baron Alexei Mordashov, listed as Russia’s wealthiest man with a fortune of about $30 billion.
But Mordashov’s upsized yacht, the 464-foot Nord, was safely at anchor on Friday in the Seychelles, a tropical island chain in the Indian Ocean not under the jurisdiction of U.S. or EU sanctions. Among the world’s biggest superyachts, Nord has a market value of $500 million.
Since Friday, Italy has seized 143 million euros ($156 million) in luxury yachts and villas in some of its most picturesque destinations, including Sardinia, the Ligurian coast and Lake Como.
Most of the Russians on the annual Forbes list of billionaires have not yet been sanctioned by the United States and its allies, and their superyachts are still cruising the world’s oceans.
The evolution of oligarch yachts goes back to the tumultuous decade after the 1991 fall of the Soviet Union, as state oil and metals industries were sold off at rock-bottom prices, often to politically connected Russian businessmen and bankers who had provided loans to the new Russian state in exchange for the shares.
Russia’s nouveau riche began buying luxury yachts similar in size and expense to those owned by Silicon Valley billionaires, heads of state and royalty. It’s a key marker of status in Moscow and St. Petersburg, and size matters.
“No self-respecting Russian oligarch would be without a superyacht,” said William Browder, a U.S.-born and now London-based financier who worked in Moscow for years before becoming one of the Putin regime’s most vocal foreign critics. “It’s part of the rite of passage to being an oligarch. It’s just a prerequisite.”
As their fortunes ballooned, there was something of an arms race among the oligarchs, with the richest among them accumulating personal fleets of ever more lavish boats.
For example, Russian metals and petroleum magnate Roman Abramovich is believed to have bought or built at least seven of the world’s largest yachts, some of which he has since sold off to other oligarchs.
In 2010, Abramovich launched the Bermuda-flagged Eclipse, which at 533 feet was at the time the world’s longest superyacht. Features include a wood-burning firepit and swimming pool that transforms into a dance floor. Eclipse also boasts its own helicopter hangar and an undersea bay that reportedly holds a mini-sub.
Dennis Causier, a superyacht analyst with VesselsValue, said oligarch boats often include secret security measures worthy of a Bond villain, including underwater escape hatches, bulletproof windows and armored panic rooms.
“Eclipse is equipped with all sorts of special features, including missile launchers and self-defense systems on board,” Causier said. “It has a secret submarine evacuation area and things like that.”
Eclipse was soon eclipsed by Azzam, purportedly owned by the emir of Abu Dhabi, which claimed the title of longest yacht when it was launched in 2013. Three years after that, Usmanov launched Dilbar, which replaced another slightly smaller yacht by the same name. The new Dilbar is the world’s largest yacht by volume.
Abramovich, whose fortune is estimated at $12.4 billion, fired back last year by launching Solaris. While not as long as Eclipse or as big as Dilbar, the $600 million Bermuda-flagged boat is possibly even more luxurious. Eight stories tall, Solaris features a sleek palisade of broad teak-covered decks suitable for hosting a horde of well-heeled partygoers.
But no boat is top dog for long. At least 20 superyachts are reported to be under construction in various Northern European shipyards, including a $500 million superyacht being built for the American billionaire Jeff Bezos.
“It’s about ego,” Causier said. “They all want to have the best, the longest, the most valuable, the newest, the most luxurious.”
But, he added, the escalating U.S. and EU sanctions on Putin-aligned oligarchs and Russian banks have sent a chill through the industry, with boatbuilders and staff worried they won’t be paid. It can cost upwards of $50 million a year to crew, fuel and maintain a superyacht.
The crash of the ruble and the tanking of Moscow stock market have depleted the fortunes of Russia’s elite, with several people dropping off the list of Forbes billionaires last week. Causier said he expects some oligarch superyachts will soon quietly be listed by brokers at fire-sale prices.
The 237-foot Stella Maris, which was seen by an AP journalist docked this past week in Nice, France, was believed to be owned by Rashid Sardarov, a Russian billionaire oil and gas magnate. After publication of an earlier version of this story, AP was contacted Sunday by yacht broker Joan Plana Palao, who said his company represents a U.S. citizen from California who purchased the Stella Maris last month. He declined to disclose the name of the buyer or the person from whom the boat had been purchased.
On Thursday, the U.S. Treasury Department issued a new round of sanctions that included a press release touting Usmanov’s close ties to Putin and photos of Dilbar and the oligarch’s private jet, a custom-built 209-foot Airbus A340-300 passenger liner. Treasury said Usmanov’s aircraft is believed to have cost up to $500 million and is named Bourkhan, after his father.
Usmanov, whose fortune has recently shrunk to about $17 billion, criticized the sanctions.
“I believe that such a decision is unfair and the reasons employed to justify the sanctions are a set of false and defamatory allegations damaging my honor, dignity and business reputation,” he said in a statement issued through the website of the International Fencing Federation, of which he has served as president since 2008.
Abramovich has not yet been sanctioned. Members of the British Parliament have criticized Prime Minister Boris Johnson for not going after Abramovich’s U.K.-based assets, which include the professional soccer club Chelsea. Under mounting pressure, the oligarch announced this past week he would sell the $2.5 billion team and give the net proceeds “for the benefit of all victims of the war in Ukraine.”
Meanwhile, location transponders showed Solaris moored in Barcelona, Spain, on Saturday. Eclipse set sail from St. Maarten late Thursday and is underway in the Caribbean Sea, destination undisclosed.
Associated Press writer Aritz Parra in Madrid contributed to this report.
Follow AP Investigative Reporter Michael Biesecker at twitter.com/mbieseck
#2 – I’ve studied the possible trajectories of the Russia-Ukraine war. None are good
Guardian Tuesday, 08 March 2022
Christopher S Chivvis
There are two likely paths: continued escalation, potentially across the nuclear threshold, or a bitter peace imposed on a defeated Ukraine.
Wars sometimes start easily, but it is a tenet of strategy that they are always unpredictable and extremely hard to end. Putin’s war of choice in Ukraine is already escalating faster than most experts would have imagined just a week ago. He has now encircled major Ukrainian cities with his army and threatens to flatten them with thermobaric weapons, cluster munitions and guided missiles.
This will terrorize the civilian population and could demoralize the budding Ukrainian resistance. He could escalate the conflict to another region, such as the Balkans, where longstanding conflicts fester and Russia has an extensive network of intelligence and security services. He may turn the lights off in a major US city with a cyber-attack. Most frighteningly, he has raised the alert level of Russian nuclear forces and may be considering introducing martial law.
[Trump: US should put Chinese flags on F-22 jets and ‘bomb shit out of’ Russia]
Meanwhile, Nato, the G7 and a host of other countries have turned the dial of economic punishment up to unprecedented levels. Several European nations that had previously hesitated to involve themselves militarily in the conflict have now done so, sending weapons and financing Ukraine’s resistance. A growing number of voices in Washington are clamoring for a more aggressive approach from the United States and Nato, pressuring the White House to support a Ukrainian insurgency with a broad menu of weaponry or even calling for Nato to impose a no-fly zone over Ukraine.
Amid this escalation, experts can spin out an infinite number of branching scenarios on how this might end. But scores of war games conducted for the US and allied governments and my own experience as the US national intelligence officer for Europe suggest that if we boil it down, there are really only two paths toward ending the war: one, continued escalation, potentially across the nuclear threshold; the other, a bitter peace imposed on a defeated Ukraine that will be extremely hard for the United States and many European allies to swallow.
Putin deliberately frames his operation in Ukraine in the same way that the United States has framed its own regime-change
States has framed its own regime-change operations in Kosovo, Iraq and Libya, charging that Ukraine has committed human rights violations and is a terrorist state. For good measure, Putin throws in the ludicrous assertion that Ukraine is fascist. These are transparent fig leaves for what is nothing more than a war of brute imperialism.
Judging from how things stand now, Putin, having invested so much in this war already, seems unlikely to settle for anything less than the complete subjugation of the Ukrainian government. If the current uneven pace of Russian military progress doesn’t accomplish the job, the most likely strategy for doing this is to make an example of a city like Kharkiv, leveling it as if it were Grozny or Aleppo, both cities that Russia has brutally destroyed in the recent past, and then threatening to burn Kyiv to the ground. He can accompany this with special forces attacks in the capital to disrupt the civilian population and sow further confusion and discontent. Ultimately, he needs at least to force the removal of President Volodymyr Zelenskiy and his government.
In this case, Russia will install a puppet government in Kyiv, which will sign terms of surrender highly favorable to Russia. The terms will almost certainly include a pledge of Ukrainian neutrality, and might go further by committing Ukraine formally to Russia’s sphere of influence with a membership in Russia’s Collective Security Treaty Organization or its Eurasian Economic Union.
Putin seems unlikely to settle for anything less than the complete subjugation of the Ukrainian government.
At this juncture, the United States and its allies would face an extraordinarily difficult policy choice. Disgust with Putin’s war has greatly increased the chances that Washington and some of its allies would seek to fight on, for instance by supporting a Ukrainian insurgency. This would roughly mirror the strategy that the United States used to assist French resistance against Nazi Germany.
The more effective Nato support to the insurgency is, the more the Kremlin would likely be willing to risk attacks on safe havens in Nato territory – most likely employing irregular forces or even the infamous Wagner Group, a private organization that operates globally as a quasi-special force of the Kremlin. These operations could lead to a massive escalation that would open the door to a much wider war between Nato and Russia – exactly the war that Joe Biden has been trying to avoid.
Alternatively, the insurgency might greatly weaken Russian forces. The Ukrainian insurgent army could impose heavy damages on Russian forces and erode Putin’s position among Russian elites, on whose support he depends for power. Ukrainian forces would have major incentives to take their fight inside Russian territory, attacking Russia’s rearguard in Belarus and Russia itself.
There are possible other paths toward further escalation, but they all eventually lead toward the nuclear threshold. Scores of war games carried out by the United States and its allies in the wake of Russia’s 2014 invasion of Ukraine make it clear that Putin would probably use a nuclear weapon if he concludes that his regime is threatened.
It is hard to know exactly what turn of events would scare him enough to cross the nuclear threshold. Certainly a large Nato army entering Russian territory would be enough. But what if events in Ukraine loosened his grip on power at home? Indeed, achieving regime change in Russia indirectly by making Putin lose in Ukraine seems to be the logic behind some of those who are pushing for escalation today.
Moving across the nuclear threshold wouldn’t necessarily mean an immediate, full-force nuclear exchange – in other words, global thermonuclear war. But it would be an extremely dangerous, watershed event in world history.
The nuclear option that has been most frequently discussed in the past few days involves Russia using a small nuclear weapon (a “non-strategic nuclear weapon”) against a specific military target in Ukraine. Such a strike might have a military purpose, such as destroying an airfield or other military target, but it would mainly be aimed at demonstrating the will to use nuclear weapons, or “escalating to de-escalate”, and scaring the west into backing down.
Some analysts have questioned Russia’s ability to actually carry out such an operation, given its lack of practice. Unfortunately, this isn’t the only or even the most likely option available to the Kremlin. Based on war games I ran in the wake of Putin’s 2014 invasion, a more likely option would be a sudden nuclear test or a high-altitude nuclear detonation that damages the electrical grid over a major Ukrainian or even Nato city. Think of an explosion that makes the lights go out over Oslo.
Those war games indicated that the best US response to this kind of attack would be first to demonstrate US resolve with a response in kind, aimed at a target of similar value, followed by restraint and diplomatic efforts to de-escalate. In most games, Russia still responds with a second nuclear attack, but in the games that go “well”, the United States and Russia manage to de-escalate after that, although only in circumstances where both sides have clear political off-ramps and lines of communication between Moscow and Washington have remained open. In all the other games, the world is basically destroyed.
Even in the better case where both sides take their fingers off the triggers, the nuclear taboo has been broken, and we are in an entirely new era: two nuclear superpowers have used their nuclear weapons in a war. The proliferation consequences alone would be far-reaching, as other countries accelerate their nuclear weapons programs.
The very fact that the nuclear taboo had been broken increases the odds that the nuclear threshold is crossed again in future conflicts, not just between Russia and America, but also with China, between India and Pakistan, in the Middle East, or elsewhere. Even this outcome in which the world is “saved”, the United States is far worse off than it was before the war in Ukraine broke out last month.
What is the alternative? Once again, infinite scenarios and branches are possible, but there is a single basic one that helps to simplify thinking. It begins with an effort to avoid further escalation today. So far, the Biden administration has wisely restrained direct US military involvement in the conflict, but holding off against the rising chorus of voices pushing for escalation may be hard in the coming days if Russian forces brutally devastate Ukraine’s cities.
But the most difficult challenge lies a little further down the road with the scenario described above: how to respond if Russia imposes a puppet regime in Ukraine. This would put the United States in the near-impossible position of having to choose between further escalation and compromising on the very principles that drove it toward the war in the first place – the right of a nation like Ukraine to be free and independent of subjugation to foreign rule.
In this scenario, the Biden administration would have to show extraordinary leadership and strength to hold together its coalition and steer it toward restraint. It would face extremely high levels of pressure from European capitals, Ukrainian lobbies, and others to reject the puppet government and fight on, perhaps by recognizing a Ukrainian government-in-exile.
The administration is already facing calls from hawkish corners of Washington to pre-empt any negotiated settlement to this war. Emotions are likely to have a much greater effect on the free democracies fighting for Ukraine than on the autocrat sitting in the Kremlin, but they will affect both sides. As they escalate, the prospects of negotiation diminish further.
Would Nato’s door remain open to a Russian-dominated Ukraine? Probably, but it would be similar to claiming that Nato’s door is open to North Korea or Iran (which it theoretically is). All of the consequences that are likely from this conflict – growing conventional force buildup on the Nato-Russia border, higher levels of defense spending in the United States at the expense of domestic programs, an end to efforts to draw down US military posture in the Middle East, and fewer resources for strategic competition with China – would still be a better outcome than the alternative, in which nuclear weapons have been used.
Wars can start quickly or slowly, but it is a dictum of strategy that once started, they take on a logic of their own. It is not too soon to think about how to bring this war to a close. The chances that Putin emerges strategically weak are real. But that does not mean the US can win. It will have to settle for a picture that is much uglier than it was before the war, and the sooner Washington accepts that, the better.
Christopher S Chivvis is the director of the American Statecraft Program at the Carnegie Endowment for International Peace
This piece originally published by Carnegie Endowment