Alasdair Pa and Mohamed Junayd

MALE (Reuters) – A day after Andrey Melnichenko became a billionaire from coal and fertilizer, his superyacht Motor Yacht A stopped transmitting its location in Maldives waters.

    In Italy, four days later, authorities seized another of Melnichenko’s vessels – the world’s largest sailing yacht, estimated by Italian financial police to be worth $578 million.

    Switching off devices that allow authorities to track a ship’s whereabouts can help keep yachts out of their sight.

According to interviews conducted with twelve people with knowledge of internal discussions regarding how to deal with U.S. or European financial sanctions including diplomats and experts from the superyacht sector, Maldives does not have any chance to take action against property owned by sanctioned Oligarchs.

Authorities in Maldives have taken a cautious approach to enforce the sanctions after Russia invaded Ukraine. This has made the Indian Ocean nation attractive for Russian yacht-owning oligarchs.

Melnichenko’s boat is one of six Russian-linked boats that has sailed between Maldives’ atolls in southwest India. This was after Western countries hit some oligarchs by imposing sanctions.

According to MarineTraffic data, three yachts moved into international waters or changed their reported locations.

    The idea of seizing yachts is “far-fetched,” because Maldives legal system is not robust enough, the country’s chief prosecutor, Hussain Shameem, said in an interview, adding that authorities could not easily confiscate visiting vessels unless a crime was committed under local law.

Melnichenko did not respond to requests for information about Motor Yacht A’s deactivation of its location devices or current ownership status. He also sent requests to his spokesperson, as well as his charity, EuroChem Group, and SUEK, which are two companies that he quit in March.

A spokesperson for the businessman told Reuters last month that he will contest the sanctions. He also stated that he has no political affiliations.

Motor Yacht A measures in at 119 metres (390 feet). It has three swimming pool and crystal furniture. Photo released by its builder. This boat’s value was estimated to be $300 million. Melnichenko’s wife, Melnichenko, has claimed that she helped with the interior design.

Melnichenko spokesperson, in 2017, acknowledged that the sailing boat belonged to him in a statement to BBC. Philippe Starck was the famous French designer who designed both vessels.

SAFE HAVEN

According to sources consulted in Maldives by Reuters, this situation highlights the difficulties Western countries face when trying to stifle the wealth of oligarchs who were targeted by sanctions for Russia’s invasion in Ukraine. However, there are many nations that offer safe havens around the globe, according the sources.

    The United States, Britain and the European Union introduced wide-reaching sanctions against Russian President Vladimir Putin, lawmakers and businessmen in the wake of the invasion, which Moscow calls a special military operation aimed the “demilitarization” and “denazification” of Ukraine.

    European countries have seized property including villas and boats, with authorities confiscating at least six vessels they say belong to some of the dozens of oligarchs hit by sanctions.

Peter Stano spoke for the European Commission. He said that the sanctions are not binding on non-EU member states or non-aligned countries like the Maldives, but he urged all nations to adhere.

Maldives has voted to denounce Russia’s aggression at the United Nations. The country publicly states that it will support international efforts against sanctioned Russians.

Officials say that they worry about the economic consequences of deterring rich Russian tourists.

    With its powder-white beaches and some 1,200 islands, the majority uninhabited, Maldives is a favourite destination of the super-rich.

    From a backwater with scant natural resources beyond tuna and coconuts, tourism propelled it to a middle-income country over the past three decades. It has a GDP per capita before the pandemic of more than $10,000 – the highest in South Asia.

    Tourism accounts for about a third of the $5.6 billion economy. According to data from the tourism ministry, Russians spend more than the average and accounted for the highest number of visitors in January. This was the month prior to the invasion by Ukraine.

    Since then, Russian arrivals have fallen 70%, Tourism Minister Abdulla Mausoom said. He hopes that this trend will be reversed.

    “Our entrance policy is very open. “Maldives is an open nation,” he stated.

    “NOBODY CAN TOUCH THEM”

    Abdul Hannan runs Seal Superyachts Maldives, providing fuel and food to vessel owners including Russian clients.

    Hannan said the yachts’ costs typically run at hundreds of thousands of dollars a week and that around half his customers are Russians. He said that superyacht owners often spend winters in the Indian Ocean, and summers in Europe.

    Hannan said he has met some Russian owners aboard their superyachts since sanctions were announced, describing them as “humble, normal people” passing through a difficult moment. Hannan did not specify if sanctions were being applied to the individuals.

He said that they were trying to keep yachts in international water for the moment, where they could sit idle for several months.

    “Then, nobody can touch them.”

    He declined to name the clients, citing confidentiality.

    A spokesperson for Maldives’ customs authority, which monitors maritime traffic in its waters, did not respond to a request for comment on the number of Russian-owned yachts currently present.

    DELICATE DIPLOMACY

    While Maldives’ institutions would find it difficult to ignore a warning by the U.S. Treasury that failing to confiscate Russian assets would affect its access to U.S. financial markets, such a message has not been sent, said an official familiar with Maldives international financial arrangements.

Andrew Adams (head of a U.S. taskforce aiming at freezing oligarchs’ assets) answered Reuters when asked about Maldives. Adams said Washington saw cooperation “at an ever high level” even as oligarchs attempt to hide mobile properties, such as yachts, planes, and other property, in secretive countries.

Two Western diplomats stated that Maldives could be forced to choose between sanctions and being politically insecure or financially restricted. This would make it more friendly to China. Although relations between China and the West were good under the previous administration, relations are improving with India and with India as a traditional ally.

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