The following feature was written by us for a National Newspaper that we then wrote for. Entitled From Russia Without Love it made interesting reading eight years ago and remains as fresh today as it did then. So we have to ask: Has the world learned nothing?
From Russia Without Love
As the Ukraine crisis is seen to impact on the global superyacht market superyacht, experts Frances and Michael Howorth ask; has Russia fallen out of love with the world of superyachts?
Written by Frances and Michael Howorth
With its relations strained with Ukraine, the sanctions imposed by the EU, and business relations in general with the United Kingdom, The British House of Lords has instigated an inquiry into the relationship between the EU and Russia. With the wide ranging brief that brings them all under scrutiny the EU Sub-Committee on External Affairs, one thread this new investigation will follow is to look the causes of the Ukraine crisis and how the EU responded to the situation.
Over recent years it is the influx of Russian capital that has greatly bolstered the economy of the superyacht industry. European shipyards have fallen under their control and much of what is new and shiny when it comes to new builds and charter yachts have been quickly snapped up those with roubles
Chairman of the committee instigating the inquiry in Great Britain, Lord Tugendhat, has written: “The relationship between Russia and the EU is both complex and interdependent.”
There have been reports written in the media suggesting that banks are shying away from lending money to Russian clients keen to purchase superyachts and other high end luxury assets.
Shipyards in Italy have told us, “Some Russian clients are in default and their superyachts are back on the market. “Sadly much of the problem stems from the difficulty Russians now encounter as they endeavour to transfer funds for payment.
A feature written for International Boating Industry (IBI) by David Robinson stated, “An unknown number of possible new-build contracts, including one as large as 185m (607ft), are no longer going ahead and chartering activity in the Mediterranean and Asian markets has been noticeably reduced by circumstances in Ukraine.”
Russian market has gone away
One German shipyard is reported to have told the same media “The Russian market has gone away and were see no return for a long time. This yard is known to have been potentially negotiating a contract for a 185m yacht for a Russian owner.”
xxxxxxxxxxxxx CEO at xxxxxxxxxxxx said that the political row involving Russia, Europe and the USA, is having a serious impact on the superyacht market. He said, “It is more difficult to sell superyachts now but the market it is not completely stopped.” He continued, “Even before recent events in Ukraine a lot of banks were shying from lending money to Russian clients. Today it is only more difficult.”
Those Russian clients still active players in the superyacht market are now paying cash without the need for financing and it would be wrong to suggest that the rouble has lost its allure for many EU based shipyards.
Russian market
With perhaps more yacht sales into and out of the Russian market than perhaps any other broker involved in superyachts and more than a billion Euros worth of yachting deals from new builds and second hand yacht deals to charter and finance, xxxxxxxxxxxt is an authority on the subject. He said, “In many cases the impact on our industry is positive with money flowing out or Russia and Ukraine into markets which are seen as more stable. I have personal experience of two such examples.
The crisis has thrown up a few high profile negative cases of course, but in general business is still brisk.” He added, “From what I can see banks seem to be as keen as ever to deal with any high net worth person. Each case is very individual so it would be wrong to say they shy away from Russians. Again in my experience Russians are some of the most straight forward business people to work with. There is a vast second tier of ultra-wealthy Russians who would not be considered Oligarchs or risky propositions.”
CEO of xxxxxxxxxxxxx superyacht builder xxxxxxxxxxxxx xxxxxxxxxxxxx has confirmed his company has sold its last two 50 metre units to people from Ukraine. He told us, “From a xxxxxxxxxxxx shipyard these political events may have consequences on potential new buyers but with regard to on going transactions, they have not impacted.”
Sudden drop in Russian clients
News from charter brokers suggesting a sudden drop in Russian clients keen to charter the latest superyachts over this coming season have drop by as much as 40% are also being contested by those at the top. xxxxxxxxxxxx CEO of xxxxxxxxxxxxx confirmed to us, “There was drop of about 15% on the charter market due to the situation but many repeating Russian clients are confirming most of the charters booked by them.
xxxxxxxxxxxx CEO of the xxxxxxxxxxxx based xxxxxxxxxxxx Group is equally bullish. He told us, “The crisis can still be considered a regional crisis. We did not have the impression that it has particularly effected the ‘Russian’ client. We have not seen a sudden drop in Russian clients keen to charter the latest superyachts Russian clients are present in the market place and that market is stable up to now” Xxxxxxx says, “None of us at Xxxxxxxx (a large yacht brokerage firm) have noticed such a big drop in Russian business.”
House of Lords inquiry
Meanwhile back in Britain The House of Lords inquiry will be examining the way in which the EU has handled its relations with Russia and neighbouring countries in the recent past and what should govern those relationships in the future. It will also examine the many and various links that exist between the EU and Russia, including links in the fields of hydro-carbons, professional services, finance, consumer goods and the food and drink sector. Trade, business and investment form a significant part of the strategic tool-kit on either side of the relationship, and the Committee will be examining how the EU’s policies in these areas tie together with wider foreign policy.
Yet many are asking ‘Can the superyacht industry survive another period of slow sales so soon after the world financial crisis that brought so much inactivity and in some cases business closures?’ xxxxxxxxxxxx is quite convinced it will. He said, “The crisis has done a lot of damage to the yacht industry, in some ways exposing the weakest to disappear or consolidate into stronger groups. For sure, it has been challenging times for most of us, and it remains. It has also allowed this industry to restructure to be able to cope with very tough times as well, this should be looked as positive development for a very young industrial activity blessed for many years. I believe the passion from our customers for yachts will remain, we just have to get stronger and more competitive.
XXXXXXXXXXX believes it certainly can, telling us, “This period of relative inactivity has been good for the industry in general. Everyone has had to focus on what’s important whether that be quality of service if you are a broker or quality of production if you are manufacture. For sure every business has had to make cuts and those that have been slow to react are now feeling the consequences.”
Friday 24 October 2014
Calling for written evidence before Friday 24 October 2014, Lord Tugendhat, said his inquiry at the `House of Lords will consider other issues, such as:
- Commercial relations with Russia and to what extent EU economies are dependent on Russia and vice versa;
- Russian ‘sensibilities’ and how much the EU takes into account the Russian perspective;
- Corruption and how much it poses a problem to commerce;
- Sanctions and how best to implement them in a strategic way;
- Political and strategic goals of the EU and how they run alongside commercial objectives; and
- EU ‘values’ and how they can be respected within the commercial relationship with Russia.
This article was written in July 2014. At the time we had the permission to quote the names of commentators and the companies they worked for. Because many no longer want to be requoted we have removed the names and companies from this re-publishing.