Filenews 5 May 2022
With the "wave" of sanctions from the West looming menacingly against them after Putin's invasion of Ukraine, Russian oligarchs removed their luxury yachts from the ports of the European Union and Great Britain in order to avoid seizures. Some transported them to Dubai, others found refuge in the Maldives. Now, however, the most popular destination for Russian oligarchs' yachts is Turkey.
At least eight yachts owned by Russian tycoons - among them the Eclipse, 162 metres long and worth €438 million - are not enough. and the Solaris, 140 meters long and worth €474 million, both owned by Abramovich- are currently tied up in Turkish ports or recently expelled from them. The vessels currently in Turkey are worth a total of €1.1 billion, according to vesselsValue's yacht valuation experts.
Turkey is a popular choice for Russian oligarchs not for its sunny weather and endless beaches in the Mediterranean: although the country is a member of NATO, Ankara has not embraced the sanctions imposed by the West against Moscow and maintains close relations with the Kremlin. In addition, at the end of March Istanbul hosted the delegations of Ukrainians and Russians for peace negotiations.
"The sanctions imposed by European countries and the U.S. forced Russian billionaires to seek alternative investment markets," says Zeynep Fıratoğlu, communications manager at Space, an Istanbul-based luxury real estate company. "Turkey stood out as a viable option for Russian tycoons, due to its geographical location, developed market and banking system. At the same time, the neutrality stance in the Russia-Ukraine conflict was appreciated."
According to data from the Turkish Statistical Institute, housing sales to non-Turkish citizens increased by 55% in February 2022 on an annual basis. Russian buyers increased by 96%, while Ukrainian buyers by 85%. The explosion continued in March, with citizens of foreign countries buying 21% more homes than in February. "After the invasion of Ukraine, we saw a significant increase in demand from Russian buyers," observes Fıratoğlu.
A pole of attraction for Russian oligarchs is the investment citizenship program, which gives a Turkish passport within 3-4 months to anyone who invests at least $250,000 in real estate or $500,000 in government bonds, companies, investment funds or an account with a Turkish bank. The required amount is... pocket money for Russian oligarchs, which makes Turkey an attractive alternative for those looking for a second passport. Other countries in Europe may have 'golden passport' programmes with similar privileges, but these roads may soon be closed to Russians. Cyprus, a popular tax haven for Russians for many years, is now driving out oligarchs: Forbes found that 15 Russian billionaires also have Cypriot citizenship, but Nicosia has already revoked the passports of eight of them, among them Putin's close ally Oleg Deripaska.
According to Şerif Nadi Varlı, the chief property broker of Istanbul-based Vartur Real Estate, Russian billionaires are looking for less luxurious homes and more large investments that could bring them financial benefit, as well as a Turkish passport. "Their yachts are here, they're spending time here themselves," he adds.
Nadi Varlı recently contacted a representative of a Russian customer, who was prepared to invest €100 million in the project for the purchase of a hotel on the Mediterranean coast of Turkey. "The hotels we manage to find buyers are located on the coastline from Antalya to Bodrum" he says. "All Russian clients are trying to obtain Turkish citizenship through investments."
Seaside cities such as Bodrum, Fethiye and Marmaris are the most popular destinations for Russian oligarchs who want to invest in Turkish real estate. Four of the eight yachts owned by Russian oligarchs and monitored by Forbes in Turkey have docked in Turkish cities in this region. In detail: the Eclipse of Abramovich and the Romea of Alexander Nesis - worth €110 million - are the most important of the year. they are located in the town of Götzek near Fethiye. Andrei Molchanov's Aurora - worth €110 million - is not enough. it is located in Marmaris and the Solaris of Abramovich is located in Yalikavak near Bodrum. The Clio of Oleg Deripaska - worth €58 million - is a step in the right direction. it departed Götzek on 16 April, while his Predator Iskander Makhmudov - worth $55 million - departed from Götzek on 16 April. it sailed from the port of Kusadasi a month ago. In addition, the Space of Vagit Alekperov - worth €8 million - is not enough. it is located in the marina of Tuzla in Istanbul, while the Rahil of Arkady Rotenberg - worth 38 million dollars - is located in the marina of Tuzla in Istanbul, while the Rahil of Arkady Rotenberg - worth 38 million dollars - is located in the marina of Tuzla in Istanbul. it was last seen also in Tuzla before sailing on April 27 to the Russian resort of Sochi.
Abramovich, the most famous oligarch who has found refuge for his yachts in Turkey, attended the peace talks held in Istanbul on March 29th. His presence in Turkey dates back a long time. Nadi Varlı told Forbes that his company sold four apartments in Bodrum to members of Abramovich's family in 2007, but it's unclear if they still own them. One of its private jets (a Gulfstream G650 registered in Luxembourg under the number LX-RAY) flew from Israel to Istanbul on March 14 and departed for Moscow the next day.
In addition to real estate investments, Russians have also established companies in Turkey. Specifically, in March 2022, Russian citizens created 64 companies in Turkey, a number almost four times higher than in February this year. That number is expected to rise once the figures for April are announced, according to Eray Sayin, an associate of Istanbul-based law firm Sayin Law & Consulting. Setting up a company in Turkey takes five days, and the process costs about $3,400.
"After the imposition of sanctions against Russia, the number of companies founded by Russian citizens in Turkey soared," Sayin notes. His company has received 25 requests in the last 25 days from Russian customers wishing to open a company in Turkey.
Most of these companies are created for the purpose of investing in real estate, but some are also interested in the energy industry, especially renewables, as well as oil and gas. Probably among the Russians who open companies in Turkey are some oligarchs, according to Sayin, but it is not known how many are going ahead with this move. If Western countries' sanctions against Moscow continue to be in place for months, Sayin estimates that Russian companies from other sectors - such as fertilizer production, one of Russia's main export activities - will build factories and invest hundreds of millions of dollars in Turkey.
"There are a lot of investors from the energy industry, but at this stage they are making modest investments because the climate is uncertain," Sayin notes. "But the amounts will increase," he estimates.
However, Turkish banks are wary of the Russians for fear of getting involved in sanctions. Thus, they ask for documents proving that the Russian citizen or the Russian entity that opens a bank account has not been sanctioned. The high demand for citizenship through investments is likely to increase the cost of the program for stakeholders: the Turkish government plans to increase the minimum investment in real estate to $400,000 from $250,000 today.
Turkey and Russia have deep economic relations that go beyond the connection with the oligarchs. Turkey is Russia's fifth-largest export market and Russia the tenth largest in Turkey. Vladimir Putin and Recep Tayyip Erdogan have also come closer in recent years, after a difficult period when the two powers supported different camps in Syria's civil war. Tension between the two countries escalated when Turkey shot down a Russian fighter jet over its airspace in November 2015, which brought about trade restrictions and a suspension of visa-free travel. However, the two states normalized relations in 2016, while Putin and Erdogan have been in contact regularly since the start of the war in Ukraine.
As long as western sanctions are in force and Turkey refuses to adopt them, Russian oligarchs will continue to invest in the country. And it will be even easier for those who have a Turkish passport and a company registered in the Turkish market.
"In the short term, we expect that Russian citizens will acquire Turkish citizenship by buying a property in the country in order to have an alternative if the Russian passport creates a problem for them," Fıratoğlu estimates. "In the medium and long term, we expect Russian tycoons to move their businesses and wealth to Istanbul and their families to relocate either to Turkey or to other European countries."
Source: Forbes
