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Superyacht struggle: Is Hong Kong now safe harbor for sanctioned Russians?

Hong Kong’s leader, John Lee, said Tuesday that the city had no legal basis to act on a Russian oligarch’s superyacht in the city. 
Luxury megayacht Nord tied to Russian billionaire Alexei Mordashov, is anchored in Hong Kong
The luxury megayacht Nord, tied to Russian billionaire Alexei Mordashov, was anchored in Hong Kong waters last week. Isaac Lawrence / AFP via Getty Images

HONG KONG — A superyacht linked to a Russian oligarch has produced the latest ripple of tensions between the U.S. and China after it moored in Hong Kong’s harbor.

Nord, a $500 million vessel connected to sanctioned tycoon Alexey Mordashov, has been docked in the city since last Wednesday after it made the weeklong journey from the Russian city of Vladivostok. 

Measuring 464.6 feet, it has two helipads, a swimming pool and 20 cabins, as well as a gym, a sauna and a cinema.  

Hong Kong said Tuesday it would not seize the superyacht, defying Washington and raising fears that the global financial hub could become a haven for people sanctioned over the war in Ukraine.

Mordashov, one of Russia’s richest men, was sanctioned by the U.S., the United Kingdom and the European Union in February, days after Russia invaded Ukraine. His company, Severstal, did not immediately respond to a request for comment about the Nord.

Hong Kong’s leader, John Lee, said Tuesday that the city had no legal basis to act on a Russian oligarch’s superyacht in the city. 

“We will comply with United Nations sanctions,” Lee said at a news conference. “We cannot do and we will not do anything that has no legal basis.”

Russia, a permanent member of the United Nations Security Council, has vetoed all attempts to take action on Ukraine, which could include sanctions against people like Mordashov. 

The State Department said in a statement Monday that it would “strongly encourage all jurisdictions to take actions under their domestic authorities to help implement sanctions imposed by the United States and more than 30 other countries.” 

It added that “Hong Kong’s reputation as a financial center depends on adherence to international laws and standards” and that “the possible use of Hong Kong as a safe haven by individuals evading sanctions from multiple jurisdictions further calls into question the transparency of the business environment.”

U.S. and European authorities have seized over a dozen yachts belonging to sanctioned Russian tycoons to prevent them from sailing to other ports that are not affected by the sanctions. So Russian oligarchs have begun docking their yachts at ports in places like Turkey, which has maintained diplomatic ties with Russia since the war began.

However, some experts predict that China will not stop Russians sanctioned by the West from registering in Hong Kong as the once strong financial hub struggles to compete in the global market, leading to fears that it will become a safe haven for Russian oligarchs trying to evade Western sanctions.  

“China is trying to restore and rebuild investors’ interest in Hong Kong,” Yun Sun, the director of the China program at the Stimson Center, a nonpartisan think tank in Washington, said by email Tuesday.

The most important consideration for Hong Kong’s authorities will be whether the city’s banks will be denied access to the U.S. financial market as a result, she said.

“Secondary sanction is more a practical matter rather than a legal or moral matter, as Hong Kong banks handling Russian transactions could be sanctioned,” Sun added. “That is the most important consideration for Hong Kong.”

China’s Foreign Affairs office in Hong Kong accused the State Department in a statement Monday of “smearing” the city's business environment. It also referred to a statement its Marine Department issued Sunday, which said that Hong Kong’s “reputation and status as an international financial center are globally recognized” and that the city maintained a “free, open and law-based business climate.”  

Lee laughed off U.S. sanctions Tuesday, calling them “barbaric.” He was himself sanctioned by the U.S. in 2020 for his role in implementing a national security law that has been criticized by the U.N.-appointed human rights committee and rights organizations.

Chinese and Hong Kong officials have repeatedly said the law was vital to restore stability after the city was rocked for months by sometimes violent anti-government and anti-China protests in 2019.

It is unclear how much Russian money has flocked to Hong Kong because of Western sanctions. The Hong Kong Marine Department did not respond to a request for comment on the number of Russian yachts in its harbors. 

China has not backed global sanctions against Russia, and President Xi Jinping has said little about the conflict in recent months. However, officials have repeatedly urged “all parties” involved in the war to engage in diplomatic negotiations

“We will have to see how much money eventually flocks to Hong Kong and how they are being handled in order to assess the impact on U.S.-China relations,” Sun said.