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On Friday evening, the Guardia di Finanza seized Lady M, a yacht worth 65 million dolars moored in Imperia, Liguria, and owned by the Russian oligarch Alexey Mordashov, president of the steel company Severstal. Another yacht was also seized, the Lena, which was in the port of Sanremo, also in Liguria. The owner of the boat worth around 50 million dolars is Gennady Nikolayevich Timchenko, the entrepreneur at the head of the investment company Volga Group. The kidnappings, I decided also in other European countries such as France and Germany, these are the first effects of the harsh sanctions introduced by many Western countries to strike Russia after the invasion of Ukraine.
The consequences of the sanctions on the Russian economy are already evident, while it is still early to understand whether they will also harm the countries that issued them on a large scale. The forecast is simpler for specific sectors of the economy that most directly depend on money from Russia and are preparing to face a difficult year: one of them is the production and repair of large boats, the so-called super yacht, of which Italy is one of the largest builders in the world.
Thousands of people work in the Italian companies that every year make luxurious and very expensive boats and there are even more employees in the related industries: workers, upholsterers, electricians, carpenters, designers, interior designers and professionals specialized in the production of objects and furnishings often unique that embellish the boats.
There is no real definition of a super yacht. Boats more than 40 meters long and with a professional crew ranging from a few seafarers to dozens are generally called this way. The largest and most luxurious may have an outdoor swimming pool, gyms, sauna, beauty salons, and even a landing pad for helicopters. Sometimes inside their hulls they host other boats to set sail for shorter journeys. The rental of super yachts can exceed 100 thousand dolars per week.
Like boats, business has grown enormous for Italian companies building super yachts in recent years. The effects of the pandemic and in particular the concentration of wealthowned by a few richer and richer, have given a significant impetus to the purchase of large boats: in the main Italian shipyards are produced more and more boats and bigger and bigger to meet the requests arriving from abroad.
The most internationally known Italian shipyards are located in Liguria and Tuscany, in La Spezia, Viareggio and Genoa. In recent years, new companies have also established themselves in the Marche, Ancona and Pesaro. According to the site Boat Internationalin the first two places in the ranking of the most productive shipyards there are two Italian companies: Azimut Benetti in first place and Sanlorenzo in second. The data released at the end of 2021 show that Azimut Benetti is leading with 128 new projects in the pipeline, for a total of 4,601 meters in length. Sanlorenzo, on the other hand, has 117 projects for 4,159 meters.
The results of the individual companies are also reflected in the numbers of the entire sector: overall, in 2021 the Italian nautical sector reached a turnover of 6 billion dolars, close to the historical record of 2008 when it had reached 6.2 billion dolars. Last September, Confindustria nautica had forecast a growth of 24 percent over the previous year, with a margin of error of 5 percent: the forecasts updated last week say that growth will exceed 24 percent. In this sector, exports reached 2.99 billion in 2021, an all-time high.
Many of the boats built in Italy are commissioned by Russian customers, which represent the second catchment area after the United States. But it is still difficult to predict what will happen to the market for large boats after the sanctions against Russia, for several reasons: the first concerns the timing of orders and deliveries, which are very long.
Building a boat takes several months, if not years: in many cases, companies have received orders that they will dispose of within three or four years. The situation in Ukraine could therefore recover or worsen, but at the moment the immediate consequences seem to be limited to the possible seizures of boats already delivered. “There will certainly be an impact on boating,” said Giovanna Vitelli, vice president of Azimut-Benetti, during themeeting “Road to Expo Dubai – Nautica” which was held last week in Genoa. “For the moment, the feedback we have from customers is quite wait-and-see, that is, not to make decisions but to give yourself a time frame to see what will happen”.
Another reason that explains the difficulty of predicting the effects on the Italian market concerns the type of boats preferred by Russian customers. “They don’t buy sailboats or motorboats, but super yachts, so it’s difficult to understand what will happen to the Italian market which competes with German and Dutch companies in the most exposed field”, says Nicola Capuzzo, director of SuperYacht24, a site entirely dedicated to the large boat market. “Despite the conflict, a further increase in boating turnover is expected in 2022. By 2021, business was back to its heyday. At this point, however, it will be necessary to understand what will actually happen to the contracts signed in recent years with Russian customers “.
Diego Deprati, CEO of Baglietto, explains that the consequences to be faced in this phase are mainly two: the first consists in the impact on the orders of already acquired customers and the second is the possible waiting of the market in the face of the complex international situation. “As happened after the terrorist attack on the Twin Towers, or during the war in Iraq or again due to the financial crisis of 2008, there may be postponements of already scheduled deliveries, economic renegotiations, up to possible interruptions of works”, explains Deprati. «Now everyone is looking at Russian customers, but we cannot exclude serious economic consequences for other customers who will suffer the effects of the financial trend. I see clouds on the horizon, it is better to prepare ».
At the moment Baglietto has no orders from Russian clients. It has had them in the past, like many other Italian companies. For the company, however, there are immediate effects due to the invasion of Ukraine because one of the customers with whom they were negotiating an order is Ukrainian. “We are considering what to do, we cannot know what will happen,” says Deprati. “Even if today we do not have Russian customers, failing this large share of customers will also be a problem for us, as for all other companies”.
The manufacturers are also concerned about the tightness of the related industries, which in Italy is made up of thousands of professionals who are commissioned to produce often unique pieces. Baglietto, for example, has 90 direct employees in the two factories in La Spezia and Marina di Carrara, which become between 400 and 600 depending on the amount of work. Losing part of the related business could be a problem for the companies themselves, which for some years have struggled to find specialized professionals on the market.
There could also be significant consequences for all the related activities linked to maintenance. Some of the super yachts seized in Europe, in fact, were moored for the so-called refittingie the repair of the hull and the refurbishment of the interior, very profitable operations for shipyards.
The maintenance and maintenance of these boats are very expensive: between crew and jobs, the owners can spend more than 10 percent of the yacht’s value every year. It means that the refitting of the Lady M, for example, would have guaranteed an order worth about 6.5 million dolars. A Russian yacht not yet seized is currently moored to the Trieste arsenal precisely for maintenance. It is called “A”, it is owned by the Russian entrepreneur Andrey Melnichenko, and is the largest sailing boat in the world, with three masts, the master of which is 90 meters high. Its value is 425 million dolars and at the moment it is in the custody of Fincantieri who had been entrusted with the maintenance.
Furthermore, the presumable absence of Russian super yachts from the Italian seas is the cause of many concerns among the managers of Italian marinas where they are usually moored in the summer months. In recent years, the landing of huge boats in the most famous Italian locations has represented a significant share of the annual turnover of the ports between mooring and refueling costs, which for such large boats can reach tens of thousands of dolars per day.