Why Turkey could become the next haven for Russian oligarchs fleeing sanctions
As Western sanctions began to rain down on Russian oligarchs following Vladimir Putin’s invasion of Ukraine, many took their yachts out of the European Union and British territories to escape the risk of seizure. Some went to Dubai, while others fled to the Maldives. Now the most popular destination for oligarch-owned yachts is Turkey.
At least eight yachts owned by Russian oligarchs, including Roman Abramovich’s $438m, 533ft Eclipse and $474 million, 458 feet Solaris— are currently moored in Turkish ports or recently departed. The vessels currently in Turkey are collectively worth $1.1 billion, according to yacht valuation experts VesselsValue.
The country is popular among oligarchs for reasons that go beyond its sunny climate and long Mediterranean coastline: despite being a member of NATO, Turkey has rejected Western sanctions and maintained close ties with the Russia, even hosting peace talks between Russia and Ukraine in Istanbul at the end of March. .
“Sanctions imposed by European countries and the United States have pushed billionaires to look for alternative investment markets,” says Zeynep Fıratoğlu, communications manager at Space, an Istanbul-based luxury real estate company. “Turkey has established itself as a viable option with its geographical location, advanced markets and banking system, as well as its neutral position between Russia and Ukraine.”
According to data from the Turkish Statistical Institute, home sales to non-Turkish buyers increased by 55% in February 2022 on a year-on-year basis. Sales to Russian buyers increased by 96%, while sales to Ukrainians increased by 85%. The boom continued in March, with foreigners buying 21% more homes than in February. “Since the invasion of Ukraine, we started to see a significant increase in demand from Russian buyers,” says Fıratoğlu.
Turkey’s main calling card for Russians is its citizenship-by-investment program, which provides a Turkish passport within three to four months to anyone investing at least $250,000 in real estate or $500,000 in government bonds, corporations, investment funds or a local bank account. It’s loose change for the Russian oligarchs, making Turkey an attractive alternative for those seeking a second passport. And while several other countries in Europe also have so-called “golden passport” systems that offer similar benefits, these avenues may soon be closed. Cyprus, long a popular tax haven for Russians, is cracking down on the oligarchs: Forbes found that 15 Russian billionaires also have Cypriot citizenship, but the island country has already revoked the passports of eight oligarchs, including Putin ally Oleg Deripaska.
According to Şerif Nadi Varlı, the main real estate broker at Istanbul-based Vartur Real Estate, Russian billionaires are less in the market for luxury homes and more for major investments that could earn them a profit, as well as a Turkish passport. . “Their yachts are here, they hang out here,” he says.
Nadi Varlı was recently approached by a client representing a Russian buyer looking to spend $100 million on a hotel on Turkey’s Mediterranean coast. “The hotels we offer them are by the sea, from Antalya to Bodrum,” he explains. “All Russian clients are now trying to obtain Turkish citizenship by investment.”
Coastal cities such as Bodrum, Fethiye and Marmaris are the most likely destinations for Russian oligarchs looking to invest in Turkish real estate. Four of the eight yachts belonging to oligarchs followed by Forbes in Turkey are moored in the area: Abramovich’s Eclipse and Alexander Nesis’ $110 million Romea are anchored in the town of Göcek near Fethiye; Andrei Molchanov’s $110 million Dawn is in Marmaris; and Abramovich Solaris is located in Yalıkavak, near Bodrum. Oleg Deripaska’s $58 million Clio left Göcek on April 16, while Iskander Makhmudov’s $55 million Predator left the port of Kuşadası further north a month earlier. Elsewhere in Turkey, Vagit Alekperov’s $8 million Space is in Istanbul’s Tuzla Marina, while Arkady Rotenberg’s $38 million rahil was last seen in Tuzla before leaving on April 27 for the Russian resort of Sochi.
Abramovich, Turkey’s most prominent yachting oligarch, was spotted at the peace talks in Istanbul on March 29. It has a long history in the country: Nadi Varlı said Forbes that his company sold four apartments in Bodrum to members of Abramovich’s family in 2007, but it is unclear whether they still own them. One of his jets – a Luxembourg-registered Gulfstream G650 with the tail number LX-RAY – flew from Israel to Istanbul on March 14 and departed for Moscow the next day.
Beyond investments in real estate, Russians have also opened businesses in Turkey. Russians set up a record 64 companies in Turkey in March, almost four times the amount in February – and that number is expected to rise once April data is released, says Eray Sayin, partner at law firm Sayin Law & Consulting based in Istanbul. It takes five days to set up a business, and the process only costs around $3,400.
“After the imposition of sanctions on Russia, there was an explosion in the number of companies founded by [Russian] citizens in Turkey,” says Sayin. His firm received 25 inquiries from Russian clients wishing to open a business in Turkey in the past 25 days.
Most of these companies are created with the aim of investing in real estate, but some also have an interest in the energy industry, particularly renewable energy and oil and gas. It’s likely that at least some Russian oligarchs and billionaires are opening businesses in Turkey, Sayin says, but it’s unclear how many. If Western sanctions linked to the war in Ukraine continue for months, he expects Russian companies in other sectors, including fertilizers, one of Russia’s main export products, to build factories and invest hundreds of millions of dollars in Turkey.
“There are a lot of investors in the energy sector, but at this stage they are only making small investments because everything is uncertain,” says Sayin. “But it will increase.”
Still, Turkish banks are worried about not breaching the sanctions and demand documentation proving that the Russian person or company opening a bank account has not been sanctioned. And the high demand for citizenship for investment may also drive up the cost of the program: the Turkish government plans to increase the minimum investment in real estate to $400,000 from $250,000.
Turkey and Russia have deep economic ties that go beyond the oligarch connection. Turkey is Russia’s fifth largest export market and Russia is Turkey’s tenth. Vladimir Putin and Turkish President Recep Tayyip Erdoğan have also grown closer in recent years, following a period of rocky relations when the two powers supported opposing sides in Syria’s civil war. Tensions came to a head after Turkey shot down a Russian fighter jet over its airspace in November 2015, leading to trade restrictions and a suspension of visa-free travel. But the countries normalized relations in 2016, and Putin and Erdoğan have stayed in touch throughout the war in Ukraine: the last phone call between the two leaders was on April 26.
As long as Western sanctions are in place and Turkey refuses to impose its own, Russian oligarchs should continue to invest in the country. This will be easier to do with a Turkish passport in hand and a locally registered company.
“In the short term, we expect Russian people to obtain Turkish citizenship by buying property in Turkey in order to have an alternative to their existing Russian passport,” says Fıratoğlu. “In the medium to long term, we can expect Russian billionaires to move their business[es] and wealth in Istanbul and that their families live either in Turkey or in other European countries.