US Warns Hong Kong on Sanctions After Russian Megayacht Turns Up

(Bloomberg) — The United States has warned Hong Kong that aiding sanctioned individuals could threaten its standing as a financial hub, after a mega yacht linked to one of Russia’s richest men docked in the city’s port.

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The $500 million ship Nord, tethered to businessman Alexei Mordashov, arrived in Hong Kong on Wednesday, after a week-long journey from the Russian city of Vladivostok. Mordashov, who is believed to be an ally of President Vladimir Putin, was sanctioned by the European Union, the United Kingdom and the United States following the Russian invasion of Ukraine in February.

“The potential use of Hong Kong as a safe haven by individuals evading sanctions from multiple jurisdictions calls into question the transparency of the business environment,” a US State Department spokesperson said in an emailed statement.

The spokesperson added that the city’s reputation as a financial center depends on its adherence to international laws and standards.

Hong Kong’s maritime ministry said on Friday that while it imposes United Nations Security Council sanctions, it does not implement “unilateral sanctions imposed by other jurisdictions”. The former chief executive of the British colony, John Lee, was sanctioned by the United States, along with several other city officials, for his role in the government’s crackdown on civil liberties at the Centre.

There are concerns that Russian business leaders may try to circumvent sanctions imposed by the United States and its allies by shifting their assets to Hong Kong. China refused to condemn Russia’s war in Ukraine, with President Xi Jinping declaring an “unlimited” friendship with Putin on the eve of the invasion.

“US companies are increasingly viewing Hong Kong’s business environment with caution,” a US spokesperson said in a statement Saturday, adding that China’s move to ease the city’s political independence has exacerbated those concerns. “We strongly encourage all jurisdictions to take action under their local authorities to help enforce the sanctions.”

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Hong Kong’s status as a global financial center has waned in recent years, thanks to the suppression of political freedoms under Beijing’s sweeping national security law and Covid restrictions that isolated the former center from the world, until recently.

More than a dozen yachts linked to Russian oligarchs have been seized by US and European governments to punish them for their ties to Putin. Mordashov, the largest shareholder in steelmaker Severstal PJSC, joined other businessmen in May in a bid to challenge the restrictions in European courts.

When she left the North Vladivostok region, which includes two helipads, a cinema, and 20 luxury cabins, it listed the Vietnamese port of Da Nang as its destination. A few days later, it changed its destination to Hong Kong, according to ship-location data compiled by Bloomberg.

The ship also changed its flag — the maritime authority under which the ship is registered — to Russia from the Cayman Islands in June, according to Marine Traffic.

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