Goodbye Sardinia: how does an Italian island live without Russian billionaires

Goodbye Sardinia: how does an Italian island live without Russian billionaires
Goodbye Sardinia: how does an Italian island live without Russian billionaires

“Russian billionaires are the new kings of the Emerald Coast” was the headline of the Italian newspaper La Nuova Sardegna after Alisher Usmanov bought Villa Merloni in Sardinia for €35 million in 2005.

Celebrating the purchase, the billionaire gave a grand reception in the spirit of the Venetian carnival. Guests in carnival costumes were brought to his new estate in Romazzino Bay on gondolas specially delivered from Venice. “[Существует] a certain chemistry between my soul and this land, ”Usmanov himself said about Sardinia.

The headline in La Nuova Sardegna is hardly an exaggeration. Having gained extraordinary popularity in the mid-2000s, Sardinia has become a second home for many participants in the Russian Forbes list. The presence of the airport in Olbia, which accepts business jets, also played its role. The owners of the villas on the island were Pyotr Aven, Oleg Deripaska, Vasily Anisimov, Alisher Usmanov, Dmitry Mazepin, Irina Abramovich, who received the villa after her divorce from Roman Abramovich, Rustam Tariko, Ziyad Manasir, Vyacheslav Kantor, Arkady Rotenberg, Alexei Mordashov and Andrey Molchanov.

After the start of Russia’s “special operation”* in Ukraine and the sanctions that followed it, some of these villas were frozen, and their owners became banned from entering the European Union.

  • In March, employees of the Italian Financial Guard (the power unit of the Ministry of Economy) froze real estate owned by Russian businessman Alisher Usmanov in Sardinia. On the island, the businessman owned the villas Capaccia, L’Aldiola, Mimosa, Li Nibani, Cormorano, Sa Piantesa and Sa Pedra. However, according to media reports, only one villa of a billionaire worth € 17 million was frozen by the authorities. According to his representative, the property belongs to a trust, the beneficiary of which Usmanov is not.
  • On March 16, real estate was arrested in Sardinia, one of the owners of which is Russian businessman Pyotr Aven. We are talking about a villa in the Porto Rafael resort area in the north of the island worth €4 million.
  • On March 19, the Italian Financial Guard arrested the residential complex of Alexei Mordashov in Sardinia worth €105 million ($112 million).
  • On April 11, the Italian Financial Guard announced the freezing of a $105 million residential real estate complex in the resort of Portisco, Olbia municipality (province of Sassari), owned by Uralchem’s co-owner Dmitry Mazepin and his son Nikita.
  • On September 1, the Italian authorities imposed an administrative arrest on 11 buildings in Sardinia belonging to the co-owner of the fertilizer manufacturer Akron, Vyacheslav Kantor.

According to Investing Reporting Project Italy, Oleg Deripaska, who is under EU sanctions, also has villas in Sardinia, but he owns them through a complex network of offshore companies, so the authorities have not yet been able to find grounds for their arrest. The villa of Arkady Rotenberg after the divorce was supposed to go to his ex-wife Natalya, however, according to Forbes, this did not happen and the villa is now frozen, and Natalya Rotenberg is trying to prove to the Italian authorities that she is the owner of this property.

Billionaires have lost the right to access their property on the island (the sanctions imply a ban on entry into the EU) and the right to make a profit (they cannot sell and rent a villa), but they can still use the seized property. So, for example, the villa of Peter Aven in Sardinia is two-thirds owned by his eldest children, where, according to Forbes, they spent this summer.

forbidden island

The “special operation” and sanctions have sharply reduced the flow of tourists from Russia to Sardinia. Until February 24, three direct regular flights flew from Moscow to Olbia every week and one from St. Petersburg. The cancellation of direct flights resulted in the fact that if earlier it was possible to get to Sardinia from Moscow in a few hours, now it is more than a day and with at least two transfers.

Sardinia coordinator Mirko Idili of the Italian Trade Union Confederation (CISL) said sanctions and a reduction in the presence of wealthy Russians this summer could hurt the island’s economy and put more than 1,000 jobs at risk. At risk are employees of expensive hotels and restaurants, employees of the villas themselves, as well as personnel of service companies and landscape bureaus that service Russian real estate. In the off-season, the villa employs an average of 10-15 people, including gardeners, maids and a manager, writes Investing Reporting Project Italy, in the summer the number of servants can increase several times.

“Compared to the pre-pandemic year of 2019, the number of tourists has decreased tenfold,” says guide Andrey Kostromin, who works in the northeast of Sardinia. The native of Russia was helped to stay afloat by the fact that in parallel he is engaged in a real estate business and provides transportation services. Many of his colleagues, due to the outflow of tourists, have already lost their jobs in the tourism industry. “Someone went to the commercial sector, and someone even got behind the wheel of a taxi,” says Kostromin.

According to him, the situation has also hit the indigenous people of the island painfully. “Settling down in a villa with Russians has always been a great success: those who managed to do this could easily support their families on their wages,” says Forbes’ interlocutor. Often, both husband and wife worked at the same facility, and the freezing of the villa effectively deprived the family of their livelihood.

Therefore, when the freezing of villas and the layoffs of staff began, this did not find understanding among the local residents. “Many of these oligarchs are still perceived here as tycoons, as philanthropists,” Mirko Idili of CISL told The Washington Post, noting that he is trying to facilitate a compromise between Alisher Usmanov and the Italian authorities in order to return the work to the personnel serving billionaire villas. So far, this has not been achieved, while the billionaire is still an honorary resident of the city of Arzachena on the Costa Smeralda.

Now the contents of the arrested villas are paid by Italian taxpayers. The matter is that the Italian government, freezing objects of property, is obliged to support them in proper condition. In an interview with La Nuova Sardegna, the owner of Engel & Völkers Luxury Real Estate Sardinia Daniela Ciboddo cited the following figures: the maintenance of one villa will cost from €250,000 to €350,000 per year, provided that it will be served by three employees – a gardener, a housekeeper and a repairman . Maintenance of the pool will add another €15,000 per year to the costs.

How the seized villas are maintained with the money of Italian taxpayers remains unclear. “According to rumors, Usmanov’s villas already have grass up to their waists,” one of the local residents told Forbes.

Ekaterina Rumyantseva, founder of the Kalinka Group, says that another problem that owners of frozen property in Europe face is the risk of being taken over. “In Europe, it is very difficult to evict a person if he has moved into a house without your knowledge. Therefore, the owners are forced to hire serious security,” she explains. In Italy, frozen houses are protected at the expense of the state, says an acquaintance of one of the owners of the arrested villa. This can also be added to the necessary expenses for the maintenance of the seized property.

Eastern alternative

Many wealthy Russians preferred to rent luxury real estate in Sardinia. In previous years, there were a lot of Russians among the tenants, but now they have been replaced by Ukrainians, says Ekaterina Rumyantseva: “This year, as never before, there were many Ukrainian clients who were looking for villas worth half a million dollars a month.”

According to an employee of a large brokerage agency, who wished to remain anonymous, a similar trend can be seen in all European luxury resorts. “Look what is happening in Saint-Jean-Cap-Ferrat – a quarter of the luxury real estate, if not half, is rented by Ukrainians,” he says.

Many Russian clients, due to sanctions, had many problems with paying for services in Europe, the amount of funds they could operate with was significantly reduced.

The absence of Russians did not lead to stagnation in the residential real estate market in Sardinia, says Knight Frank partner Ekaterina Zenkovich. According to her, the market is now “post-pandemic activity” – people have again returned to travel and to the acquisition of resort real estate. The elite segment has not stopped either: this year, one deal with a Chinese buyer for €80 million has already been concluded on the island and another one is being prepared, for €100 million. The buyer is also not from the CIS countries.

Many wealthy Russians in 2022 decided to refuse to visit European resorts, fearing aggressive rhetoric due to the situation in Ukraine, says Ekaterina Rumyantseva. Where did they spend this summer? “The entire list of sanctions was in Turkey, in Bodrum, at the Mandarin Oriental hotel. The cost of renting villas there reached $1 million per month,” says the expert.

Russians who have fallen under sanctions can neither sell nor rent their real estate in Europe, including in Sardinia. Lawyers and directors of offshore companies where the Russians’ villas are registered simply refuse to carry out the instructions of the beneficiaries and do not sign the necessary papers, says one of the Forbes brokers who worked with the real estate of Russian citizens in Europe. Western countries, especially Great Britain and the United States, severely punish for participation in the violation of the sanctions regime, even their own citizens. For example, in August 2022, about 10 people were detained in the UK, who are suspected of helping people on the sanctions lists to circumvent restrictive measures.

What markets have Russian clients reoriented to in search of new real estate to buy? “We now have only two main markets – Turkey and the UAE,” Rumyantseva says. At the same time, in both locations, prices are significantly higher than the expectations of customers. “Today, the Emirates is a very high-budget market. I see bewilderment in the eyes of valued clients when it turns out that a nine-bedroom house in close proximity to the beach will cost $40-45 million,” she says, noting that prices in the Emirates are now in line with prices in the best locations on the Cote d’Azur. In Turkey, elite real estate is even more expensive – prices for it are twice as high as on the Riviera, the expert continues – “interesting” real estate objects cost from €25 million. At the same time, these objects are not available for sanctioned clients: both Arab and Turkish banks refuse to deals with them.

However, they also have investment options, says Rumyantseva: “Wealthy Russians are still interested in Moscow and the Moscow suburbs.”

* According to the requirement of Roskomnadzor, when preparing materials on a special operation in eastern Ukraine, all Russian media are obliged to use information only from official sources of the Russian Federation. We cannot publish materials in which the ongoing operation is called an “attack”, “invasion” or “declaration of war”, unless it is a direct quote (Article 57 of the Federal Law on the Media). In case of violation of the requirement, the media may be fined 5 million rubles, and the publication may also be blocked.

The article is in Russian

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