Scholar: Hong Kong Becomes ‘Axis of Evil’ Financial Center

Luxury megayacht Nord, reportedly tied to Russian billionaire Alexei Mordashov, arrived in Hong Kong waters on Oct. 5, 2022. Hong Kong's leader made light of the U.S. sanctions against him on Oct. 11, 2022, as he defended his government's decision not to act against a superyacht reportedly owned by a Kremlin ally. (Peter Parks/AFP)

Russian steel Oligarch Alexey Mordashov has been sanctioned by several countries, and his superyacht “Nord” was found moored in Hong Kong waters. A partner at the Hong Kong law firm ONC Lawyers told the media that many Russian companies are seeking cooperation with Hong Kong law firms.

Some scholars and current affairs commentators have analyzed that the berthing incident is a blatant challenge to the sanctions rules of Western countries, and Hong Kong has become the financial center of the “Axis of Evil.” A U.S. State Department spokesman warned that some may use Hong Kong as a safe haven for evading sanctions, raising questions about the transparency of the city’s business environment.

“Nord” entered Hong Kong waters on Oct. 5 and anchored in the southwest waters. In response to media inquiries at that time, the Hong Kong Marine Department stated that it does not comment on the matters of individual arriving vessels, and said that the Hong Kong government has always enforced the sanctions imposed by the United Nations Security Council and that the government has no power and will not impose unilateral sanctions imposed by other jurisdictions on individual countries.

On Oct. 8, a U.S. State Department spokesman warned that some people may use Hong Kong as a safe haven to avoid sanctions and stressed that Hong Kong’s reputation as a financial center depends on compliance with international laws and standards.

On Oct. 9, the Commissioner’s Office of the Chinese Ministry of Foreign Affairs in Hong Kong responded that the American comments were misleading and accused the U.S. State Department of smearing Hong Kong’s business environment.

On October 11, Hong Kong Chief Executive Lee Ka-chiu responded before attending the Executive Council that actions in certain places have no legal basis in Hong Kong and Hong Kong will not take any action. Lee claimed that Hong Kong will implement any sanctions proposed by UN resolutions, but it is impossible to do anything without a legal basis. He emphasized that this is illegal, and it is not in the spirit of the rule of law in Hong Kong. Hong Kong must handle funds or activities in accordance with the law.

Simon Shen: HK Has Become a Financial Center of the ‘Axis of Evil’

International relations scholar Simon Shen described Hong Kong as the financial center of the “Axis of Evil.” As Hong Kong offered shelter for the “white-gloved” superyacht of Putin, it is naturally regarded as blatant by the United States, Europe, and the United Kingdom, challenging their sanctions against Russia and even being seen as indirectly supporting Russia’s invasion of Ukraine. And Hong Kong can be a “safe haven” for rich Russians, so it is attractive to them.

Shen pointed out that when the world’s mainstream countries imposed sanctions on Russia, it has become the norm, and according to “customary law,” Hong Kong should follow the norm unless Hong Kong voluntarily becomes a member of the other side of the mainstream country’s camp. Therefore, Hong Kong has violated those norms. Simon’s analysis pointed out that when Hong Kong becomes a “safe haven” for the rich in Russia, it will greatly increase the risk of Hong Kong being sanctioned, which is completely contrary to the Hong Kong government’s recent claim of “securing talents.”

Simon Shen quoted an expert from The Royal Institute of International Affairs, a British think tank, as saying that Russian billionaires have transferred their capital to Hong Kong in a surprising way within a few months. When Russia was sanctioned globally, it was no longer possible for Russian billionaires to “smuggle currency and launder money” in New York, London, and other countries. As Hong Kong has its infrastructure left over from the United Kingdom since the Hong Kong-British period, which is now more attractive than the Cayman Islands and the British Virgin Islands (BVI), the well-known money laundering paradises.

Simon Shen also quoted a senior researcher at the Hudson Institute, an American think tank, as saying that Hong Kong would become a “London substitute” in the eyes of Russian billionaires because Hong Kong has an automated transfer system that can process billions of dollars of transactions without involving the U.S. banking system, which helps them elude Western scrutiny.

Stephen Shiu: HK Will be Sanctioned if it Facilitates the Transfer of Russian Funds to US dollars

Current affairs commentator Stephen Shiu analyzed that the Hong Kong government did not violate the sanctions ban by allowing the yachts of Russian oligarchs to moor this time, because Hong Kong has not joined the agreement to confiscate Russian property, but he believes that the rich and Hong Kong the government has openly challenged the sanctions rules of Western countries.

He predicts that there is little chance of Western countries sanctioning Hong Kong for the yacht berthing incident. However, Western countries will closely monitor whether Russian funds are converted into U.S. Dollars or Hong Kong dollars through Hong Kong.

Lee Simon: Hong Kong Dare Not Actively Assist Sanctioned Countries

Political and economic commentator Lee Simon analyzed in an interview with the Epoch Times that the Hong Kong government’s choice can be divided into “passive hindrance to sanctions” and “active assistance for sanctioned countries,” and he believes that the Hong Kong government withheld their actions this time may not be entirely wrong, as long as Europe and the United States strengthen the sanctions and clarify the specific measures of sanctions, as it will inevitably lead to the “extraterritoriality” national sentiment and hatred for more than 100 decades.

Lee believes that neither Beijing nor the Hong Kong government dares to “actively render assistance to sanctioned countries” and even Hong Kong banks can decide whether to do business with Russian billionaires, he is very sure that banks will not do business with Russian millionaires.

Superyacht Worth US$500 Million

After the outbreak of the Russian-Ukrainian war, the United States, the European Union, the United Kingdom, and other countries imposed sanctions on tycoons who are regarded as Putin’s allies, including Moldashov. Moldashov is the largest shareholder of Severstal, Russia’s largest steel and mining company. A spokesman for him declined to comment on the movements of “Nord,” but claimed that Mordashov was in Moscow.

The superyacht “Nord” currently moored in Hong Kong waters is worth US$500 million and is owned by Moldashov. There are 20 luxury cabins on board, large helicopter landing pads on deck, extra swimming platforms, a swimming pool on the main deck, and a large sports and diving center on the lower deck.

Nord had previously stayed in Seychelles, an island country in the western Indian Ocean, and sailed back to the Russian port of Vladivostok in March this year. Nord left Vladivostok on Sept. 27, and once listed the Da Nang Port in Vietnam as the destination, but then changed its destination to Hong Kong waters on Sept. 5.

Moldashov’s other yacht, Lady M, worth about US$68 million, was also seized in Italy earlier.