Russia Cracks Down on a Delinquent Tenant - the US


For the past six months, the magnificently domed, pastel yellow mansion that is home to the American ambassador in Moscow has stood empty, its chandeliers gathering dust, its echoing ballrooms awaiting the nomination of a new US envoy.

But among the several problems that the lack of an ambassador entails, wasting taxpayers' money on rent for an unoccupied residence does not rank high.

What is the annual rent on this 26,000-square-foot, turn-of-the-century palace, in one of the most historic corners of Moscow, a mile from the Kremlin?

A mere $12.61. Plus utilities, of course.

This is not how it was meant to be. And if the Russian government gets its way in a lengthy dispute with the US Embassy, this boondoggle's days are numbered. Even the embassy acknowledges that "the rent we are paying now is not reasonable." But the State Department's lawyers are out in force, and Washington is not giving up its current lease without a fight.

Spaso House, as the residence is known, built before World War I for a wealthy Russian merchant, is more than a splendid building in which to live and entertain. It has been at the heart of American life in Moscow since 1934, when the first United States ambassador moved in.

Writers of diplomatic memoirs have recalled such riotous occasions as the Christmas party in 1934, when the new ambassador was incautious enough to hire a troupe of performing animals from the Moscow Zoo to amuse the guests. Three trained seals went berserk in the ballroom, and a diplomatic incident was narrowly avoided when a baby bear, which had not been housebroken, ruined a Soviet general's uniform.

The rent dispute broke out because the lease on the residence, running from 1985 to 2005, was denominated in rubles at a time when the ruble was artificially pegged to the US dollar. The agreed rent of 72,500 rubles a year was worth nearly $110,000 then. But by 1993, after hyperinflation and devaluation devastated the Russian economy in the wake of the Soviet Union's collapse, the rent was worth only $158 a year.

When fire destroyed some records in 1993, and the Russian government stopped sending quarterly reminders that the rent was due, no one at the embassy noticed that the rent was not being paid. By the embassy's own admission it "failed to make timely lease payments" twice that year.

That, said the Russians, was a breach of the contract serious enough to warrant severing the lease ahead of schedule and negotiating a new one. At a "somewhat higher" rent.

Moscow would not ask for more than "oh, about $300 a square meter," says Sergei Tegin, a senior official with the Department for Diplomatic Corps Affairs (UPDK), the Russian government agency that rents property to foreigners. Such a rent would come to $900,000 a year for the US embassy.

Ever since the embassy spotted its error four years ago, it has been dutifully sending quarterly rent payments to UPDK's bank account (the last check was for $3.15), but the UPDK has equally dutifully sent them back, in case anyone thinks it recognizes the validity of the current contract.

The embassy says it is ready to pay a fine for late rent payment, as provided for by the contract. The Russians are not interested. Rent negotiations continue, at ever higher diplomatic levels, but the Russians are not sanguine. The talks, UPDK deputy director Yevgeny Ustinov groaned last week, might take "a long time, maybe years."

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