Russia Vows to Defend Rights
as Czarist Creditors Seek Lawsuit

France was a key market for Russian bonds before the 1917 Bolshevik Revolution
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The Russian government vowed to “defend our rights” after French holders of czarist bonds valued at as much as 100 billion euros ($137 billion) threatened to sue the Kremlin and seize property it owns in Paris.

“May God help them,” Viktor Khrekov, a spokesman for the Kremlin Property Department, said by phone today from Moscow, after the Paris-based International Federative Association for Russian Bond Holders, or AFIPER, pledged to sue to recoup part of the century-old debt.

“We have experience defending our property abroad,” said Khrekov. “Russia and France settled this debt a long time ago, so if they are planning to sue they will also have to deal with the French government. But they’re welcome to file a lawsuit; we will defend our rights.”

AFIPER’s announcement yesterday came after the French Budget Ministry said Russia had purchased the Meteo France building near the Eiffel Tower in Paris for an undisclosed sum.

France was a key market for Russian bonds before the 1917 Bolshevik Revolution, with royalty to workers buying them for savings. Holders of czarist debt have clamored for a better deal since 1996, when Russia made a $400 million payment that France said “definitively” settled debt incurred to it before 1945.

Creditors Clamor

Some creditors accepted about 50 euros per bond as part of that agreement while others held out, saying the bonds should be valued at as much as 10,000 euros each.

“The Russian state owes the French people a lot of money and there is no date limit for that, even if some of this debt is more than 100 years old,” said Eric Sanitas, director of AFIPER, which estimates that as many as 10 million czarist bonds may be in French hands.

Sanitas said AFIPER can only take legal action if Russia doesn’t designate its Paris land as diplomatic property. The Kremlin says it will build a “cultural-spiritual center” on the site of the meteorological institute on the banks of the Seine river.

“A church can’t be a diplomatic territory -- well, not usually,” Sanitas said in a telephone interview.

The new plot will be used to build an Orthodox cathedral, said Khrekov, who declined to comment on financial details of the property sale. Construction will begin after Meteo France vacates the building in 2011 and may take two years, he said.

Orthodox Cathedral

“The construction of an Orthodox cathedral will become a symbol of friendship and spirituality between the two countries,” Russian Orthodox Church spokesman Fyodor Ryabikh said. “This means the French government is paying special attention to the development of relations with our country.”

Sanitas said a recent French court ruling that handed Russia ownership of an Orthodox cathedral built in the coastal city of Nice on the orders of Czar Nicholas II may play to his organization’s favor.

The onion-domed Cathedral of St. Nicholas, the largest Russian church outside the country, and its contents including hundreds of precious religious icons belong to Russia, a Nice court ruled on Jan. 20. The Kremlin had argued that the czar bought the land for the state and not his family.

Sanitas said AFIPER will sue to seize the Nice church if an appeals court upholds that ruling.

“Russia says czarist-era problems are no longer its problem, but seeing as they want the Nice cathedral back, it seems czarist property is theirs,” Sanitas said. “Well, their non-refunded debt will be their property, too.”

Bloomberg
10 February, 2010