Feedcry Archive -> Bloomberg

By Helene Fouquet and Lyubov Pronina

Feb. 9 (Bloomberg) -- A group representing French holders of czarist bonds says it will sue Russia in a bid to seize Paris property bought by the Kremlin and reclaim part of a century-old debt valued at as much as 100 billion euros ($137 billion).

The International Federative Association for Russian Bond Holders will take legal action against Russia, AFIPER Director Eric Sanitas said in an interview. He spoke after the Budget Ministry in Paris announced in an e-mailed statement yesterday the sale of the Meteo France building near the Eiffel Tower to Russia for an undisclosed sum.

“The Russian state owes 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,” Sanitas said by phone.

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.

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.

Solvent State

“Russia is a solvent state today, an oil-rich, currency- rich state,” said Sanitas, whose organization estimates there may be as many as 10 million czarist bonds still in French hands. “It’s been a long enough time for it to pay back.”

Sanitas said AFIPER can only take legal action if Russia does not deem the newly purchased 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.

The new plot will be used to build an Orthodox cathedral, Viktor Khrekov, a spokesman for the Kremlin Property Department, said in an interview yesterday. Construction will begin after Meteo France vacates the property in 2011 and may take two years, he said.

“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.”

No Comment

Khrekov declined to comment on financial details of the project and was not available when sought for comment about the bonds. The Budget Ministry declined to comment on the plot sale or AFIPER’s plans. A spokesman at Russia’s embassy in Paris wasn’t immediately available when contacted by Bloomberg News.

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, AFP reported. 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.”

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net; Lyubov Pronina at lpronina@bloomberg.net