Kremlin Avoids $4M Claim

The Kremlin on Wednesday managed to avoid paying some $4 million to a German businessman who is seeking to confiscate government property as compensation for a company he lost in St. Petersburg in the 1990s.

But Franz Sedelmayer, who claims the Russian government owes him up to $10 million, said the forced auction in Cologne, Germany, was still open and that the Kremlin had finally compensated him voluntarily, paying him 40,000 euros ($57,000) in back rent.

"This is the first time they paid," Sedelmayer said by telephone from Cologne, adding that he had already received more than 500,000 euros in seized rental payments.

The only bidder Wednesday for the apartment block owned by the government and valued at around 2.8 million euros ($4 million) was a property management firm controlled by the Kremlin, said JЯrgen Mannebeck, a spokesman for the Cologne District Court, which conducted the auction.

Well before the auction, the Kremlin gave the company the legal right, known as usufruct, to all profits and benefits from the property, Mannebeck said by telephone. This made the apartment block unattractive for other buyers, he said. Because the usufruct is worth the same as the property, the transaction could go through while Sedelmayer would only get his back rent, Mannebeck said. "They need not pay the money. This is very cunning," he said.

Sedelmayer accused the Kremlin of "cheating" by illegally giving the usufruct to the company.

Kremlin Property Department spokesman Viktor Khrekov said the government merely exercised its rights and would take "all possible legal means to protect our property abroad."

The block of 45 apartments is part of a 3,570-square-meter estate in Cologne's southern outskirts that formerly housed staff for the Soviet trade representation. In March, a Cologne court ruled that Sedelmayer could auction off Kremlin property in Cologne as compensation for assets he says he lost after the Property Department confiscated his St. Petersburg security company in 1994.