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. Last Updated: 07/27/2016

Rent for Spaso House Raising Russia's Hackles

Twenty-two dollars and 56 cents does not get you far in Moscow these days. It's barely enough for a gallon of orange juice at a smart supermarket or four T-shirts from a street peddler.

But $22.56 still goes a long way at Spaso House, the official residence of the American ambassador to Russia, an elegant New Empire mansion of breathtaking proportions and handsome decor.

In fact, it is the annual rent.

That is the price the U.S. government pays Russia each year for Spaso House's dozen bedrooms and sitting rooms, nine baths, 27-meter-long main hall crowned by a domed ceiling and a gigantic gold and crystal chandelier -- and one of the most stylish addresses in town. Not a bad value, all in all.

But a very bad deal as far as the Russians are concerned. The rent, fixed for 20 years at 72,500 rubles, was worth about $60,000 a year when it was negotiated in 1985, using an artificially generous exchange rate. That price subsequently was bumped up to 120,000 rubles -- exactly how is mysterious -- but it has not made much difference. Torrid inflation has laid waste to the currency's value, and 120,000 rubles is worth just $22.56 at today's exchange rate.

"I think it's unfair,'' said Yury Proshin, head of the Russian government's Main Bureau for the Diplomatic Corps, which deals with such matters. "Of course, it's not like this is going to ruin us. But I know the State Department gave them money for the reconstruction of the U.S. Embassy. They've got money. They act in a strange way, really.''

Mention this to Thomas Pickering, the U.S. ambassador in Moscow, and he chortles with the frugal delight of a man who has spent a fruitful few hours at the Price Club warehouse. "I've presided over this house when the rent has gone from $300 a year to $30 a year, which I'm quite happy about,'' he said, fudging the figures for effect.

The Russians do not appreciate the joke. They want to renegotiate the lease, justifying the request by insisting it was the Americans who abrogated the contract when they failed to pay rent in 1993. For public consumption, the Russians are even threatening to evict the United States from the mansion, which has been home to every American ambassador here since Washington sent its first envoy to the Soviet Union in 1933.

Content to play hardball when called upon, Pickering contends the rent went unpaid in 1993 because the Russians did not send a bill. He said he "resists'' the idea that the 1985 contract should be torn up. As far as he is concerned, it expires in 2005.

In fact, said Pickering, the United States overpaid Moscow by some $4 million in the 1970s and early '80s because the Soviets charged rent based on an exorbitant ruble rate. If Moscow insists on breaking the 1985 contract, Washington may insist on recovering the $4 million it overpaid, he said.

"The Russians, having in the past outsmarted us or themselves by insisting the rent be paid in rubles, are trying to change the deal,'' he said.

He said Moscow now wants to charge $700,000 to $1 million annually for Spaso House, which is located 1.6 kilometers from the Kremlin in one of the city's most prestigious neighborhoods. Moscow real estate agents said that amount would probably be a fair reflection of Spaso House's value.

Pickering said the best solution would be for the United States to buy the mansion and its 1 hectare of land outright. But buying Spaso House would require congressional authorization, and the property would not come cheaply. The State Department's own computer lists the mansion's appraised value in at $11.3 million. But that appraisal was made in 1992, well before Moscow's real estate boom.