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. Last Updated: 07/27/2016

Kremlin to Hawk Gems on Red Square

Precious gems and metals from the governments vaults will be sold off steadily at an elite Red Square hotel-and-auction complex the Kremlin intends to open in about two years time, the Kremlin property chief said Wednesday.

Vladimir Kozhin one of the many St. Petersburgers who have been called up to the capital by President Vladimir Putin told a press conference that the gems and metals would have "no state or historic value," and would come from Gokhran, the Finance Ministrys state precious metals and gems reserve.

Kozhin offered no details on how much the valuables would be worth, or how they would be sold, or to what end. And Gokhran and the Finance Ministry seemed perplexed about the project.

"Maybe the money will go to the budget," hopefully suggested Olga Leonova of the Finance Ministry. "It can go to the budget, and then be allocated to the Kremlin, or for other purposes."

Kozhin first floated his plan to create a gem-and-antique auction house and five-star hotel complex on Red Square earlier this month at an investment symposium in Boston. But when reached by telephone on Wednesday, both Leonova and Gokhran spokesman Alexei Druzhinin said they knew of the plan only from media reports.

"Gokhran has nothing to do with this," Druzhinin said cautiously in an interview Wednesday. He confirmed that in its vast collection, Gokhran has items "of no historical, aesthetic or state value" but he added that the depository has never sold any part of its collection, and would only start doing so on direct orders from the government.

Gokhran has been collecting baubles since 1719, but it mostly consists of treasures confiscated by the Bolsheviks after the 1917 Revolution.

Kozhin said it would take from two to two and a half years to build his envisioned Federal Kremlin Complex, which he said would involve annexing a building on Red Square now used by the Defense Ministry.

Kozhin also said his offices were working to bring a lawsuit against the U.S. tobacco industry.

At Wednesdays press conference he estimated the cost of the construction at $300 billion which would mean the hotel and auction center would cost more to build than the nations entire annual gross domestic product. Later in the day Interfax reported it would cost not $300 billion, but $300 million.

Whatever it will cost, Kozhin was emphatic that no budget money would be used on the project. He said the Kremlin property department would instead line up investors, and it already had heard from construction companies worldwide who were keen to be involved. He declined to name them.

Kozhin also said his Kremlin property department would try to consolidate all of Russias foreign real estate holdings, and that Putin would in the next few days issue a decree on those properties.

Kozhin said a third of such properties are managed by the Foreign Ministry and the rest by his office. Kozhins predecessor once estimated that Russia owns $50 billion in real estate in 78 countries.

And Kozhin also announced his offices were working with unspecified U.S. legal firms to bring suit against the U.S. tobacco industry demanding that they help pay the costs the Russian state will incur while treating its citizens for smoking-related illnesses like cancer.

"The lawsuits are being prepared, and the amount [being sought] is fairly impressive," Kozhin said.

The property department is a Kremlin octopus with immense financial and real estate holdings. It was created in 1993 by then-President Boris Yeltsin, who transferred to it all property that had belonged to the Soviet Communist Party.

Kozhins predecessor, Pavel Borodin, was a powerful political player in the Yeltsin administration. He was also, coincidentally, the man who gave Putin his first Moscow job, as deputy Kremlin property chief.

Borodin last year estimated that his Kremlin property departments empire held assets worth $600 billion or twice the size of most estimates of the nations annual GDP. Borodins partial list of his assets included 3 million square meters of office space in Moscow alone, including the Kremlin, the White House, the State Duma and the Federation Council buildings, dachas, apartments, hotels, various businesses, car parks, rest homes and hospitals throughout the nation, and the presidential airline company Rossiya.

In the twilight of the Yeltsin years, Borodin found himself accused by Swiss prosecutors of accepting kickbacks from Swiss construction firm Mabetex, among others, in return for lucrative contracts to do renovations on the Kremlins buildings. Geneva prosecutors have said they will arrest Borodin if he ever sets foot in Switzerland. Borodin has denied any wrongdoing.

After Putin became president, Borodin was appointed secretary of the Russia-Belarus Union a vague post at a vague structure, but one from which Borodin is already pushing for his own construction project, a $2 billion Russian-Belarussian Parliamentary Center in St. Petersburg.

Kozhin stepped into Borodins shoes from the VEK the hard-currency export control, a law enforcement agency that tracks nonruble financial transactions. On Kozhins watch, the VEK has slapped hefty fines on environmentalist Alexander Nikitin and Moscow Mayor Yury Luzhkov.