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. Last Updated: 07/27/2016

Majestic Sedov Seized Over Russia's Debts

When the 117-meter Sedov barque -- the world's largest sailing ship f swept elegantly into the harbor at Brest, France, earlier this week, its crew had no idea that it was sailing straight toward disaster.

But on Thursday, the scourge of the Russian federal government, Swiss businessman Nessim Gaon, struck again f getting French courts to arrest the majestic ship in pursuit of his attempts to collect on an eight-year-old, $63 million debt he says is owed him by Moscow.

The four-mast ship, used by the federal fisheries authorities for training, had arrived in France to take place in the annual Brest boat festival f part of the July 14 Bastille Day celebrations across France f when it was seized.

"This is against my will, but what can I do?" Gaon, head of Swiss-based Noga d'Importation et d'Exportation SA, said Friday in a telephone interview from company headquarters in Geneva.

"I have to go on with my business and pay off my debts."

At stake is the $63 million debt stemming from a series of food-for-oil deals that Noga struck with the Russian government in the early 1990s. Gaon's lawyers say they are seeking to recover a total of $800 million in interest and damages, but for now are demanding the immediate payment of the $63 million debt.

Gaon's persistent efforts to seize back those food-for-oil deal debts were cited last year by Central Bank Chairman Viktor Gerashchenko as the reason for creating the Financial Management Co., or FIMACO f an offshore shell company registered in the British Channel Islands where the bank parked billions of dollars from the nation's hard-currency reserves.

Gerashchenko argued the wily Gaon could have seized the reserves if they had been held abroad more openly.

French authorities took possession of the Sedov at 3:15 p.m. Thursday on a Paris judge's orders, sources in Brest and Paris said. The ship's crew was ordered not to undock until the debt was paid.

"It was the decision of a judge in connection with the Noga affair. Apparently the decision was made yesterday [Thursday]," a French diplomatic source said by telephone from Paris.

A spokesman for the Russian Embassy in Paris slammed the arrest of the Sedov. An official letter of protest had been lodged with the French Interior Ministry, he added, in remarks reported by Itar-Tass.

The seizing of the ship was an act that broke all norms governing maritime issues, with French authorities failing to inform Russia's diplomatic missions in France that they intended to seize the ship, as they are obliged to, the spokesman said.

Among the Sedov's crew were 15 cadets, aged 12 to 14, from the Moscow Maritime School, Interfax reported. The ship had been due to head for the Canary Islands after Brest, before heading back to Murmansk.

The head of the Murmansk Marine University, which owns the Sedov, was very bitter regarding the seizure.

"The ship will not take part in the events of Brest 2000," said university rector Alexander Galyanov, speaking on RTR television. "Because of this we will suffer losses of 360,000 francs."

Equally disappointed were Brest 2000 officials who had counted on the 75-year-old Sedov as being one of the highlights of the July 13-17 event.

Some 3,000 ships f from tiny 3-meter rigs to the world's largest sailboat, Sedov f representing 25 countries are participating in the festival.

"This is a terrible event for the organization ? and the Sedov sailors are very, very disappointed and very angry," festival organizer Anna Burlat said by phone from Brest.

The bitter tale began in 1991 when Noga signed a deal to import consumer goods and agricultural products to Russia in exchange for oil. Some $1.5 billion in contracts later, the relationship between the company and Russia soured, and Noga began pursuing the government through the courts.

His numerous court victories owe much to the fact that Russia waived the usual right of governments to sovereign immunity when signing the contracts.

In the mid-1990s, Gaon got Switzerland and Luxembourg to freeze $700 million in Russian assets, and then in 1997 the Stockholm arbitration court awarded him $23 million.

But Gaon said he still could not collect the debt. So Noga went to the French courts and won a 450 million franc ($63 million) ruling in Paris this March under which the French authorities can seize Russian government assets over the debt. In May, France started freezing government bank accounts f much to Moscow's chagrin.

Gerashchenko acknowledged in May that the accounts of 70 state-connected entities operating in France had been frozen. It remains unclear which assets were actually seized, but Gerashchenko has said that none of the Central Bank's gold or hard-currencyreserves were affected.

The government has lodged and lost several appeals since the March ruling, most recently this Tuesday, and the assets remain frozen.

Gaon said Friday that he has yet to see a penny and intends to continue seizing government assets f even ships f until he is paid. "They can seize the [Russian] embassy [in Paris], they can seize the paintings," he said. "Until we collect the money, they will seize and continue to seize.

"Do you think I want to seize an old marine ship and sell it?" he said. "No, I just want to get my payment."