Row over Moscow embassy rent

Palatial residence at cheap rent (Picture: US embassy)

Relations between Russia and the United States, currently strained over a spy scandal, are being further soured - but this time it is over real estate.

The Russians are angry at the peppercorn rent the Americans pay, or rather do not pay, for their ambassador's residence, a palatial mansion in the heart of Moscow.

Spaso House

Interior includes a dozen bedrooms

25m (82ft) main hall with domed ceiling and crystal chandelier

Built as a private house in 1914

Siezed by the Soviet Government in 1917

Became US ambassador's official residence in 1933

Under a Soviet-era contract, the US pays 72,500 roubles per year - at the time a respectable sum, but today the equivalent of about $3.

The Russians say the agreement is no longer valid because the Americans missed a payment in 1993. They are insisting on a market-level rent, but the US is refusing to budge.

The residence, called Spaso House, was built in 1914 for a wealthy Tsarist-era merchant in one of Moscow's most prestigious neighbourhoods.

It has been the official home of American ambassadors since diplomatic relations were established between the US and the former Soviet Union in 1933.

'Millions in arrears'

The last rent agreement was signed 30 years ago.

But runaway post-Soviet inflation, which saw three zeros lopped off the value of the rouble in the 1990s, has made the rent almost worthless.

According to the Russians, the US missed a payment eight years ago, invalidating the contract.

US ambassador James Collins: Dealing with rows over spies and rent

Russia's Deputy Foreign Minister, Ivan Sergeyev, quoted by Interfax news agency, said the US owed Russia $6m in back payments for the property.

If the Americans did not come up with a better proposal to solve the problem, said Mr Sergeyev, Russia would be obliged to seek international arbitration.

US officials say that the cheap lease still has not made up for grossly inflated rent during Soviet times, when the official rouble exchange rate was pegged far above its real value.

The rent dispute comes amid a US-Russian spy scandal, with both sides ordering dozens of diplomats to leave.

This development followed the arrest in February of an FBI agent, Robert Hanssen, who is accused of spying for Russia for 15 years.

Despite the expulsions, both President George W Bush and President Vladimir Putin have sought to play down the spying row.