France closes golden deal on Tsarist bonds

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The Independent Online
France and Russia dispatched a large chunk of unfinished historical business in Paris yesterday with a "final settlement" of all mutual financial claims dating from before 1945, including the contentious issue of Tsarist bonds held by French citizens.

A memorandum of agreement was signed by the finance ministers of the two countries at the end of a Franco-Russian economic commission meeting which also yielded an accord on co-operation in space exploration and a double taxation agreement.

The vexed question of the bonds, which date from between 1822 and 1913, had impaired relations between the two countries ever since the bonds were cancelled by the Bolsheviks after the Russian revolution. But it has been a particular obstacle during the past five years, as post-Soviet Russia has opened up to foreign investment.

The late French President Francois Mitterrand obtained an undertaking from Mikhail Gorbachev in 1990 that the bonds would be reimbursed, which was repeated by the Russian government in 1992. But no agreement was reached. Yesterday's accord takes account of French claims for reparations following its intervention in the Russian civil war and for the return of gold awarded to France under the Treaty of Versailles, and the matter of the Tsarist bonds.

It provides for France to recover what remains of its gold, and to receive US$400m (2bn francs). A commission is to be formed in France to decide how the bonds will be reimbursed. The French bondholders' association, set up in 1955, had claimed a total of 160bn francs for the 4 million bonds held in France, but unless the French government substantially tops up the amount agreed with the Russians, bondholders are likely to receive sums little higher than those received by British holders of Tsarist bonds 10 years ago.

At a press conference to present the accords, the Russian prime minister, Viktor Chernomyrdin, was in ebullient form, pledging that the Russian government would pay its debts, and all the debts incurred by its predecessors. "When you are in debt, you have to pay up. It is a matter of honour," he said. "Russia will pay, and we will always pay what we owe."