DIPLOMACY / REDEEMING THE CZAR’S BONDS : A Potential Windfall From Old Wallpaper

Virtually unnoticed among the many superpower negotiations, the United States and Soviet Union are trying to settle U.S. claims of more than $1 billion on debts that predate the Bolshevik Revolution, including old czarist bonds bought by Americans.

Recent U.S.-Soviet commercial talks have focused on Soviet efforts to obtain most-favored-nation trading status, which would enable the Soviets to get the U.S. government credits and loans they need to resuscitate their economy.

Settling the old debts could also provide the Soviets with another source of funds. It would give them access to private American financial markets for loans to state enterprises--the auto industry, for example--that want to sell stock to foreign investors.

But before you start searching the attic or examining old wallpaper--seemingly worthless czarist bonds were widely used as wallpaper in the 1920s--you should know that the most you stand to collect is the amount actually paid for the bonds. No interest payments are contemplated.

“People call up and think they’re millionaires when they hear about the bond negotiations,” a foreign bond dealer in New York said the other day. “I don’t have any Russian bonds to sell, and I don’t want to buy any Russian bonds. But I hear some are worth $20 or $30 as collector’s items.”

According to a State Department official, some of the impressive, multicolored certificates, many of which feature a portrait of Czar Nicholas II, have brought almost their face value as antique art.

“I’ll take whatever we can get,” Barbara Swaney of San Antonio told a reporter.

Czarist bonds were traded legally in the United States through 1934 and illegally afterward, and Swaney’s father put thousands of dollars into them. Her bonds have a face value of 114,500 rubles--$183,000 at the current, artificially high exchange rate.

“Dad said he bought them with (President Franklin D.) Roosevelt’s encouragement,” she said, “after the President said his family was buying $5 million worth.”

But according to a State Department specialist on the matter, Roosevelt never publicly urged Americans to buy the bonds.

The bonds represent only a small part of the U.S. claims involved in the negotiations, which began in late 1988. The largest single claim is by the U.S. government, for $187 million in loans to the short-lived provisional government that preceded the Bolshevik takeover in 1917.

Including interest, that debt now comes to more than $1 billion.

Other claims, filed on behalf of American individuals and companies, could add more than $300 million to the total.

The State Department has refused to disclose exactly how much the U.S. negotiators are seeking. The amount is determined as much by “political decision” as by financial calculation, the State Department official said.

For its part, Moscow wants to deduct the value of the assets of czarist-era individuals and companies seized decades ago by the U.S. government to help settle claims against the Soviets.

Also, Moscow has submitted counterclaims for damage done by the U.S. military forces that landed at Archangel and Vladivostok shortly after the Bolshevik takeover.

As soon as they took power, the Soviets repudiated all debts incurred by previous governments, yet over the years they have been inclined to honor them, at least in part.

The Soviets have also agreed to resume payments on $674 million they owe the United States for World War II lend-lease aid.

The U.S. loans to the provisional government, which held sway during the period between the ouster of Czar Nicholas II in February, 1917, and the Bolshevik Revolution that October, were intended to keep Russia in World War I.

In 1934, after the United States declared the Soviet Union in default on those loans, Congress passed the Johnson Act, which made it a crime for American companies or individuals to lend money to the Soviet Union, or to buy or sell instruments of Soviet debt, until the loans were settled.