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US closure of Russian diplomatic properties may be act of property development piracy

The local implications to some of America’s biggest property markets may be a key angle in understanding why the US has acted so aggressively.

While initial reports concealing the forced eviction of Russian diplomatic and consular offices from their property by the US State Department has generally been discussed in terms of geo-political implications, there is another angle which hitherto has been ignored. There is an increasing likelihood that part of the reason why the US kicked the Russian diplomats and their staff out of properties they have held for decades, is due to a desire of local and federal US actors to get their hands on properties that are worth millions on the open market.

The properties which were formerly occupied by Russian diplomatic and consular officials are objectively grand buildings in prime (aka expensive) locations in three of America’s most expensive cities, New York, Washington D.C. and San Francisco.

The phenomenon of so-called ‘property regeneration’ has been a prominent fixture in each of the aforementioned cities. One element of property regeneration whether in poor areas being redeveloped or in affluent areas which are home to old buildings which aren’t living up to their ‘economic potential’, is when longtime tenants or owners are removed in order for new tenants and owners to move in. These new owners are tenants are selected on the basis of being able bring more economic value to the local economy.

One of the ways American state, local and federal governments do such things is through the use of something called eminent domain wherein property owners are forced to relocate while being compensated at a rate the government determines. Unless a property owner can win a lawsuit against the government in a court of law (which rarely happens), the owners/tenants have little say in the matter. They are simply forced to pack up without having the privilege of selling their property on the open market.

Donald Trump himself made extensive and controversial use of eminent domain when he encouraged Atlantic City to evoke it when clearing out the owners of old buildings where he ended up building large hotels and casinos.

Generally speaking, the properties of embassies and consular facilities in cities across the globe are in prestigious areas of capital cities and other big metropolitan areas. Naturally, the property which is owned by the governments of foreign countries would be worth a great deal of money on the open property market, a market which real estate brokers and developers are more than eager to get their hands on. As of yet, there is no instance of the US invoking eminent domain against a foreign embassy or consular property, not least because such things would almost certainly violate the Vienna Conventions.

The US has shown a precedent for being all too aware of this. For example, one of the biggest American embassies overseas is located in London. The current embassy of the United Sates in Britain is located in Mayfair, the most expensive region in the British capital.

In 2008, the United States announced it would be constructing a new embassy in the Nine Elms area of London, a then derelict part of the city where land was vastly cheaper than the location of the current embassy.

By the time the US moves into the new embassy, the property prices in Nine Elms will have increased substantially, as the once barren area filled with crumbling post-industrial facilities has been ‘redeveloped’. In other words, America will make a great deal of money from selling their old property while obtaining a good investment that may pay for itself in a few short years.

The former locations of the Russian properties in the United States which have recently been vacated are also located in extremely expensive parts of extremely expensive cities. The large building which housed the Russian Consulate in San Francisco is located in the Pacific Heights district, one of the most affluent and beautiful parts of the California city.

Pacific Heights, San Francisco.
The former Russian Consulate in San Francisco

The Russian Consular Annex which was shut down in New York was located in the Upper East Side, the most desirable and expensive part of Manhattan. The consular annex in Washington D.C. was also located in one of the distract’s most affluent areas.

Russia’s opulent former trade mission in Washington D.C.
Russia’s consular building in New York’s Upper East Side

The question now is: what happens to the properties?  

The way in which the Russian diplomats and workers were kicked out leaves little room for doubt that the facilities are not going to be re-opened to their existing owner, the Russian Federation.

As a result Russia expects compensation as anyone in a similar position would seek.

This reality was mentioned by the official Spokeswoman of the Russian Foreign Ministry, Maria Zakharova. She stated,

“I am telling you a sensation. It is difficult to believe, officially the Department of State made it clear to us, we were told directly, that they expect that we shall sell those facilities to the US.

They expect from us that we shall sell those properties to the American government. Today, we shall make a set of pictures of those facilities, so that it is clear what we are talking about – those are not one-bedroom flats in the outskirts. Those are central locations in Washington and San Francisco (and New York). The facilities, the so-called residences fare the most respectable locations and this is why it was so interesting to host events there”.

While Russia has called America’s actions “hostile” in respect of violating the internally recognised Vienna Conventions, the act also most be something else, a proverbially hostile takeover.

From a pure economic standpoint, it seems incredibly devious that the US will according to Zakharova, force Russia to sell the properties to the US government rather than put them up for sale on the open market. If the properties were put up for sale on the open market, Russia could reasonable expect to receive a better final sale price.

If the US does indeed purchase the properties what then will happen? Will the US use the properties, thus increasing the property portfolio of the US government by an amount that is almost certainly over the tens of millions and will almost certainly increase over time?

Or will the US government sell the properties themselves on the open market to the highest bidder? Extrapolating this further, might the US government sell the properties to a developer who may have donated money to a Congressional party or a prominent politician? All of this is not only possible but increasingly probable.

The US may be close to getting a good deal on properties which are extremely desirable, properties the rightful owner did not have any intention on selling or otherwise giving up. It is a kind of eminent domain which has been exercised through geo-political and diplomatic warfare, all of which is illegal according to international law.

While this could merely be an unintended outcome of the protracted diplomatic struggles Washington has instigated against Moscow, it must be said that prior to becoming the President of the United States, Donald Trump was a property developer. If anyone in the US government knows how much the properties are worth and what economic potential they hold, that person is Donald Trump, a man who objectively has more experience in the property market than he has on foreign policy.

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  1. “As of yet, there is no instance of the US invoking eminent domain against a foreign embassy or consular property, not least because such things would almost certainly violate the Vienna Conventions”.

    As written, that sentence is incorrect. If, in the spirit of Mark Twain, we cross out “almost” and replace it with “damn”, the sentence will now be true.

  2. The Russian government should refuse to sell the properties. If the US government wishes to steal them by force, let it do so publicly.

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