Mosintour, the Russian partner on the project, had refused to pay $9. 5 million to the Austrian construction company Rogner for work already completed on the aging building.
Moscow Deputy Mayor losif Ordyonikidze told The Moscow Times on Thursday that the government had decided to intervene because the incident was harming Moscow's reputation as a reliable business partner.
"This deal will not make us a profit", he said.
Ordyonikidze said he had met with Rogner representatives over the last few days and agreed to pay the $9. 5 million over the next year.
Moscow will arrange a $6 million line of commercial credit from Russian banks and would also authorize the transfer of $3. 5 million from the Mosintour holding company to Rogner.
Mosintour's representative Nicholas Shevelkin had said that Mosintour originally walked away from the deal because the debts were incurred by Gosintour, the Soviet predecessor of Mosintour. He said Mosintour had not wanted to be held responsible for Gosintour's debts.
The total cost of the project is $50 million, but 60 percent was guaranteed by the Austrian government in the form of low-interest credits. The Russian side had already paid $4. 5 million of its total $14 million liability under the deal.
About 400 Russian workers were employed on the project under the supervision of Austrian engineers to restore the 1903 structure at the beginning of Tverskaya Street in the city's center.
The project will renovate the site, which was once Lenin's headquarters in Moscow and create an international hotel. Work was about one-third complete when the non-payment dispute soured relations with Rogner.
The delay also threatened an operating agreement which had been planned with Marriot, the world's largest hotelier, which was to contribute $60 million to the restoration, with an additioni $10 million of guaranteed U. S. credits.
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