Photo of building under construction with International News and Australia labels

The construction and lease of a Russian embassy in an affluent Canberra suburb in Australia has been canceled due to onsite delays, contractor controversies, and possibly because of political complexities in light of the war in Ukraine. 

The site of the embassy has experienced numerous setbacks since the lease was formally approved in 2011. At least one building contractor has hit financial straits, the Australian government’s hesitation to approve Russian contractors, and sanctions after Russia’s invasion of Crimea have all crippled the progress of the site.

This comes at a time of extreme stress for the Australian construction industry, with the residential sector in crisis as multiple contractors and developers are in bankruptcy.

Australia says it canceled Russia’s lease not due to current political issues in Ukraine, but because of the government’s “use it or lose it” policy. These are policies stating when and how a contractor must develop the property or else risk losing their lease. 

These policies are used worldwide to encourage the development of empty plots of land mostly for business purposes. 

The embassy site is in Yarralumla, which is a suburb of the national capital of Canberra that has close proximity to the Australian Parliament. This construction project was estimated to cost around $8.2 million and include living quarters as well as a swimming pool. 

Russia pushes back against cancelation

The Russian government is arguing against the cancelation of its lease, as they claim that work had been commencing on the site for the past two years uninterrupted.

Aerial photographs taken by the Australian government in 2019 showed that the site had been demolished partially after work had finally begun in 2017.

Allegedly, there were not only concerns about the empty lot in a prime real estate location, but also that the Russian government might use the site as a haven for espionage activities. For this reason, Australia refused to allow Russian contractors and workers entry into the country, and at one point even considered using workers from North Korea due to such restrictions, according to reports.

These sorts of issues can lead to complications for any U.S.–based contractors working on embassy projects — however, the Miller Act does protect contractors on any U.S. Embassy project around the world. 

If a contractor is hired to work on a project that is not a U.S. government project, then there are potential complications collecting payment due to foreign immunity being given to other governments. 

“Just as an American embassy in a foreign country is owned by the U.S. government, the embassies of foreign countries in the U.S. are the property of the foreign country they represent,” says Nate Budde, construction attorney and the Levelset Chief Legal Officer. “This, unfortunately, means that U.S. mechanics lien laws, or bonding requirements, do not apply.”

Nate Budde

Nate Budde

14 years experience
265 articles
576 answers

The best bet for any contractor to make in order to avoid these geopolitical complications is to secure a payment bond for the project. There are few other remedies to collecting payment if the project is on foreign soil. 

As for Russian work, there are no records of any other Russian embassy projects throughout the world at this moment.

After the cancelation of the Australian lease, the Ukrainian government has shown interest in taking it over. Vasyl Myroshnychenko, Ukraine’s Foreign Minister, has said that he will apply for the lease to Australia’s National Capital Authority after receiving approval from his government.