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Ukraine withdraws EBRD loan application for K2/R4

Nuclear Monitor Issue: 

(December 7, 2001) On 29 November, at the meeting of the Board of Directors of the European Bank for Reconstruction and Development (EBRD) no decision was taken on the requested loan for the completion of the Ukrainian Khmelnitsky-2 and Rivne-4 reactors. This came after a surprising move by the Ukrainian representatives who requested that the Board not consider the loan for the completion of the two reactors.

(559.5345) CEE Bankwatch Network/WISE Amsterdam - In the meeting, the Ukrainian authorities asked for further consultation on some conditions of the loan and indicated that the project was not yet ready for an immediate decision. Due to this move the Board did not even discuss or consider the question whether the project fully met the conditions (see also WISE News Communique 558.5344: "Final (?) decision on K2/R4 next week").

CEE Bankwatch Network, the international NGO who has been campaigning for years on this issue said to be "happy to see this move, as taxpayers' money should not be used to support unsafe and uneconomic nuclear power plants". Bankwatch believes that the Ukrainian withdrawal of the project creates a need to intensify the EBRD's and other financial institutions' investment into the Ukrainian Energy sector. "We urge the EBRD and the World Bank to fulfil their joint Energy Efficiency Plan for Ukraine prepared in 1998 that has thus far been ignored by those institutions," added Petr Hlobil, spokesman for Bankwatch. The completion of the reactors got preliminary approval in December of last year for a loan of US$215 million, in reaction to the blackmailing of the international community by the Ukrainian President Kuchma, who threatened them with the continued operation of the Chernobyl nuclear power plant.

Being aware of the problems associated with the project, the EBRD Board had difficulty approving the loan. Eighteen countries represented on the Board voted against the project or abstained (see WISE News Communique 540.5226: "EBRD approves K2R4 loan - campaign continues").

Finally, the project was approved with a number of conditions attached. This 2000 decision was followed by the approval of a Euratom loan of US$585 million, and cleared the way for the rest of the donors to collect the US$1.48 billion needed for K2/R4. Funds for the completion of the K2/R4 units were supposed to come from the following sources: Energoatom (project sponsor), the EBRD, Euratom, the Russian government, the Export Credit Agencies of the UK, Czech Republic, France, Spain and Switzerland and the US ExIm Bank.

The EBRD Board minutes report that one of the conditions to the effectiveness of K2/R4 loan approval is "Commitment by other co-financiers to provide funds for the project". It is only the Czech ECA that has committed itself to provide funding. Other ECAs promised no more than to "consider the project favorably".

Parallel to the withdrawal, Ukraine president Kuchma is negotiating with Russia's president Vladimir Putin on Russian participation in the completion of the two nuclear reactors. "Ukrainian NGOs welcome the fact that the EBRD is not going to finance those reactors, but we know that it is not the end of this bitter tale," said Yury Urbansky, from the National Ecological Center of Ukraine. "President Kuchma is trying to increase Ukrainian dependence on Russia."

On the day of the EBRD board meeting, Kuchma said that his country would rely on Russia's help to complete construction of the reactors, turning its back on Western offers of assistance.

Kuchma said the conditions imposed by the EBRD were "unacceptable. It amounts to eternal slavery for Ukraine". A few days later, on 3 December, Kuchma commented on his own earlier statements by saying the Ukrain was "ready to get around the negotiating table with the EBRD in order to resolve all problems". This seems an impossible option as the EBRD's rules mean that if the deal was not agreed upon at the 29 November meeting the whole review process would have to start all-over from scratch.

Source and contact:
CEE Bankwatch Network, PO Box 89, 01025 Kiev, Ukraine
Tel: +380 44 238 6260; fax: +380 44 238 6259