Representatives of the European Bank for Reconstruction and Development and of Ukraine are still negotiating over loans to complete two nuclear power plants.
A project to complete Khmelnitski 2 and Rovo 4 (the so-called K2R4 project), two reactors which had reached an advanced stage of construction before the collapse of the USSR, has been under discussion since 1995. One sticking point has been debate on whether EBRD should fund the Soviet-designed reactors at all. Also at issue have been the conditions placed by EBRD on the loan, and even the scope of the upgrading work required. For example, the bank wanted Ukraine to raise electricity rates by some 30 per cent, to improve its ability to repay the debt. This would be a tough decision politically, perhaps an impossible one with a general election due in the next few months.
At the end of 2001 Ukraine more or less rejected the EBRD's terms and announced a direct agreement with Russia to complete the plants. But the deal would give Ukraine a Russian credit line that is barely half the $1.5 billion that EBRD estimates is required to complete the units. Although Ukraine and Russia both consider that the plants can be completed for less than the EBRD figure, it is generally accepted that Russian credits would still not be enough.
Recently, EBRD negotiators offering more flexibility on how Ukraine meets the loan conditions, are said to have been pleased with their reception, although changes in the loan would have to be approved by the lending agencies, of which there are several. The original form of the EBRD loan would have married $215 million from the Bank with $585 from Euratom, $124 million from Russia and other loans from western export credit agencies.
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