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Ukraine: EBRD Seems Set To Make Loan To Replace Chornobyl

After years of wrangling, a major international bank appears set to loan Ukraine more than $200 million to complete two nuclear reactors whose energy Kyiv says it needs in order to shut down the crippled and still dangerous Chornobyl plant. RFE/RL Tony Wesolowsky correspondent looks at what hurdles the loan may still face and what it could mean for nuclear power in Eastern Europe.

Prague, 21 November 2000 (RFE/RL) -- The president of the European Bank for Reconstruction and Development, or EBRD, says he will recommend Ukraine receive a $215 million loan to complete construction of two nuclear reactors needed to replace the Chornobyl facility. One is at the Khmelnitsky power station, the other at a plant at Rivne.

But EBRD head Jean Lemierre is making his approval conditional on Ukraine meeting certain requirements.

In a letter to the EBRD's board of directors last week, Lemierre said one condition for the loan should be the introduction by Ukraine's nuclear company Energoatom of a program to improve the nuclear safety of its plants and operations. Lemierre also wants Ukraine to strengthen nuclear regulation by establishing an independent safety body, and to push ahead with reform of its electricity industry.

Lemierre made clear, too, that his bank's loan approval will hinge on prior approval by the International Monetary Fund, or IMF, of new credits for Ukraine. The IMF has stopped its lending to Ukraine because of perceived corruption and the country's slow pace of economic reform.

The 22-member EBRD board is expected to meet at its London headquarters early next month (Dec. 7) to vote formally on the loan. If the board approves, the credit to Kyiv would be the development bank's largest single project.

It will also be one of the bank's most controversial. Ukraine has argued that the new reactors are needed to compensate for the energy it will lose when it shuts down the last remaining operating reactor -- Unit 3 -- at Chornobyl on December 15. But the EBRD has been debating the project for four years amid a steady stream of criticism.

One of the most frequent charges is that the project does not meet the bank's least-cost criteria. That was the conclusion of a 1997 study commissioned by the EBRD to consider the viability of the project. The study-- carried out by researchers at Britain's Sussex University-- concluded Ukraine needed no new energy-generating capacity, and that there was huge untapped potential in improving efficiency in the energy supply.

Concern has also been raised by anti-nuclear campaigners over the safety of the Soviet-designed reactors due to be completed. Several West European countries have spoken out against the project, including Sweden, Austria, and Germany. Denmark and Belgium have also expressed strong reservations over the two new reactors, commonly referred to as K2/R4.

But Tobias Muenchmeyer, an anti-nuclear campaigner with the environmental group Greenpeace, says the likelihood of the project being halted is low. He says any final objections to the project could be raised next week (Nov 30), when the EBRD board meets to discuss K2/R4 during an informal meeting.

"This will probably be another crucial moment because there [in London], for the first and last time actually, the content of the issue, let's say -- not only politics but the content of the whole economic aspect of it [K2/R4] -- will be discussed by the decision-makers."

Muenchmeyer says a recent trip to Kyiv by Lemierre made loan approval all but certain. He says Ukrainian officials hinted to the EBRD chief that failure to approve the EBRD loan could mean a delay in shutting down the only remaining operative reactor at the crippled Chornobyl plant.

Muenchmeyer also notes that comments from the EBRD as recently as last month had suggested the bank would only be considering the loan some time at the start of next year. After Lemierre's trip to Ukraine, Muenchmeyer says the bank appears to have moved with a new sense of urgency.

"One can assume that the pressure on the EBRD was immense to avoid a further delay of the Chornobyl closure. Because, obviously, the EBRD would have been made publicly responsible for an ongoing operation of Chornobyl."

The project got an earlier boost two months ago when the 20 members of the European Commission approved a formal communication to the Commission supporting the project. The 20 commissioners urged the EBRD to fund the reactors, in their words, so "that these two reactors are completed to the highest possible safety standards."

The Brussels-based European Voice weekly says that within the Commission strong support for K2/R4 has been expressed by External Relations Commissioner Chris Patten and Enlargement Commissioner Guenter Verheugen. One of the more vocal critics is thought to be Environment Commissioner Margot Wallstrom. According to Greenpeace's Muenchmeyer, Budget Commissioner Michaele Schreyer and Agriculture and Fisheries Commissioner Franz Fischler have also expressed opposition to K2/R4 in the past.

The Commission has said the European Union's separate loan package for K2/R4 would be conditional on the EBRD going ahead with its loan. The EU's atomic energy agency, Euratom, is considering a $610-million loan for the Ukrainian reactors.

The cost of K2/R4 is now estimated at about $1.8 billion. Additional funding is expected to come from other foreign credits. France's Framatome, Germany's Siemens AG and the U.S.'s Raytheon are potential contractors if the EBRD-IMF loan package is approved. With nuclear power declining in Western Europe, the nuclear industry has long had its eye on Central and Eastern Europe, where public opposition is not as great as in the West.

A green light for the EBRD loan could spark new contracts in the East, according to David Kyd, a spokesman for the International Atomic Energy Agency, a UN-affiliated nuclear agency.

"What it might do in the future is encourage other countries that have nuclear power plant projects on the books, such as Romania, to go to the EBRD and say, 'Why not us?'"

Romania would like to add one or two Canadian-designed CANDU reactors to its Cernovoda plant.

Kyd notes commercial banks are not eager to lend for nuclear projects both because of their high prices-- a reactor costs some $2 billion on average-- and the lengthy construction time usually involved. That leaves international banks like the EBRD, which draws its money from leading Western governments -- and ultimately from their taxpayers -- as the largest source of credits.

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    Tony Wesolowsky

    Tony Wesolowsky is a senior correspondent for RFE/RL in Prague, covering Belarus, Ukraine, Russia, and Central Europe, as well as energy issues. His work has also appeared in The Philadelphia Inquirer, the Christian Science Monitor, and the Bulletin Of The Atomic Scientists.