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Russia: EU Launches Support Fund For Environmental Cleanup

The European Commission, together with five EU member states and Russia itself, today pledged 110 million euros to set up a new support fund to fight pollution and neutralize nuclear waste in northwestern Russia. The money will be used to secure larger loans from international financial institutions.

Brussels, 9 July 2002 (RFE/RL) -- Both Russia and prospective donors from the European Union and international financial institutions today hailed pledges of an initial 110 million euros ($109 million) to solve Russia's environmental woes.

Tensions at today's conference in Brussels were never far from the surface, however. Diplomats report the two sides squabbled over priorities, access to Russia's nuclear dumps, and the country's overall capacity to absorb investments.

Hugues Mingarelli, who oversees the European Commission's relations with most Soviet successor states, said the pledges make an "excellent start." "Specific pledges made during the conference amount to a total of 110 million euros, which exceeds the minimum amount required to launch the fund. This will give the support fund an excellent start in its important tasks," Mingarelli said.

Mingarelli added that he has no doubt that further pledges will be made in the coming months, but warned that today's conference was "the first step in a long process."

According to EU estimates, the support fund will need to generate about 1.8 billion euros in further grants and loans to finance a total of 12 priority environmental projects and a host of nuclear-cleanup operations in northwestern Russia and Kaliningrad. The EU said the fund will have a 400-500 percent multiplier effect, which means that to leverage 1.8 billion euros in loans, the support fund will eventually need to grow to 300 million to 400 million euros.

Russian Deputy Finance Minister Sergei Kolotukhin also praised today's results and particularly highlighted Russia's own 10 million-euro contribution. The bulk of the funds, 50 million euros, -- was contributed by the European Commission, with Denmark, Finland, the Netherlands, Norway, and Sweden each giving 10 million euros. Nearly all of the EU member-state donors are affected or threatened by spillover effects from Russian pollution.

But Kolotukhin said Russia is unhappy with the donors' decision to earmark 62 million euros in the new fund for the nuclear wing of the cleanup program, as this will leave less money to secure loans for other projects. In his speech, the Russian minister said that given the magnitude of Russia's nuclear-waste problem, that amount is "negligible." He also pointed to the $20 billion that the G-8 group of leading industrialized countries promised Russia last month to tackle nuclear waste.

It is worth noting, however, that the single most expensive project among the 12 nonnuclear projects is the St. Petersburg Flood Protection Barrier, with a total cost of nearly 500 million euros. The European Commission's background papers say the barrier will be "environmentally neutral," while noting it does have a "high degree of visibility within the Russian government."

Western donors deny direct links between nuclear and nonnuclear issues. Jon Sigurdsson, president of the Nordic Investment Bank, said money for environmental projects will start to flow as soon as they are able to receive it. "There is no cross-conditionality involved between the new compartments of the nuclear and environmental front. We are now ready to operate because we already have money in the bank -- the EBRD [European Bank for Reconstruction and Development] -- which can be put to good use as soon as other conditions for investment are fulfilled. I do not see any problem in this that should hinder investment in ordinary environmental projects," Sigurdsson said.

The European Commission and most EU donors, however, did express concern over Russia's unwillingness to sign a multilateral treaty allowing Western experts access to the storage facilities where its nuclear waste is kept. Commission representative Mingarelli said the treaty is necessary to provide Western donors with a "coherent and consistent" framework for their nuclear-related activities in Russia.

This, as well as many donors' greater relative concern over nuclear pollution, explains why the pledges today were heavily weighted toward what EU officials describe as the "nuclear wing," although overall nuclear projects will consume only 500 million euros in further loans, whereas purely environmental projects will need 1.3 billion euros.

Kolotukhin said today that Russia "understands its partners' concerns" and is "politically" ready to sign the access treaty in the autumn, provided a few remaining technical issues are worked out before then.