Proposal for a Council Decision providing exceptional financial assistance to Azerbaijan (98/C 150/08) COM(1998) 205 final - 98/0129(CNS)

(Submitted by the Commission on 3 April 1998)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 235 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas Azerbaijan is undertaking fundamental political and economic reforms and is making substantial efforts to implement a market economy model;

Whereas trade, commercial and economic links will develop between the Community and Azerbaijan within the framework of the Partnership and Cooperation Agreements signed on 22 April 1996; and whereas an Interim Agreement was signed on 8 October 1997;

Whereas Azerbaijan agreed with the International Monetary Fund (IMF) in April 1995 on a first set of stabilisation and policy reform measures which was supported by the IMF's Systemic Transformation Facility (STF), and whereas the IMF Board approved in November 1995 a Stand-by Arrangement and a second drawing under the STF Facility in support of further ambitious stabilisation and structural adjustment reforms, for the period November 1995 to November 1996; whereas the IMF board approved in December 1996 a combined three-year Enhanced Structural Adjustment Facility (ESAF)/Extended Fund Facility (EFF) at concessional terms in favour of Azerbaijan;

Whereas, so far, the level of international assistance to Azerbaijan has been proportionally lower than to the other countries in the Caucasus and whereas the Council adopted in November 1997 a Decision providing exceptional financial assistance to Armenia and Georgia (OJ L 322 of 25.11.1997, p. 37);

Whereas Azerbaijan is a low income country and is facing particularly critical political, economic and social circumstances; and whereas the country is eligible for highly concessional loans from the World Bank and the IMF;

Whereas this assistance is exceptional and only justified on account of the particularly harsh political, economic and social conditions presently faced by Azerbaijan, and, in particular, on account of the large number of refugees living on its territory;

Whereas the authorities of Azerbaijan have formally requested exceptional financial support from the Community;

Whereas concessional financial assistance from the Community in the form of a grant is an appropriate measure to help the beneficiary country at this critical juncture by supporting the policy objectives attached to the governments' reform efforts and alleviating the social cost of adjustment measures;

Whereas the maximum amount of this assistance is without prejudice to the competences of the budgetary authority;

Whereas this assistance should be managed by the Commission;

Whereas the Treaty does not provide, for the adoption of this decision, powers other than those of Article 235,

HAS DECIDED AS FOLLOWS:

Article 1

1. The Community shall grant to Azerbaijan exceptional financial assistance of a maximum amount of ECU 30 million in the form of straight grants, with a view to alleviating the social hardship of the austerity measures accompanying the implementation of IMF supported adjustment programmes, notably by securing implementation of adequate levels of budgetary expenditures, in particular in the social sectors, and to helping the country to cope with its refugee problem.

2. The Community exceptional assistance shall be managed by the Commission in close consultation with the Monetary Committee and take into account the provisions of any agreement reached between the IMF and Azerbaijan.

Article 2

1. Subject to the provisions of Article 1, the Commission is empowered to come to an agreement with the Azeri authorities, after consultation with the Monetary Committee, on the conditions attached to this assistance. These conditions shall be consistent with any agreement as referred to in Article 1(2).

2. The Commission shall verify at regular intervals, in consultation with the Monetary Committee, that the policies in Azerbaijan are in accordance with the objectives of this assistance and that its conditions are being fulfilled.

Article 3

1. The assistance will be made available in three successive annual instalments from 1998 to 2000, subject to the provisions of Article 2.

2. The funds shall be paid to the National Bank of Azerbaijan.

Article 4

All related costs incurred by the Community in concluding and carrying out the operation under this Decision shall be borne by Azerbaijan.

Article 5

At least once a year, the Commission shall address to the European Parliament and to the Council a report which will include an evaluation on the implementation of this Decision.