Proposal for a Council Decision concerning a Community contribution to the European Bank for Reconstruction and Development for the Chernobyl Shelter Fund
Date: 1997-09-03
Institutions: European Commission
Subjects: EBRD, EU financing, Ukraine, nuclear accident, nuclear safety

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 03.09.1997 
COM(97) 448  final 

97/ 0235 (CNS) 

Proposal for a 

COUNCIL DECISION 

concerning a 
Community Contribution to the 
European Bank for Reconstruction and Development 
for the 
Chernobyl Shelter Fund 

(presented by the Commission) 

Introduction 

Explanatory  Memorandum 

1. 
In 1996 an international group of experts, including experts from the EU, US 
and Ukraine, elaborated a study of alternative solutions to convert the Chernobyl Unit 
4 and its present shelter (Ukritye) into an environmentally  safe condition.  The study 
report issued 29 November  1996 proposed a Recommended Course of Action, 
comprising stabilisation and other short term measures, preparation for conversion 
into an environmentally  safe site, and conversion into an environmentally  safe site. 

The G-7  Nuclear Safety Working Group reached an agreement at the beginning of 
1997 with representatives  of the Government of  Ukraine to proceed with the further 
development of the Recommended Approach. As a result, a Shelter  Implementation 
Plan (SIP) was developed in close cooperation with EU, US and Ukrainian experts 
with a view to transforming the existing Chernobyl sarcophagus  into a safe and 
environmentally  stable system. 

The SIP includes the following major technical steps to be implemented over the 

period up to 2005: 

The stabilisation of the present shelter to the minimum extent required for the 
follow-up steps; 

shielding for radiation protection purposes; 

increase nuclear safety to eliminate risk of criticality through water  management; 

build a new confinement; 

remove upper unstable parts of present  shelter; 

2. 

3. 

analyse Fuel Containing Masses (FCM) and elaborate  FCM removal strategy. 

The total cost of the proposed measures will be about 750 million USD.  The content 
of the SIP has been explained in detail to the Phare/Tacis  Nuclear Safety  Expert 
Group on 27 May 1997. 

At their Denver Summit of June  1997, the G7 Heads of State and Government and 
the President of the European Commission endorsed the setting up of a multilateral 
funding mechanism to assist Ukraine in transforming the existing Chernobyl 
sarcophagus  into a safe and environmentally  stable system, with measures as 
described in the Shelter  Implementation Plan. 

The SIP is composed of 22 tasks to be executed over a period of 8-10 years to secure 
and stabilise the sarcophagus.  These tasks will be grouped into a series of  integrated 
projects to be prepared under the supervision of the European Bank for 
Reconstruction  and Development  by a technical management team, including 
architect/engineers.  The EBRD has been asked to provide programme  management 
and to manage the funds for the overall project in a special account called the 
Chernobyl Shelter Fund (the Fund).  Accordingly, the Board of Directors of the EBRD 
is to establish the  Fund and to accept the administration of the Fund by the EBRD in 
accordance with the Rules. 

The Rules of the Chernobyl Shelter Fund 

4.  More specifically, the Rules of the Chernobyl Shelter Fund contain the following 

provisions: 

The purpose of the Fund is to finance, through specific grants, the provision 

4.1 
of works and services necessary to support the carrying out of the SIP as agreed 
between the G-7 and Ukraine, and comprises the provision of technical assistance, 
public information, consultancy, civil works and engineering services and the 
acquisition, installation and placing into operation of equipment, and to pay for the 
costs and expenses arising from the carrying out of such activities. 

4.2 
behalf of contributors and in accordance with the provision of the Rules. 

The Fund and its resources will be administered by the EBRD acting on 

The Bank shall receive compensation for all costs incurred by it and for fees and 
expenses of consultants engaged by the Bank in connection with the administration of 
the Fund. 

The resources of the Fund shall be separate from the ordinary capital resources and 
from other Special Funds resources of the EBRD. 

As regards the governance of the Fund, the Assembly of Contributors, in 

4.3 
which each contributor will be represented, will exercise a supervisory role and 
determine the principle orientations of the activities financed with the resources of the 
Fund. 

The Community and the Chernobyl Shelter Fund 

5. 

6. 

From the Community point of view the setting up of the Chernobyl Shelter Fund is 
desirable in that it will provide a powerful tool to assist Ukraine in resolving a major 
safety hazard for itself and for Europe.  This is fully in line with the objective of the 
existing Tacis Nuclear Safety Programme.  It should be noted that the Community is 
by far the largest donor of assistance in the field of nuclear safety. 

Community participation in the Chernobyl Shelter Fund will also help to ensure that 
the activities carried out under the Shelter Implementation Plan will be placed in the 
context of the Memorandum of Understanding between the G7 and Ukraine on the 
closure of Chernobyl by the year 2000. 

The Community contribution to the Chernobyl Shelter Fund 

7. 

8. 

As regards the level of the Community's contribution to the Chernobyl Shelter Fund, 
the Commission proposes a contribution of a maximumof  100 MECU  over two years. 

The SIP is a comprehensive set of measures and it is essential that the SIP is 
managed under a single implementation scheme. This is provided in the Shelter Fund 
rules. These rules also contain provisions for the procurement of services and of 
supplies. 

EBRD procurement policies and rules will apply to grants made from the resources of 
the  Fund, except that in principle procurement  shall be limited to goods and  services 
produced  in or supplied from the  countries  of  the  contributors  or to the  countries of 
EBRD  operation.  These  rules  are  thus  not  fully  consistent  with  the  Tacis  rules. 
Therefore a specific budget line will be created. 

9. 

A  new  budget  line  from  which  the  contribution  can  be  operated  shall  be  created  in 
view of the  nature of the shelter  project and the rules of the  Fund.  The  Commission 
will propose to the  Budgetary Authority the  creation of this new  line  in the  1998  and 
1999 budgets. 

The  corresponding  amount to be  inscribed  in this new  budgetary  line will come from 
existing Tacis credits. 

10.  The  proposed  Community  contribution  of  a  maximum  of  100  MECU  will  be  used to 
cover  the  commitment  of  the  Commission  to  seek  a  Community  contribution  of  100 
Mio  USD  as  part  of  the  total  300  Mio  USD  committed  by the  G7  in  Denver  in June 
1997.  The  precise  amount  to  be transferred  in  ECU  to the  EBRD will  be  calculated 
when  including  the  second  tranche  in  the  1999  budget  taking  into  account  the 
applicable exchange rates ECU/USD. 

11.  The  contribution  to  the  EBRD  will  be  administered  by  the  Commission.  The  usual 

auditing requirements will apply. 

Conclusion 

12.  The Commission therefore proposes that the Council adopts the attached proposal for 
a  Decision  concerning  a  Community  Contribution  to  the  European  Bank  for 
Reconstruction and  Development for the  Chernobyl  Shelter  Fund, pursuant to Article 
II, Section 2.02 of the Rules for the Fund. 

Proposal for a 

Council Decision 
(Euratom/EC) No  ...191 

Concerning the Community Contribution to the European Bank for Reconstruction and 
Development for the Chernobyl Shelter Fund 

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 Treaty establishing the European Atomic Energy Community, and in 
particular Article 203 thereof, 

Having regard to the proposal from the Commission, 

Having regard to the opinion of the European Parliament, 

Whereas a Memorandum of Understanding (MoU) was signed on 21 December  1995 between 
the governments of the G7 countries and the Commission of the European Communities and 
the government of Ukraine on the closure of the Chernobyl Nuclear Power Plant by the year 
2000; 

Whereas Article III §4 of the MoU provided that Ukraine and the G7 will continue to 
cooperate in the development of a cost effective and environmentally sound approach to the 
shelter for Chernobyl IV, including the definition, as soon as possible, of technical and cost 
options as the basis for reviewing financial requirements; 

Whereas the Commission, through the Tacis programme,  participated actively in the 
development of such an approach which resulted in the definition of the "Shelter 
Implementation Plan" (SIP) endorsed by the Ukrainian authorities; 

Whereas at their Denver Summit of June  1997, the G7 Heads of State and Government and the 
President of the European Commission decided to add to the commitments undertaken in the 
MoU with Ukraine and endorsed the setting up of a multilateral funding mechanism to assist 
Ukraine in transforming the existing Chernobyl sarcophagus into a safe and environmentally 
stable system, with measures as described in the SIP; 

Whereas the implementation of the SIP will be placed in the context of the MoU between the 
G7 and Ukraine on the closure of Chernobyl by the year 2000; 

Whereas, for the purpose of implementing the SIP, the Chernobyl Shelter Fund has been 
established at the European Bank for Reconstruction and Development (EBRD) and will be 
administered by the EBRD; 

Whereas the Community pursues a clear policy of supporting Ukraine in its efforts  to eliminate 
the consequences of the nuclear accident which occurred  on 26 April  1986 at the Chernobyl 
Nuclear Power Plant and is thus willing to contribute the Chernobyl  Shelter Fund; 

Whereas, without prejudice to the powers of the budgetary authority, the contribution  should 
amount to a maximum of  100 MECU  over the two years  1998 and  1999; 

Whereas the contribution will be taken from  existing Tacis credits and will thus not imply any 
supplementary budgetary expenditures from  the  1998 and  1999 budgets; 

W^hereas this contribution shall be administered by the European  Commission; 

Whereas the Commission will ensure that, with regard to procurement  arrangements pursuant 
to the rules of the Chernobyl  Shelter Fund, no discrimination will be made between individual 
Member  States of the European Community, irrespective of their having concluded individual 
Contribution Agreements with the Bank or not; 

DECIDES: 

Article I 

1. 
The Community shall contribute to the European Bank for  Reconstruction and 
Development  (EBRD) for the Chernobyl Shelter Fund, pursuant to Article II, Section 2.02, of 
the Rules of the Fund. 

The contribution to the Fund shall be administered by the Commission in accordance 

2. 
with this Decision. 

The Community will make a contribution  to the Fund of a maximum  amount of 100 million 
ECU , to be paid over the two years  1998 and  1999 

Article 2 

Article 3 

The Commission will forward  all relevant information  to the Court of Auditors and will 

1. 
request from the EBRD supplementary information that the Court of Auditors may wish to 
receive, as regards the financial operation of the Chernobyl Shelter Fund to the extent that it is 
related to the Community's  contribution. 

The Commission  shall present,  on a yearly basis, a progress report on the 

implementation  of the Chernobyl  Shelter Fund to the Council through the Committee  for 
assistance to the New Independent  States and Mongolia (Council  Regulation  (Euratom/EC) 
N°l 279/96, Art.8, §1) 

Done at 

, 

1997 

For the Council 
The President 

1 

Financial Statement 

The Contribution Agreement with a total contribution of 100 MECU (maximum amount) over 
two years, will not imply any supplementary budgetary expenditures from the 1998 and 
1999 budgets. 

The Community Contribution to the Chernobyl Shelter Fund will be funded entirely from 
existing Tacis credits.  A new budget line will be created for this contribution to the EBRD. 

See Annex I for more details. 

4 

FINANCIAL  STATEMENT 

1.  TITLE OF OPERATION 

Proposal  for  a Council  Decision  concerning  a Community  Contribution  to  the  European 
Bank for Reconstruction and Development for the Chernobyl  Shelter Fund. 

2.  BUDGET HEADING  INVOLVED 

Creation of a new line under heading B7-52. 
The action will be financed from the indicative Financial Envelope for Tacis  (B7-52) 

3.  LEGAL  BASIS 

Article 235 of EC Treaty; Article  103 of Euratom Treaty. 
Proposal  for  a council  decision  concerning  a Community  Contribution  to the  EBRD  for 
the Chernobyl  Shelter Fund. 

4.  DESCRIPTION  OF OPERATION 

4.1  General  objective 

The Chernobyl  Shelter Fund has been established for the purpose of carrying out the 
Shelter  Implementation  Plan,  whose  aim  is  to  build  an  environmentally  secure 
sarcophagus  around  the  Chernobyl  nuclear  power  plant  in  Ukraine.  From  the 
Community  point  of  view  the  setting  up  of  the  Chernobyl  Shelter  Fund  is 
desirable  in  that  it  will  provide  a  powerful  tool  to  assist  Ukraine  in  resolving  a 
major  safety  hazard  for  itself  and  for  Europe.  This  is  fully  in  line  with  the 
objective  of the existing Tacis Nuclear Safety  Programme. 

4.2  Period covered and arrangements for renewal 

Allocations will be made in 1998 and  1999.  Their renewal is not  foreseen. 

5.  CLASSIFICATION  OF EXPENDITURE OR REVENUE 

5.1  Compulsory/Non-compulsory expenditure 

Non-compulsory  expenditure 

5.2  Differentiated/Non-differentiated  appropriations 

Differentiated  appropriations 

5.3  Type of revenue involved 

Not applicable 

1 

6. TYPE OF EXPENDITURE OR REVENUE 

100% subsidy:  NO 

Subsidy for  joint  financing  with other  sources  in  the public 
and/or private sector.  YES 

Interest subsidy:  N/A 

Other:  N/A 

Should  the  operation  prove  an  economic  success,  is  there 
provision for  all  or part  of  the Community contribution to be 
reimbursed?  N/A 

Will the proposed operation cause any change in  the level of 
revenue?  If so,  what sort of change and what type of revenue 
is involved?  N/A 

7.  FINANCIAL  IMPACT 

7.1  Method  of calculating total cost of operation  (relation  between  individual  and 

total costs): 
The  total  cost  of  the  Chernobyl  fund  project  has  been  evaluated  by  the  group  of 
experts who developped the project.  It has been estimated  at  750 milion USD  over 
the period  1998-2005. The Community provides a partial contribution to the fund. 
The proposed  Community  contribution  of a maximum of  100 MECU  will be used 
to  cover  the  commitment  of  the  Commission  to  seek  a  Community  contribution 
of  100  Mio  USD  as  part  of  the  total  300  Mio  USD  committed  by  the  G7  in 
Denver  in June  1997. The precise amount  to be transferred  in  ECU  to the EBRD 
will  be  calculated  when  including  the  second  tranche  in  the  1999  budget  taking 
into account the applicable exchange rates  ECU/USD. 

7.2 

Itemised  breakdown  of cost 

Commitment a 

ppropriations ECU million (at current \ 

Breakdown 

1998 

1999 

n + 2 

n + 3 

n + 4 

n + 5 
and 
subs, yrs 

Community 
Contrib. to 
EBRD for 
Chernobyl 
Shelter Fund 
Total 

70 

70 

30 
(max) 

30 
(max) 

)rices) 
Total 

100 (max) 

100 (max) 

1 

.u 

7.3  Operational expenditure for studies, experts etc.  included in Part B of the budget 

NOT APPLICABLE 

7.4 Schedule of commitment and payment  appropriations 

Commitment 
appropriations 
Payment 
appropriations 
1998 
1999 
n + 2 
n + 3 
n + 4 
n + 5 
and subs, yrs 

Total 

yearn 
1998 

70 

n +1 
1999 
30 (max) 

70 

30 (max) 

70 

30 (max) 

n + 2 

n + 3 

n + 4 

ECU million 
n + 5 and 
subs, yrs 

Total 

100 
(max) 

100 
(max) 

8. FRAUD PREVENTION MEASURES 

Audit by the Court  of Auditors will  be possible  as indicated by the  exchange  of letters 
with the European Bank for Reconstruction and Development.  Annual reporting to the 
Assembly of Contributors, of which the European Commission will be a member. 

9.  ELEMENTS OF COST-EFFECTIVENESS ANALYSIS 

9.1  Specific and quantified  objectives; target  population 

The  Shelter  Implementation  Plan  includes  the  following  major  technical  steps  to 
be carried out over the period up to 2005: 

• 

• 
• 

• 
• 
• 

The  stabilisation  of  the  present  shelter  to the  minimum  extent  required  for 
the follow-up steps; 
shielding for radiation protection purposes; 
increase  nuclear  safety  to  eliminate  risk  of  criticality  through  water 
management; 
build a new confinement; 
remove upper unstable parts of present shelter; 
analyse  Fuel  Containing  Masses  (FCM)  and  elaborate  FCM  removal 
strategy. 

The  total  cost  of  the  proposed  measures  will  be  about  750  million  USD.  The 
content of the SIP has been explained  in detail  to the  Phare/Tacis  Nuclear  Safety 
Expert Group on 27  May  1997. 

'M 

Although  Ukraine is the target beneficiary,  the benefits  of nuclear safety  are global, 
and provide added environmental security for the European Union Member States. 

9.2  Grounds for the operation 

In 1996 an international  group of  experts,  including experts from the EU,  US and 
Ukraine,  elaborated a study of alternative solutions to convert the Chernobyl  Unit 
4  and  its  present  shelter  (Ukritye)  into  an  environmentally  safe  condition.  The 
report proposed  a Recommended  Course  of  Action,  comprising  stabilisation  and 
other  short  term  measures,  preparation  for  conversion  into  an  environmentally 
safe site,  and conversion into an environmentally  safe site. 

The  G-7  Nuclear  Safety  Working  Group reached  an  agreement  at the  beginning 
of  1997  with  representatives  of  the  Government  of  Ukraine  to  proceed  with the 
further  development  of  the  Recommended  Approach.  As  a  result,  a  Shelter 
Implementation  Plan  (SIP)  was developed  in close  cooperation  with  EU,  US and 
Ukrainian  experts  with  a  view  to  transforming 
the  existing  Chernobyl 
sarcophagus into a safe and environmentally  stable system. 

At  their  Denver  Summit  of  June  1997,  the  G7  Heads  of  State  and  Government 
and  the  President  of  the  European  Commission  endorsed  the  setting  up  of  a 
multilateral  funding  mechanism  to  assist  Ukraine  in  transforming  the  existing 
Chernobyl  sarcophagus  into  a  safe  and  environmentally  stable  system,  with 
measures as described in the Shelter Implementation Plan. 

9.3  Monitoring and evaluation  of the operation 

An annual report will be sent to all contributors.  The Assembly of Contributors will 
monitor and oversee the actions undertaken in the SIP. 

10.  ADMINISTRATIVE EXPENDITURE (SECTION III,  PART A  OF THE BUDGET) 

10.1  Effect  on the number of posts 

Actual  mobilization  of  the  necessary  administrative  ressources  will  depend  on the 
Commission's  annual  decision  on  the  allocation  of  resources,  taking  into  account 
the number of staff and additional amounts authorized by the budgetary authority 

Type of post 

Staff  to be assigned  to 
managing  the  operation 
Permanent 
posts 

Temporary 
posts 

Officials  or 
temporary 
staff 
Other  resources 

A 
B 
C 

Total 

0.25 
0.25 
0.10 

0.6 

Source 

Existing 
resources  in 
the DG or 
department 
concerned 
0.25 
0.25 
0.10 

Duration 

Additional 
resources 

1998-2005 

0 

0.6 

0 

(1 

10.2  Overall financial  impact of additional  human resources 

Amounts 

Method of calculation 

ECU million 

Officials 
Temporary  staff 
Other resources (indicate budget 
heading) 

0 

0 

Total 

No additional  human  ressources required 

1 

10.3  Increase in other administrative expenditure as a result of the operation 

Budget heading 

Amounts 

Method of calculation 

A-130 

London meetings  (3 per  year) 

1875 Ecu 

Three 2-days mission per year for  1 official 

The necessary  ressources for  missions by Commission  officials  will be obtained  through 
redeployment of existing ressources. 

/» 

ISSN 0254-1475 

C()M(97) 448  final 

DOCUMENTS 

EN 

01  11  12  14 

Catalogue  number  :  CB-CO-97-462-EN-C 

ISBN  92-78-24455-4 

Office  for Official  Publications of the European  Communities 

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