CELEX: 51991PC0443
Language: en
Date: 1991-11-08
Title: Proposal for a COUNCIL DECISION granting a medium­term loan to the USSR and its constituent Republics

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                C0M(91) 443 final
                                                Brussels, 8 November 1991
                                     Proposal for a
                                    COUNCIL DECISION
                               grcinting a medium-term loan
                       to the USSR and its constituent Republics
      jyjjg:
                             (presented by the Commission)
BÉÏfeËste
 ---pagebreak---                                - / -
                           Explanatory memorandum
On 10 September the Soviet authorities presented the Community with a
request for assistance totalling ECU 5-6 billion. Requests were also
addressed to other industrialized countries. The Council, meeting on
7 October 1991 to discuss economic and financial affairs, agreed in
principle to the granting of the aid covered by this Decision and
representing the Community's contribution to an emergency aid package
coordinated with the other main industrialized countries.
The purpose of this measure is to grant a back-to-back loan to the USSR and
its constituent Republics for the purchase of food, agricultural products
and medical supplies. The corresponding funds will be borrowed on the
market by the Commission, acting on behalf of the European Economic
Community.
The initiative will come on top of the assistance to the USSR already
decided on by the Community, namely food aid amounting to ECU 250 million
and an ECU 500 million credit guarantee.
At least 50% of the loan will be allocated to the financing of imports from
the Community, the remainder being used to finance imports from the
countries of Central and Eastern Europe in so far as the latter are able to
supply the goods needed. The aim is to help restore trade between those
countries and between them and the USSR.
Economic conditions will be attached to the granting of the loan, which
will be made available to the USSR and its constituent Republics in three
successive instalments. They may cover in particular the reform of the
agri-foodstuffs industry and markets in the USSR.
The following procedural arrangements will have to be implemented:
(a) a Council Decision on the granting of the loan will have to be adopted;
(b) the granting of the loan will require a token entry (p.m.) in the 1992
    budget;
(c) a protocol to the agreement between the Commission and its Soviet
    partners will have to define accurately the identity of borrowers and
    the necessary guarantees to ensure that the loan is repaid. The
    detailed rules and conditions attached to the loan will also have to be
    defined and agreed.
 ---pagebreak---                                 -z -
                      PROPOSAL FOR A COUNCIL DECISION
                        granting a medium-term loan
                 to the USSR and its constituent Republics
THE COUNCIL OP THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic 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 bilateral links between the Community and the USSR were
strengthened by the cooperation agreement which entered into force on
1 April 1990;
Whereas the Community wishes to support the efforts of the USSR and its
constituent Republics to bring about political reform and economic
restructuring;
Whereas the USSR and its constituent Republics are facing a critical
economic and financial situation;
Whereas the Soviet authorities have asked the European Community, the
United States of America, Japan, Canada and other industrialized countries
for financial assistance to underpin the development of democratic
processes within the USSR and its constituent Republics and to help the
country face up to the worsening food and medical situation; whereas the
Soviet authorities have supplied adequate information on their needs in
these areas;
Whereas the granting by the Community of a medium-term loan of
ECU 1 250 million to the USSR and its constituent Republics is an
appropriate means of providing food and medical aid and supporting the
continuation of the economic reforms;
Whereas the assistance granted pursuant to this Decision is in addition to
that already committed in the form of food aid to the USSR (direct food aid
amounting to ECU 250 million and a credit guarantee of ECU 500 million for
exports of agricultural and food products);
Whereas Community assistance to the USSR and its constituent Republics
 ---pagebreak---                               >
forms part of an overall package which should be based on balanced
contributions by the main industrialized countries;
Whereas provision should be made for measures to ensure that, while not
compromising the normal conditions of supply according to the rules of the
market, the Community loan is used to finance imports of agricultural and
food products and medical supplies from the Community and from Bulgaria,
Czechoslovakia, Hungary, Poland, Romania, Lithuania, Latvia, Estonia (and
Yugoslavia) in so far as they are able to supply them;
Whereas exports financed pursuant to this Decision may help to restore
trade between the countries of Central and Eastern Europe and between those
countries and the USSR on the basis of transactions being paid for in
convertible currencies;
Whereas the Community loan 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 the USSR and its constituent Republics a
medium-term loan of not more than ECU 1 250 million in principal, in three
successive instalments and for a maximum duration of five years, in order
to enable agricultural and food products and medical supplies to be
imported from the Community, Bulgaria, Czechoslovakia, Hungary, Poland,
Romania, Lithuania, Latvia, Estonia (and Yugoslavia), thereby helping to
restore trade between the USSR and the countries of Central and Eastern
Europe.
2. The proportion of the loan used to finance imports from the Community
shall be at least 50%, taking account of the possibilities of products
being supplied by Bulgaria, Czechoslovakia, Hungary, Poland, Romania,
Lithuania, Latvia, Estonia (and Yugoslavia).
                                 Article 2
To this end, the Commission is hereby empowered to borrow, on behalf of the
European Economic Community, the necessary resources that will be placed at
the disposal of the USSR and its constituent Republics in the form of a
loan.
 ---pagebreak---                            -4-
                                 Article 3
The loan shall be managed by the Commission.
                                 Article 4
The Community is hereby empowered to negotiate with the authorities of the
USSR and its constituent Republics, after consultation with the Monetary
Committee, the economic and financial conditions to be attached to the
loan, the rules governing the provision of funds and the necessary
guarantees to ensure loan repayment.
                                 Article 5
The economic conditions shall relate in particular to the economic reforms
in the agri-foodstuffs industry and markets in the USSR and its constituent
Republics.
                                 Article 6
1. Imports of products financed by the loan shall be effected at world
market prices. Free competition shall be guaranteed for the purchase and
supply of products, which shall meet internationally recognized standards
of quality.
2. The other detailed rules relating to the purchase, receipt, transport
and distribution of products from the Community the importation of which is
financed by the loan shall be adopted in accordance with the procedure set
out in Article 8(2), on the basis of the negotiations between the
Commission and the authorities of the USSR and its constituent Republics.
                                 Article 7
The Commission shall verify at regular intervals that the loan conditions
referred to in Articles 4, 5 and 6 are being fulfilled.
                                 Article 8
1. The Commission shall be assisted in matters coming under Article 6(2)
by an advisory committee made up of representatives of the Member States
and chaired by the representative of the Commission.
2. The representative of the Commission shall present to the committee
proposals for the measures to be taken. The committee shall deliver its
opinion on these proposals within a period which the chairman may determine
according to the urgency of the matter, where appropriate putting the
matter to a vote.
The opinion shall be recorded in the minutes; each Member State shall also
have the right to request that its own position be indicated in the same
minutes.
 ---pagebreak--- The Commission shall take the greatest possible account of the opinion
delivered by the committee. It shall inform the committee of the manner in
which it has taken account of that opinion.
                                 Article 9
The loan shall be made available to the USSR and its constituent Republics
in three successive instalments, subject to Articles 1 and 7.
The initial instalment shall be released as soon as the borrowing
operations have been concluded.
The USSR and its constituent Republics shall be responsible for repayment
of the principal and interest on the basis of the procedures laid down
pursuant to Article 4.
                                 Article 10
1. The borrowing and lending operations referred to in Articles 1 and 2
shall be carried out using the same value date and shall not involve the
Community in the transformation of maturities, in any exchange or
interest-rate risk or in any other commercial risk.
2. The Commission shall take the necessary steps, if the USSR and its
constituent Republics so wish, to ensure that an early repayment clause is
included in the loan conditions and can be exercised.
3. At the request of the USSR and its constituent Republics, and where
circumstances permit a reduction in the interest rate on the loan, the
Commission may refinance all or part of its initial borrowings or
restructure the corresponding financial conditions. Refinancing or
restructuring operations shall be carried out in accordance with the
conditions set out in paragraph 1 and shall not have the effect of
extending the average duration of the borrowing concerned or increasing the
amount, expressed at the current exchange rate, of capital outstanding at
the date of the refinancing or restructuring.
4. All related costs incurred by the Community in concluding and carrying
out the operations provided for in this Decision shall be borne by the USSR
and its constituent Republics.
5. The Monetary Committee shall be kept informed of developments in the
operations referred to in paragraphs 2 and 3.
 ---pagebreak---                                    -6-
                                 Article 11
At least once a year, the Commission shall address a report to the European
Parliament and to the Council, which will include an evaluation, on the
implementation of this Decision.
Done at Brussels,
                                            For the Council
                                            The President
 ---pagebreak---                      F I N A N C I A L   R E C O R D
1. Budget line concerned
   Item (BO-2131) medium-term loan to the USSR and its Republics to be
   created in the 1992 budget.
2. References (legal base)
   Article 235 of the Treaty
3. classification of the Expenditure
   Obligatory
4. Description and justification for the action          -'
   a)  Description of the action
       Provision medium-term loan to the USSR and its Republics for
       the exportation of food products and medical supplies from the
       Community, Bulgaria, the CSFR, Hungary, Poland, Romania,
       Lituania, Latvia, Estonia (and Yugoslavia) to the USSR and its
       Republics.
   b)  Justification for the action
       -    The USSR has asked the Community for financial assistance
            to support tne development of the democratic process and to
            help supply food products and mediaines, for which it is
            necessary that the Community grant the required loan.
       -    The budget entry is intended to provide a budgetary support
            for the European Community loan extended to the USSR and
            its Republics.
5. Nature of the expenditure and method of calculation
   a)  Nature of the expenditure
       Possible financing of capital and interest repayments in the
       case of default.
   b)  Method of calculation
       A token entry is proposed given that the amount and timing of
       any call on this budget line cannot be calculated, .in advance
       and futhermore it is to be expected that this budget entry will
       not be called on.
6. Effect of the action on intervention credits
   Only in the case of an effective call on the budget due to default-
7. Financing of intervention expenditure
       Endownroent of the line by transfer, by reutilisation of
       reimbursed amounts (Article 27(3) of the Financial Regulation
       of 1977), or by amended and/or supplementary budget.
 ---pagebreak---                              -p~
In order to fulfill its obligations, the Cocuaitision can
provisionally ensure the debt service with funds ftora its
treasury- In that case. Article 12 of the Council Regulation
(EEC, Euratom) no. 15S2/89 of 29-5-1989 will apply-
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                                                              COM(91) 443 final
                                                      DOCUMENTS
EN                                                                              11
                                 Catalogue number : CB-CO-91-499-EN-C
                                                             ISBN 92-77-77437-1
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