9808/01 Mip/CY/Ct 1 DG G COUNCIL of THE
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COUNCIL OF Brussels, 12 June 2001 (13.06) THE EUROPEAN UNION (OR. fr) 9808/01 Interinstitutional File: 2001/0121 (CNS) LIMITE ECOFIN 163 ENV 324 NIS 45 COVER NOTE from : Mr Bernhard ZEPTER, Deputy Secretary-General of the European Commission date of receipt : 6 June 2001 to : Mr Javier SOLANA, Secretary-General/High Representative Subject : Proposal for a Council Decision granting a Community guarantee to the European Investment Bank against losses under a special lending action for selected environmental projects in the Baltic Sea basin of Russia under the Northern Dimension Delegations will find attached Commission document COM(2001) 297 final. Encl. COM(2001) 297 final 9808/01 mip/CY/ct 1 DG G EN COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 5.6.2001 COM(2001) 297 final 2001/0121(CNS) Proposal for a COUNCIL DECISION granting a Community guarantee to the European Investment Bank against losses under a special lending action for selected environmental projects in the Baltic Sea basin of Russia under the Northern Dimension (presented by the Commission) EXPLANATORY MEMORANDUM 1. INTRODUCTION The Northern Dimension was first recognised EU-wide at the Luxembourg European Council in December 1997. The Vienna European Council (December 1998) and the Cologne European Council (June 1999) developed it into a more concrete concept. In November 1999, the Finnish EU Presidency held a Foreign Ministerial Conference on the Northern Dimension and, one month later, the Helsinki European Council invited the Commission to prepare an Action Plan which was endorsed by the Feira European Council in June 2000. The Northern Dimension covers the geographical area from Iceland to the west across to North West Russia, from the Norwegian, Barents and Kara Seas in the North to the Southern coast of the Baltic Sea. It aims at addressing the special regional development challenges of northern Europe. These include harsh climatic conditions, long distances, particularly wide living standard disparities, environmental challenges including problems with nuclear waste and waste water management, as well as insufficient transport and border crossing facilities. The Northern Dimension aims to intensify cross border cooperation between the EU and its neighbouring countries and regions in northern Europe. It aims to create security and stability in the region, as well as building a safe, clean and accessible environment for all people living in the north. The Northern Dimension also has the objectives of addressing the problems related to uneven regional development and avoiding the emergence of new dividing lines as new countries join the Union. One key priority is addressing the environmental challenges in the area covered by the Northern Dimension, including re-establishing the ecological balance of the Baltic Sea. Urgent action is needed in the Baltic Sea rim of Russia. For instance, effluents from 3.5 million inhabitants of the St Petersburg region are at present discharged into the Gulf of Finland with only partial wastewater treatment. A similar situation exists around Kaliningrad. Following an initiative by the Swedish Council presidency, a limited EIB special action for environmental projects in Russia was discussed at the Ecofin working lunch of 12 March 2001. An in principle agreement was reached for EIB involvement in environmental projects in North West Russia, notably in the St Petersburg and Kaliningrad. The criteria considered by the Council were summarised by President of the Ecofin Council in a letter dated 10 March 2001 and addressed to the Ecofin Ministers, the Commissioner for Economic and Financial Affairs and the President of the EIB: – Projects shall be assessed and approved on a case-by-case basis by the Board of Governors of the EIB. It is thus not a question of a general lending mandate for Russia. – Projects shall have a strong environmental objective and be of significant interest for the EU. – EIB shall co-operate and co-finance with other IFIs in order to ensure reasonable risk sharing and appropriate project conditionality. – The aggregate volume of loans shall be subject to an indicative ceiling of 100 million euros. – Russia must honour its international financial obligations, including those to the Paris Club. At its meeting in Stockholm on 23-24 March 2001, the European Union agreed “that the Union should open up EIB lending for selected environmental projects [in Russia], according to the specific criteria decided by the Council”. 2. THE PROPOSAL The present communication puts forward a Commission proposal for a special action under the Northern Dimension to grant a Community guarantee to the European Investment Bank against losses under loans for selected environmental projects in the Baltic Sea basin of Russia. The guarantee will cover EIB loans on a case-by-case basis up to a ceiling of EUR100 million. This special action will be separate from and over and above the general EIB lending mandate laid down in Council Decision 2000/24/EC of 22 December 1999 1. The 65% global Community guarantee for that mandate shall be extended to cover lending in Russia under the special action. Given the specific criteria that EIB projects under the present special action must meet, the present proposal shall not constitute a lending mandate, but the Board of Governors of the EIB will be invited to approve the loans on a case-by-case basis under Article 18. of the Statute of the Bank. Eligible projects shall have a strong environmental objective and be of significant interest to the EU. The limited number of projects that the Council has asked the EIB to support could for instance include wastewater projects, water supply projects, waste and hazardous waste disposal sites and investments helping to limit the environmental impact of new infrastructure or industrial projects. The Bank is already in talks on a waste water project in St Petersburg and intends to explore possible involvement in a similar, smaller project in Kaliningrad. The EIB will apply its usual criteria for lending under the present special action. The financial viability of potential projects may be enhanced by the availability of sufficient grants from the 1 OJ L 9, 13.1.2000, p. 24. EU through TACIS, bilateral donors and Russian contributions. The EIB will only become active under the present guarantee in cooperation and co-financing with other IFIs. A high-level meeting took place in Helsinki on 9 March 2001 to discuss key issues related to the financing of infrastructure and environmental investments in the transition economies in the Northern Dimension area. It was attended by EIB, the World Bank (IBRD), International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), the Nordic Investment Bank (NIB), the Nordic Environmental Finance Corporation (NEFCO), the Council of Europe Development Bank (CEB), the Swedish EU presidency, the European Commission and representatives of the governments of Finland and Belgium. The high-level meeting agreed to establish a “Northern Dimension Environmental Partnership (NDEP)” with participation of IFIs, the Commission, as well as bilateral and multilateral donors and the transition countries concerned, in order to meet environmental and energy efficiency challenges in the area. The meeting agreed to establish a working group for this purpose under the co-chairmanship of the Swedish EU Presidency and the EBRD, which would submit its report before the end of June 2001. The working group will focus on the operational aspects of co-operation in the financing of projects under the Northern Dimension and will in particular seek to facilitate and accelerate investment financing by IFIs, the European Union and bilateral donors and the transition countries in environmental protection and energy efficiency. At the beginning of 2001, Russia’s performance in servicing its sovereign debt and in particular its Paris Club obligations suffered from payment delays. In the meantime, Russia’s debt service payments have started to catch up with existing agreements, and should be current on its Paris Club debt in the near future. The EIB shall present projects for approval by its Board of Governors only if Russia is deemed to ensure proper servicing of its external financial obligations, notably towards Paris Club creditors. The present special action aims at supporting the implementation of selected environmental projects of Community interest in the Baltic Sea rim of Russia. It is not part of the general external lending mandate of the EIB, and does not constitute a precedent for any future actions. 3. BUDGETARY IMPLICATIONS The present proposal for introducing a ceiling of EUR100 million for a special EIB lending action for environmental projects in the Baltic Sea rim of Russia, on the basis of a 65% global guarantee will have a total impact of EUR 5.85 million on the guarantee fund for external actions. At present, after taking into account all external actions already decided or proposed as well as those that can be foreseen with some certainty but before taking account of the present proposal, the margin remaining in the reserve for the Guarantee Fund for 2001 stands at EUR 18.55 million. This figure also includes the effect of a small, positive correction that will take place in connection with this year’s first budgetary transfer from the reserve for loans and loan guarantees to the Guarantee Fund for external actions, which is currently being prepared by the Commission. The correction is in pursuance of Council Regulation 2728/94 of 31 October 1994, as amended by Regulation 1149/99/EC of 25 May 1999, and stems from the introduction of the EIB Turkey customs union facility under Decision 2000/788/EC of 4 December 2000 1 into the budgetary system already in December 2000, whilst lending effectively only commenced in 2001. The current proposal will bring the margin remaining in the reserve for the guarantee fund for 2001 to EUR 12.70 million.