Loan Number 4058 RU
LOAN AGREEMENT
(COAL SECTOR ADJUSTMENT LOAN)
BETWEEN RUSSIAN FEDERATION AND INTERNATIONAL BANK
FOR RECONSTRUCTION AND DEVELOPMENT
(Washington, 28.VI.1996)
Agreement dated June 28, 1996 between Russian Federation (the
Borrower) and the International Bank for Reconstruction and
Development (the Bank).
Whereas the Bank has received a letter dated May 22, 1996 from
the Borrower describing a program of actions, objectives and
policies designed to achieve adjustment of the Borrower's coal
sector (hereinafter called the Program), declaring the Borrower's
commitment to the execution of the Program, and requesting
assistance from the Bank in support of the Program during the
execution thereof; and
Whereas on the basis, inter alia, of the foregoing, the Bank
has decided in support of the Program to provide such assistance
to the Borrower by making the Loan in two tranches as hereinafter
provided;
Now therefore the parties hereto hereby agree as follows:
Article I
General Conditions; Definitions
Section 1.01. The "General Conditions Applicable to Loan and
Guarantee Agreements for Single Currency Loans" of the Bank, dated
May 30, 1995 (the General Conditions) constitute an integral part
of this Agreement.
Section 1.02. Unless the context otherwise requires, the
several terms defined in the General Conditions have the
respective meanings therein set forth and the term "Deposit
Account" means the account referred to in Section 2.02 (b) of this
Agreement.
Article II
The Loan
Section 2.01. The Bank agrees to lend to the Borrower, on the
terms and conditions set forth or referred to in the Loan
Agreement, an amount equal to five hundred million dollars
(500,000,000 USD).
Section 2.02. (a) Subject to the provisions of paragraphs (b),
(c) and (d) of this Section, the Borrower shall be entitled to
withdraw the proceeds of the Loan from the Loan Account in support
of the Program.
(b) The Borrower shall open, prior to furnishing to the Bank
the first request for withdrawal from the Loan Account, and
thereafter maintain in its central bank, a deposit account in
Dollars on terms and conditions satisfactory to the Bank. All
withdrawals from the Loan Account shall be deposited by the Bank
into the Deposit Account.
(c) The Borrower undertakes that the proceeds of the Loan shall
not be used to finance expenditures excluded pursuant to the
provisions of Schedule 1 to this Agreement. If the Bank shall have
determined at any time that any proceeds of the Loan shall have
been used to make a payment for an expenditure so excluded, the
Borrower shall, promptly upon notice from the Bank, (i) deposit
into the Deposit Account an amount equal to the amount of said
payment, or (ii) if the Bank shall so request, refund such amount
to the Bank. Amounts refunded to the Bank upon such request shall
be credited to the Loan Account for cancellation.
(d) No withdrawal shall be made from the Loan Account after the
aggregate of the proceeds of the Loan withdrawn from the Loan
Account shall have reached the equivalent of 250,000,000 USD,
unless the Bank shall be satisfied, after an exchange of views as
described in Section 3.01 of this Agreement based on evidence
satisfactory to the Bank: (i) that the macro-economic framework of
the Borrower is consistent with the Program as determined on the
basis of indicators agreed upon by the Borrower and the Bank; (ii)
with the progress achieved by the Borrower in the carrying out of
the Program; and (iii) that the actions described in Schedule 3 to
this Agreement have been taken. If, after said exchange of views
and consultation with the Borrower, the Bank shall have given
notice to the Borrower that the progress achieved and actions
taken are not satisfactory and, within ninety (90) days after such
notice, the Borrower shall not have achieved progress and taken
actions satisfactory to the Bank, then the Bank may, by notice to
the Borrower, cancel the unwithdrawn amount of the Loan or any
part thereof.
Section 2.03. The Closing Date shall be December 31, 1997 or
such later date as the Bank shall establish. The Bank shall
promptly notify the Borrower of such later date.
Section 2.04. The Borrower shall pay to the Bank a commitment
charge at the rate of three-fourths of one percent (3/4 of 1%) per
annum on the principal amount of the Loan not withdrawn from time
to time.
Section 2.05. (a) The Borrower shall pay interest on the
principal amount of the Loan withdrawn and outstanding from time
to time, at a rate for each Interest Period equal to LIBOR Base
Rate plus LIBOR Total Spread.
(b) For the purposes of this Section:
(i) "Interest Period" means the initial period from and
including the date of this Agreement to, but excluding, the first
Interest Payment Date occurring thereafter, and after the initial
period, each period from and including an Interest Payment Date
to, but excluding the next following Interest Payment Date.
(ii) "Interest Payment Date" means any date specified in
Section 2.06 of this Agreement.
(iii) "LIBOR Base Rate" means, for each Interest Period, the
London interbank offered rate for six-month deposits in single
currency for value the first day of such Interest Period (or, in
the case of the initial Interest Period, for value the Interest
Payment Date occurring on or next preceding the first day of such
Interest Period), as reasonably determined by the Bank and
expressed as a percentage per annum.
(iv) "LIBOR Total Spread" means, for each Interest Period:
(A) one half of one percent (1/2 of 1%);
(B) minus (or plus) the weighted average margin, for such
Interest Period, below (or above) the London interbank offered
rates, or other reference rates, for six-month deposits, in
respect of the Bank's outstanding borrowings or portions thereof
allocated by the Bank to fund single currency loans or portions
thereof made by it that include the Loan; as reasonably determined
by the Bank and expressed as a percentage per annum.
(c) The Bank shall notify the Borrower of LIBOR Base Rate and
LIBOR Total Spread for Interest Period, promptly upon the
determination thereof.
(d) Whenever, in light of changes in market practice affecting
the determination of the interest rates referred to in this
Section 2.05, the Bank determines that it is in the interest of
its borrowers as a whole and of the Bank to apply a basis for
determining the interest rates applicable to the Loan other than
as provided in said Section, the Bank may modify the basis for
determining the interest rates applicable to the Loan upon not
less than six (6) months' notice to the Borrower of the new basis.
The basis shall become effective on the expiry of the notice
period unless the Borrower notifies the Bank during said period of
its objection thereto, in which case said modification shall not
apply to the Loan.
Section 2.06. Interest and other charges shall be payable
semiannually on June 15 and December 15 in each year.
Section 2.07. The Borrower shall repay the principal amount of
the Loan in accordance with the amortization schedule set forth in
Schedule 2 to this Agreement.
Article III
Particular Covenants
Section 3.01. (a) The Borrower and the Bank shall from time to
time, at the request of either party, exchange views on the
progress achieved in carrying out the Program and the actions
specified in Schedule 3 to this Agreement.
(b) Prior to each such exchange of views, the Borrower shall
furnish to the Bank for its review and comment a report on the
progress achieved in carrying out the Program, in such detail as
the Bank shall reasonably request.
(c) Without limitation upon the provisions of paragraph (a) of
this Section, the Borrower shall exchange views with the Bank on
any proposed action to be taken after the disbursement of the Loan
which would have the effect of materially reversing the objectives
of the Program, or any action taken under the Program, including
any action specified in Schedule 3 to this Agreement.
Section 3.02. Upon the Bank's request, the Borrower shall:
(a) have the Deposit Account audited in accordance with
appropriate auditing principles consistently applied, by
independent auditors acceptable to the Bank;
(b) furnish to the Bank as soon as available, but in any case
not later than six (6) months after the date of the Bank's request
for such audit, a certified copy of the report of such audit by
said auditors, of such scope and in such detail as the Bank shall
have reasonably requested; and
(c) furnish to the Bank such other information concerning the
Deposit Account and the audit thereof as the Bank shall have
reasonably requested.
Article IV
Additional Event of Suspension
Section 4.01. Pursuant to Section 6.02 (1) of the General
Conditions, the following additional event is specified, namely,
that a situation has arisen which shall make it improbable that
the Program, or a significant part thereof, will be carried out.
Article V
Termination
Section 5.01. The date ninety (90) days after the date of this
Agreement is hereby specified for the purposes of Section 12.04 of
the General Conditions.
Article VI
Representative of the Borrower; Addresses
Section 6.01. The Minister of Finance or any Deputy Minister of
Finance of the Borrower is designated as representative of the
Borrower for the purposes of Section 11.03 of the General
Conditions.
Section 6.02. The following addresses are specified for the
purposes of Section 11.01 of the General Conditions:
For the Borrower:
Ministry of Finance
Ilyinka Street 9
103009 Moscow
Russian Federation
Telex:
112008
For the Bank:
International Bank for
Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address: Telex:
INTBAFRAD 197688 (TRT),
Washington, D.C. 248423 (RCA),
64145 (WUI) or
82987 (FTCC)
In witness whereof, the parties hereto, acting through their
duly authorized representatives, have caused this Agreement to be
signed in their respective names in the District of Columbia,
United States of America, as of the day and year first above
written.
SCHEDULE 1
EXCLUDED EXPENDITURES
For purposes of Section 2.02 (c) of this Agreement, the
proceeds of the Loan shall not be used to finance any of the
following expenditures:
1. expenditures in the currency of the Borrower or for goods or
services supplied from the territory of the Borrower;
2. expenditures for goods or services supplied under a contract
which any national or international financing institution or
agency other than the Bank or the Association shall have financed
or agreed to finance, or which the Bank or the Association shall
have financed or agreed to finance under another loan or credit;
3. expenditures for goods included in the following groups or
sub-groups of the Standard International Trade Classification,
Revision 3 (SITC, Rev. 3), published by the United Nations in
Statistical Papers, Series M, No. 34/Rev.3 (1986) (the SITC), or
any successor groups or sub-groups under future revisions to the
SITC, as designated by the Bank by notice to the Borrower:
---------T-----------T-------------------------------------------¬
¦ Group ¦ Sub-group ¦ Description of Items ¦
+--------+-----------+-------------------------------------------+
¦ 112 ¦ - ¦ Alcoholic beverages ¦
¦ ¦ ¦ ¦
¦ 121 ¦ - ¦ Tobacco, unmanufactured, tobacco refuse ¦
¦ ¦ ¦ ¦
¦ 122 ¦ - ¦ Tobacco, manufactured (whether or not ¦
¦ ¦ ¦ containing tobacco substitutes) ¦
¦ ¦ ¦ ¦
¦ 525 ¦ - ¦ Radioactive and associated materials ¦
¦ ¦ ¦ ¦
¦ 667 ¦ - ¦ Pearls, precious and semi-precious stones,¦
¦ ¦ ¦ unworked or worked ¦
¦ ¦ ¦ ¦
¦ 718 ¦ 718.7 ¦ Nuclear reactors, and parts thereof; fuel ¦
¦ ¦ ¦ elements (cartridges), non-irradiated, ¦
¦ ¦ ¦ for nuclear reactors ¦
¦ ¦ ¦ ¦
¦ 728.43 ¦ - ¦ Tobacco processing machinery ¦
¦ ¦ ¦ ¦
¦ 897 ¦ 897.3 ¦ Jewelry of gold, silver or platinum group ¦
¦ ¦ ¦ metals (except watches and watch cases) ¦
¦ ¦ ¦ and goldsmiths' or silversmiths' wares ¦
¦ ¦ ¦ (including set gems) ¦
¦ ¦ ¦ ¦
¦ 971 ¦ - ¦ Gold, non-monetary (excluding gold ores ¦
¦ ¦ ¦ and concentrates) ¦
L--------+-----------+--------------------------------------------
4. expenditures for goods intended for a military or
paramilitary purpose or for luxury consumption;
5. expenditures for environmentally hazardous goods (for
purposes of this paragraph the term "environmentally hazardous
goods" means goods, the manufacture, use or import of which is
prohibited under the laws of the Borrower or international
agreements to which the Borrower is a party; and
6. in furtherance of the purposes of Section 5.01 of the
General Conditions, expenditures
(a) in the territories of any country which is not a member of
the Bank or for goods procured in, or services supplied from, such
territories or
(b) on account of any payment to persons or entities, or any
import of goods, if such payment or import is prohibited by a
decision of the United Nations Security Council taken under
Chapter VII of the Charter of the United Nations.
SCHEDULE 2
AMORTIZATION SCHEDULE
------------------------------------T----------------------------¬
¦ Date Payment Due ¦ Payment of Principal ¦
¦ ¦(expressed in Dollars) <*> ¦
+-----------------------------------+----------------------------+
¦On each June 15 and December 15 ¦ ¦
¦ ¦ ¦
¦ beginning December 15, 2001 ¦ ¦
¦ through December 15, 2012 ¦ 20,835,000 ¦
¦ ¦ ¦
¦On June 15, 2013 ¦ 20,795,000 ¦
L-----------------------------------+-----------------------------
--------------------------------
<*> The figures in this column represent Dollar equivalents
determined as of the respective dates of withdrawal. See General
Conditions, Sections 3.04 and 4.03.
SCHEDULE 3
ACTIONS REFERRED TO IN
SECTION 2.02 (D) OF THIS AGREEMENT
1. During the second half of calendar 1996, the Borrower's
actual transfers from the allocation for state support to the coal
sector in the Borrower's 1996 budget
(i) to federal subjects for the development, replacement,
rehabilitation, maintenance and operation of social assets
divested from the coal sector to local authorities, and
(ii) to coal companies and local authorities for social
protection, including community support and employment programs,
are or were being made in accordance with the schedule, agreed
upon by the Borrower and the Bank.
2. The Borrower has demonstrated to the satisfaction of the
Bank that, during the calendar quarter immediately preceding the
review referred to in Section 2.02 (d) of the Agreement, no state
support for operating losses was made available to coal mines
which have recruited employees in excess of 1% of their respective
total number of employees during such period.
3. The Borrower's proposal for state support to the coal
industry for 1997, the actual budget, if in place at the time of
the review referred to in Section 2.02 (d) of this Agreement, the
allocation of state support to the coal industry for 1997 approved
by the Inter-Agency Coal Commission and the actual quarterly
transfers during 1997, in case the review referred to in Section
2.02 (d) of this Agreement takes place in 1997, incorporate and
are consistent with the parameters agreed upon by the Borrower and
the Bank.
4. The Borrower has initiated the operation of the regional
offices of the Federal Employment Services in all regions where
mines are being closed with adequate capacity to deliver pre-
redundancy services free of charge to employees prior to cessation
of coal production for all coal industry employees of mines whose
closure has been announced.
5. The Borrower has established the necessary institutional
framework, which includes the participation of the Federal
Employment Services, and has initiated the activities of the
community support and employment programs, agreed upon by the
Borrower and the Bank in the Kuzbass, Eastern Donbass, Pechora,
Moscow and Kisel coal basins.
6. The Borrower has taken all actions required to be taken in
accordance with the demonopolization program, agreed upon by the
Borrower and the Bank.
7. The Borrower has demonstrated on the basis of social impact
and monitoring reports, of such scope as agreed by the Borrower
and the Bank, for the calendar quarter preceding the review
referred to in Section 2.02 (d) of this Agreement, overall
compliance with social impact indicators, agreed upon by the
Borrower and the Bank, and has published such reports.
8. The Borrower has prepared and furnished to the Bank a
financial impact monitoring report on the financial performance of
the regional coal companies in such scope and detail as agreed by
the Borrower and the Bank.
9. The Borrower has submitted to the Bank audits on five coal
companies, which are main recipients of state support, in such
scope and detail as has been agreed upon by the Borrower and the
Bank.
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