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“UKRAINE'S COMMITMENTS TO REFORM IN THE ENERGY SECTOR” mentioning the U.S. Dept of State was published in the Extensions of Remarks section on pages E377-E378 on March 19, 1996.
The publication is reproduced in full below:
UKRAINE'S COMMITMENTS TO REFORM IN THE ENERGY SECTOR
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HON. LEE H. HAMILTON
of indiana
in the house of representatives
Tuesday, March 19, 1996
Mr. HAMILTON. I would like to bring to my colleagues' attention a letter I received from the administration concerning a commitment by Ukraine to reform its energy sector in return for United States assistance in the form of a USAID/Eximbank credit facility. In a series of communications with Mr. Richard Morningstar, special adviser to the President and Secretary of State for United States Assistance to the NIS, I expressed my concern that United States provision of a USAID/
Eximbank facility be conditioned upon Ukrainian agreement to specific reforms.
In return for a $175 million credit facility, Ukrainian Deputy Finance Minister Shpek committed to restructure the power market. He specifically agreed to break up the power market by taking four distinct steps, as itemized in the following letter from the Department of State. The reforms agreed to by Mr. Shpek are above and beyond any existing IMF or World Bank conditionality. In my judgment, the conditions attached to this credit facility will enhance reform in the Ukraine.
The text of the letter follows:
U.S. Department of State,
Washington, DC, February 22, 1996.Hon. Lee Hamilton,House of Representatives.
Dear Mr. Hamilton: During your meeting last fall with Mr. Richard Morningstar, Special Advisor to the President and Secretary of State for U.S. Assistance to the NIS, you expressed interest in the Administration's program of encouraging reform in Ukraine's energy sector and the AID/Eximbank facility. We wanted to take the opportunity to describe the energy sector reforms to which the Government of Ukraine has committed as a condition of approval of the facility.
In two face-to-face official meetings, Mr. Morningstar has made clear to Ukrainian Deputy Prime Minister Shpek that commitment to restructure the power market is an essential condition under which we could implement the $175 million facility. Deputy Prime Minister Shpek understood and accepted that condition and has committed to break up the state-owned power monopoly into the following parts:
Four already established, competing electricity generating companies that will be privatized; a national electricity transmission company; twenty-seven independent, joint stock local electric companies; and a competitive market for power by the end of March 1996 in which the generation companies bid to supply the local distribution companies with electricity at the lowest price.
This commitment is above and beyond any IMF conditions and any condition for any existing World Bank loan. Creation of the power market will become part of the negotiations for an upcoming World Bank loan. The AID/Eximbank credit will give the Government of Ukraine short-term funding flexibility to implement the energy market structure and will help to leverage the World Bank financing.
The AID/Eximbank facility is a special export credit insurance facility for U.S. exporters of agricultural-related goods and services to Ukraine. The purchase of refined fuel agricultural inputs--up to $100 million of the $175 million facility and of critical importance to the Government of Ukraine--would qualify for coverage under the program; however, the facility may not be used for broader, untied fuel purchases. We strongly believe that the commitment to the reforms outlined above justifies the inclusion of refined fuel products in the agriculture credit facility. The facility will operate according to ExIm's regulations and Eximbank will recommend whether to extend insurance coverage on a case-by-case basis. We assure you that any agricultural fuel inputs will be closely monitored and traced to agricultural use. As we go forward with this program we will be sure that it remains consistent with our broader efforts to promoting reform in Ukraine.
Please let me know if we can be of further assistance on this or any other issue.
Sincerely,
Wendy R. Sherman,
Assistant Secretary,Legislative Affairs.
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