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MOSCOW TIMES: FRIDAY, MARCH 16, 2001. PAGE 1
By YEVGENIA BORISOVA

Ministry Cost Russia Billions

The ministry is effectively forcing taxpayers to fund billions of dollars worth of foreign nuclear reactor contracts by allowing buyers like Iran and China to pay through federal loans, Moscow-based environmental groups Ecodefense and the Social-Ecological Union said in a report released Thursday.

The $5 billion in deals that have been signed or are pending with other countries have interest rates as low as 4 percent and payback periods of up to 20 years, the report said.

"All of this money will make it back only in 15 years to 20 years," Vladimir Slivyak, a co-author of the report, said in a telephone interview. "And we can't expect countries with unstable economies to manage to make the payments at all.

"I wonder why Russia is spending billions of dollars -- which is effectively the money of Russian taxpayers and are badly needed here -- to fund the export of dangerous technologies," he said.

A Nuclear Power Ministry spokesman shrugged off the report, saying environmentalists did not have the expertise to judge his ministry's activities.

The Finance Ministry, which oversees the government's cashflow, refused to confirm the terms of the contracts, saying they are classified information.

But Slivyak said all information in the report was taken from publicly available material.

Vyacheslav Sotnikov, assistant to the head of Atomstroiexport, which builds nuclear power plants abroad, called the report "superfluous."

"The contracts are very complex and involve some payments in cash, some in goods and some in loans," he said, refusing to give further details. He added that all of the deals had to be approved by a number of levels within various ministries before winning the government's stamp of approval.

None of the nuclear reactor contracts, however, have to be approved by the State Duma -- even though some of them are worth up to 10 percent of the federal budget, the environmentalists said in their report.

"Even though the state effectively uses the money of taxpayers for nuclear exports, the [government's] export rules do not allow the public to participate in making the decisions," the report said. "Thus, taxpayers have to sponsor economic projects in other countries."

The report points to a $1.5 billion contract to construct two reactors for the Lyanynugan nuclear power plant in China as an example of a deal that is costing Russia dearly. When the contract was signed in 1997, Russia agreed to provide a 13-year loan with 4 percent annual interest for all but 10 percent of the cost.

China was only required to make a down payment worth $75,000, half in cash and the rest in goods, the report said. It will then pay another $75,000 when the contract is fulfilled.

"We are building two blocs for China. I can say we are halfway finished," said Viktor Kozlov, general director of Atomstroiexport in an interview with Russian Ren TV on Wednesday.

He added that negotiations to build two reactors for India are being conducted and a contract to build them is likely to be signed in the fall.

Russia has already initialed a $2.6 billion contract to build a nuclear power plant in the Indian city Kudankulam. The terms for that deal, signed in April 1999, included an unspecified loan being disbursed over 10 years and being repaid over 12, according to Prime-Tass, citing an intergovernmental agreement. One-fourth of the credit is to be paid in kind.

Russia has also promised to lend Bulgaria $150 million to upgrade the Kozlodui nuclear power plant, the environmentalists said. The Finance Ministry was ordered to provide the funds to Roseximbank starting in 2000.

"I wonder if we will ever see this money again," Slivyak said. "The power plant has to shut down four of its six reactors in the near future, which means it will be short of cash. It will just become the next bad loan."

Another deal -- and one that irks the United States to this day -- came in a 1995 decision to build a $850 million nuclear reactor for a power plant at the Iranian port Bushehr.

Iranian President Mohammad Khatami on Thursday inspected the nearly completed body of the reactor at Izhorskiye Works in St. Petersburg. It is supposed to be delivered in 2003-04.

The United States considers Iran a rogue state and fears it will use the nuclear technology to develop weapons.

The report said that Atomstroiexport is financing most of the project through loans it secured from banks.

"Iran has paid off only 5 percent of the cost of the contract," the report said. "The rest will be paid off after the shipment of the reactor."

Izhorskiye Works said Thursday that the Iranian president promised a new reactor contract as soon as the current one is completed.

Interestingly, negotiations between Iran and the Nuclear Power Ministry this week were not hampered even though the Prosecutor General's Office has opened an investigation into whether a branch of the ministry illegally exported nuclear technologies and radioactive materials -- items needed to build weapons of mass destruction -- to Iran.

Nuclear Power Minister Yevgeny Adamov headed the branch, a scientific research institute, before being appointed to head the ministry.

Meanwhile, the Moscow prosecutor's office launched an investigation last week into whether Adamov improperly engaged in business activities after being named minister in March 1998, the office said Thursday. The probe was instigated by a Duma report issued March 5 that accused Adamov of engaging in such activities and of using his position to appoint business associates to key positions.

Prosecutors refused to comment about the case Thursday.

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