GERMANS THREATEN TO CUT GOVERNMENT LOANS TO UKRAINE

The German Government will be forced to stop financing its credit line for Ukraine unless the Cabinet of Ministers of Ukraine resolves the issue of the repayment by Kalush-based Oriana chemical plant (Ivano-Frankivsk oblast) of a DEM 72,132,000 loan received from the United Bank of Bavaria in 1992, said German Ambassador to Ukraine Eberhard Hayken at a March 26 meeting with the head of Ukraine’s Agency for Development and European Integration Roman Shpek.

Oriana received the credit to build a polyethylene-making facility which was completed in the summer of 1997. Due to the high cost of raw materials, the project has not yet paid off. By July, 31, 1997, Oriana was to repay DEM 23.5 million to the German bank in line with the credit agreement, and another DEM 22,331,000 by January 31 1997. Oriana failed to make both payments despite government loan guarantees and the fact that the credit was insured by the German Hermes insurance company.

Ambassador Hayken stressed that government credit lines for Ukraine will be frozen as soon as the German government repays Oriana debt to the United Bavarian Bank. Following this, other interstate credit lines could also be stopped. Roman Shpek suggested to reschedule the debt, by analogy with the LyNOS refinery in Lysychansk which negotiated a new repayment schedule with the German Westdeutsche Landesbank, but the Ambassador emphasized that the German government wishes to resolve the Oriana debt issue by March 31.