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G-7 Chairmen's Statement on Support for Russian Reform

Text of the Chairmen's Statement of the G-7 Joint Ministerial Meeting and the Following Meeting with Russian Ministers, Tokyo, Japan, April 15, 1993

    1. Introduction

    At the request of the Heads of State and Government of the seven major industrialized countries and of the President of the EC Commission, and in the process of preparation of the Tokyo Summit, Foreign and Finance Ministers of G-7 countries and representatives of the European Community met in Tokyo April 14, 1993 to discuss support for reform in the Russian Federation. Prime Minister Kiichi Miyazawa of Japan opened the meeting, which was chaired jointly by Kabun Muto, Minister for Foreign Affairs of Japan and Yoshiro Hayashi, Minister of Finance of Japan.

    On April 15, 1993, the Ministers met with Mr. Boris Fyodorov, Deputy Prime Minister and Finance Minister of Russia, and Mr. Andrei Kozyrev, Foreign Minister of Russia for an extended discussion of the economic and political situation in Russia and to review how the international community could best support Russia's reform program. Our Russian colleagues reaffirmed the determination of President Yeltsin and his government to move forward with reform. They welcomed our determination to support the reform process in ways which complement the efforts of Russia.

    2. Support for Russia's reform process with the aim of building a democratic society, establishing a market economy and improving the welfare of its people under the leadership of President Yeltsin

    Russia has made courageous and extraordinary progress in the last two years. Russian reform and progress towards democratization are essential to world peace. We want to see a democratic, stable and economically strong Russia, firmly integrated into the community of democratic states and into the world economy. We are confident that the G-7 and Russia will continue to cooperate constructively and responsibly in international affairs.

    The Russian people themselves must bear primary responsibility for economic and political reform. The development of a market economy in Russia will be a long, arduous undertaking which will require difficult adjustments by the Russia people. We assure the Russian people of our support in coping with the inevitable hardships of the transition period. we remain resolved to work with Russia to develop lasting cooperation based on the principles of partnership and help for self-help laid out at the Munich Summit. Our assistance will be pragmatic, visible, tangible and effective, tailored to Russian absorptive capacity and phased with the progress of reform.

    We welcome the recognition by the Russian government that both monetary stabilization and further structural reform, including privatization, are critical. A positive environment for private reinvestment, including a proper legal and administrative framework, is crucial for the transformation of the economy. Better access to export markets is indispensable to structural reform in Russia.

    3. Bilateral and Multilateral Actions

    We have agreed on a series of multilateral actions which are closely interlinked with our bilateral efforts, as described in the Annex. Close coordination amongst our countries and the international organisations as well as close contacts with the Russian authorities will be necessary.

    Russia is currently experiencing a particularly difficult situation. We are also mindful of the challenging tasks facing other economies in transition. They too can continue to rely on our support.

    The success of the Russian reform program is in the interest of all countries. We encourage others to contribute to the actions we have taken today.

    4. Next Steps

    Our meeting in Tokyo has helped lay the foundation for the meeting to be held with President Yeltsin in July in Tokyo. The Heads of State and Government of the seven major industrial democracies and the President of the Commission of the European Communities will continue to pay close attention to developments in Russia. They look forward to a fruitful review in July.

    4. Annex: Support To Be Provided To Russia

    1. Support by the IMF for Macroeconomic Stabilization

    Progress towards macroeconomic stabilization, especially the reduction of Russia's high rate of inflation by bringing monetary and credit expansion under control, is of paramount importance to the success of Russia's economic reforms.

    We encourage the IMF to play a more active role in this area, and we agree that IMF should be prepared to provide tangible support for the steps towards stabilization.

    (a) We warmly welcome the proposal to create a new IMF Systemic Transformation Facility which could help countries in transition and provide Russia with up to $3 billion in financial support made available in two tranches.

    We urge that the first tranche be disbursed when Russia makes a political commitment to adopt an appropriate adjustment policy, as indicated by a policy statement.

    The second tranche should be disbursed when there has been satisfactory policy implementation with a focus on monetary policy measures to contain inflation, paving the way for a stand-by arrangement.

    (b) The IMF and Russia are strongly encouraged to develop a stand-by arrangement of up to $4.1 billion in more intensive support for economic stabilization, on the basis of a comprehensive macroeconomic stabilization program, as soon as possible and in any event before October 1, 1993.

    (c) We reaffirm our commitment to make available the currency stabilization fund of $6 billion to boost confidence in the rouble market, once macroeconomic conditions have stabilized.

    2. Support by the World Bank For Structural Reforms

    (a) Structural reform measures are essential for building a market economy and can most effectively be implemented in the context of macroeconomic stabilization.

    (b) The World Bank as a provider of long term support is well positioned to take the lead in supporting Russian structural and sectoral reform.

    (c) We urge the Russian authorities to improve their cooperation with the World Bank and to accelerate their efforts to utilize existing support by drawing down funds under last year's import rehabilitation loan, and to conclude the negotiation of the $500 million oil sector loan, which carries an additional $500 million co-financing, as rapidly as possible.

    (d) We back the World Bank's effort to increase support for structural and sectoral reforms in parallel with the IMF's new Systemic Transformation Facility, including a second critical imports loan. We welcome the World Bank's willingness to provide, for the coming 15 months, up to $4 billion in new commitments in the form of loans to support investment, the strengthening of institutions, and reform in several key sectors such as energy, agriculture and housing which will directly benefit the Russian people.

    3. Support Mainly Through the EBRD for Small and Medium Sized Enterprises

    (a) Small and medium sized enterprises are crucial for the development of a private sector in Russia. The EBRD should have a key role in this area.

    (b) We ask the EBRD to establish, in close cooperation with us, a $300 million fund financed half with its own funds to promote Russian small and medium sized enterprises. We invite other countries to contribute to this fund. We also request the EBRD to prepare the ground for creating a Russian Bank for small and medium sized enterprises.

    4. Support for Privatization Of Large Enterprises

    One of the crucial areas of structural adjustment in Russia is the restructuring and the privatization of large scale enterprises. We agree to set up a working group to explore how best to assist this process including possibly by combining bilateral and International Financial Institutions resources, with a view to reporting at the Tokyo Summit.

    5. Debt Rescheduling

    We welcome the agreement between 19 creditor countries and Russia on the rescheduling of the debts of the former Soviet Union, concluded at Paris on April 2, 1993, which represents a support of over $15 billion and which puts a heavy burden on creditor countries' budgets. The relief will substantially ease balance of payments constraints in the present stage of the reform process and paves the way for maintaining creditworthiness and for new capital inflows.

    6. Export Credit Agency Activities and Cooperation

    (a) The activities of the ECAs represent a major source of financing in our support for Russia.

    (b) It is important to ensure that their ECA financing supports Russia's structural reforms especially industrial restructuring in such key areas as energy.

    (c) To this end, it is highly desirable that there be opportunity for cooperation between the World Bank and the ECAs.

    (d) We are confident that the ECAs can provide export credits and guarantees for viable projects in an amount in the range of $10 billion.

    7. Expansion of Trade

    Improvement of access for Russian products to international markets strongly reinforces Russian structural reform. We intend to take measures to further open our markets. We will work with the Russian authorities for Russia's full integration into the international trading system through membership in the GATT.

    Existing trade regulations in the area of advanced technologies (including COCOM-related regulations) should be gradually liberalized, provided that Russia establishes effective export controls.

    8. Energy Sector

    We urge the rapid creation, in Russia, of an environment which encourages private investment and trade in the energy sector. In step with this, we intend to encourage relevant companies in our countries to expand their investment in Russia's energy sector. We emphasize the importance of an early conclusion of the Energy Charter Treaty.

    9. Nuclear Safety

    (a) Recent incidents highlight the urgency of achieving improved safety of nuclear power plants in Russia. This requires in the first place resolute action from Russia itself. We are committed to cooperate through the full and timely implementation of the multilateral program of action agreed at the Munich Summit. Concrete projects for safety improvements need to be undertaken without delay.

    We will work through the improved G-24 coordination mechanism to achieve early and significant safety gains. We also emphasize the importance of fully utilizing the Nuclear Safety Account managed by the EBRD in pursuing this aim. We call upon the international community to contribute to the Account. We emphasize the importance of close coordination between the EBRD and the G-24 in the operations of the Nuclear Safety Account. We will examine appropriate measure with our Russian colleagues on the basis of the World Bank and IEA studies and will carry forward the process initiated at Munich at the forthcoming Summit in Tokyo.

    (b) Ocean dumping of radioactive waste is a matter of great concern. We agree that this should be studied further.

    10. Dismantling Nuclear Weapons

    The importance of assistance to dismantling of nuclear weapons and the disposition and control of fissile materials derived from them is recognized as an issue relating to the security of the whole world. National cooperation with Russia in this area constitutes a part of multilateral efforts. Some G-7 countries are already working with Russia. We agree to consider how this work could be furthered and how other countries could be involved in these efforts.

    11. Science and Technology

    (a) With respect to the International Science and Technology Center, whose establishing agreement was signed last November, we stress the importance of necessary procedures to be taken in Russia to enable the International Science and Technology Center to commence its activities at the earliest possible date.

    (b) We see possibilities to proceed with new forms of cooperation in science and technology, including programs in the field of outer space.

    12. Food and Medical Assistance

    We are now providing food and medical assistance and remain ready, as in the past, to consider additional support in case of emergency.

    13. Technical Assistance

    We stand ready to assist Russia in attracting a broad flow of know-how and experiences to benefit concrete projects and individual enterprises in the regions and localities. Teams of experienced advisors should engage in long-term cooperation on the spot and more Russians should come to our countries for training. The Russian Government should strengthen its ability to direct technical assistance to where it is needed. We urge the World Bank to activate without delay and make full use of the Consultative Group process agreed at the Munich Summit in order to achieve a more effective coordination.

    14. Bilateral Cooperation

    We welcome the recent decisions of G-7 countries to increase their bilateral support. Our bilateral efforts are an integral part of our common strategy to assist Russian reforms. We stand ready to continue our bilateral efforts, which are closely linked with and complement the above outlined actions program.

    15. Support Implementation

    Recognizing that the greater efforts to improve the effectiveness of our support are needed, we will work urgently to ensure such support is implemented as efficiently as possible. To that end we will seek, in close consultation with the Russian authorities and relevant international organisations, to establish arrangements to facilitate the use of technical cooperation with the Russian authorities in removing bottlenecks so as to improve the efficient implementation of support.

    Source: US Department of State Dispatch Supplement, May 1993, Vol. 4, No. 2.


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