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. Last Updated: 07/27/2016

Lending Program to Speed Up

The World Bank and the Russian government have agreed on an accelerated lending program that could see as much as $4 billion in World Bank money pumped into the country over the next 13 months.

Meanwhile, the International Finance Corporation, an arm of the World Bank that lends only to private enterprises, has approved two loans to Russia worth $71. 5 million.

They represent the first two project-financing loans in Russia to date by the IFC, which is the world's largest lender to the private sector.

Artes Stoutjesdik, the director of the World Bank's Moscow office, said Friday that the Russian government had issued a decree last week giving formal backing to a $4 billion loan program worked out with the World Bank.

Stoutjesdijk said the program represented a doubling of what the World Bank planned loan to Russia this year.

"At the latest G-7 meeting in Tokyo there was a general agreement that everyone should try and accelerate their financial assistance to Russia", he said. "We brought several projects forward".

The program includes separate loans for the Russian oil industry, home building, imports, agriculture and privatization.

Stoutjesdijk cautioned that each of the loans would need separate approval by the World Bank board and some would require the Russian government to meet tough lending conditions. In addition, each would require the approval of parliament, which has been difficult to obtain in the past.

"Until that has happened, there are obstacles", he said.

Stoutjesdijk said the first to be approved would likely be a $600 million loan to pay for critical imports, which could be submitted to the World Bank board by September.

The next priorities would be assistance for the oil and gas industries, worth about $900 million, and a $250 million project to bring several Russian financial institutions up to world standards and to improve the Central Bank's payment system.

The package also includes $500 million for the $4 billion privatization fund. This loan was proposed by the United States but the exact amount is likely to be cut in half because of resistance from other G-7 nations.

U. S. Treasury Secretary Lloyd Bentsen said Thursday that he thought the G-7 would agree to $2 billion for this fund at next week's G-7 summit in Tokyo. About $1 billion would come from the World Bank and the European Bank for Reconstruction and Development and the remainder would come from G-7 countries. The IFC, meanwhile, has agreed to fund two loans worth $71. 5 million for Russian projects. Russia joined the organization in April when it made a $35. 6 million payment, making it eligible for loans.

The first IFC loan, worth $60 million, will go to Polar Lights Co. , a joint venture with U. S. -based Conoco Inc. and Arkhangelskgeologia, a Russian exploration enterprise.

The venture plans to export up to 82 million barrels of crude oil annually to Europe from the Ardalin oil field in northern Russia.

The project has already received a $90 million loan commitment from the EBRD and another $50 million loan from the U. S. Overseas Private Investment Corp.

The IFC board has approved a second loan, worth $10 million to the Vasyugan Service Joint Enterprise, to help increase output at existing oil and gas wells in the Tomsk region of western Siberia. The entire cost of the project - a venture between Canadian Fracmaster and two Russian entities, Tomskneft Production Association and the Vasyugan Production Division - is put at $37 million.

Roger Gale, director of the IFC in Moscow, said he expected the loans to begin being disbursed soon: As the IFC lends only to the private sector and does need to extract guarantees from the government, the loan signatures should be obtained more quickly.

Gale said a third loan to a private Russian bank had been approved by the IFC board in Washington. The loan, worth between $10 and $15 million, would be given to the bank to disburse to small- and medium-sized Russian companies.