OPIC Still Closed for Ukraine

U.S.-Ukraine Business Council

OPIC STILL CLOSED FOR UKRAINE: ISSUE NEEDS TO BE RESOLVED

NOW SO SETTLEMENT CAN BE ANNOUNCED DURING U.S. VICE

PRESIDENT BIDEN’S HISTORIC TRIP TO UKRAINE WEEK OF JULY 20

Ukraine has been losing jobs, income, taxes and investment for 10 years.

U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thursday, July 9, 2009

WASHINGTON, D.C. – The government of Ukraine needs to resolve the issue of the U.S. Government’s Overseas Private Investment Corporation (OPIC) being closed for Ukraine in the next tendays so this important achievement can be announced during U.S. Vice President Joe Biden’s historic trip to Ukraine during the week of July 20th.

Both countries, now more than ever, with the world financial crisis hitting Ukraine very hard, need to stand together in Kyiv during the week of July 20th and announce: “OPIC IS NOW OPEN FOR BUSINESS IN UKRAINE.”

The government of Ukraine made real progress in April, 2009 on resolving the long-standing claim (which has been going on for ten years) of the U.S. Government’s Overseas Private Investment Corporation (OPIC).  But the final resolution documents needed to settle the OPIC claim has not yet been completed by the government of Ukraine so OPIC is still closed for business in Ukraine.

The time for Ukraine to completely resolve the issue is now, during the next 12 days.  An historic opportunity now stands before Ukraine.  USUBC urges the present Ukraine government to deliver on a commitment they made some time ago to get OPIC open for business in Ukraine.

This major problem continues to cause Ukraine to lose thousands of much needed jobs, tens of millions in income and taxes, during these most difficult economic times.  Hundreds of millions in potential U.S. investments are being held up because OPIC is still closed for Ukraine.

VPM HRYHORIY NEMYRIA

Dr. Hryhoriy Nemyria, Vice-Prime Minister of Ukraine for European and International Integration, has been leading the efforts by the Ukraine government to finally resolve the OPIC issue. “The over 100 members of the U.S.-Ukraine Business Council (USUBC) are most appreciative of VPM Nemyhria’s strong support and ongoing work to resolve the OPIC claim,” said Morgan Williams, USUBC president.

VPM Hryhoriy Nemyria has been working closely with PM Yulia Tymoshenko, U.S. Ambassador William Taylor (before his tour of duty as Ambassador was completed in late May) and with William Klein, Deputy Counselor for Economics at the U.S. Embassy (whose tour of duty at the U.S. Embassy in Kyiv is over today).

U.S. Ambassador William Taylor and Deputy Counselor for Economics, William Klein, had several key meetings with PM Yulia Tymoshenko and VPM Hryhoriy Nemyria in April and May about the OPIC issue. These meetings produced very positive results and the OPIC issue was moved forward. VPM Nemyria also met personally with USUBC president Williams and William Klein in Kyiv on April 13th about the OPIC matter.

The U.S-Ukraine Business Council (USUBC) had a working luncheon meeting with VPM Hryhoriy Nemyria in Washington on April 24th, 2009.  The VPM reported to members of USUBC about a resolution passed by the Cabinet of Ministers on Wednesday, April 15, 2009, that would move the OPIC issue closer to resolution.  Nemyria said that a private business entity in Ukraine was appointed on Friday, April 17thto implement the Cabinet of Ministers resolution.

CABINET OF MINISTERS RESOLUTION OF APRIL 15

VPM Hryhoriy Nemyria personally led the effort which resulted in aresolution by Ukraine’s Cabinet of Ministers dated Wednesday, April 15, 2009.  The Defense Ministry and the Economy Ministry were instructed to appoint an institution to provide for the implementation of a memorandum of mutual understanding laying the grounds for the return of Overseas Private Investment Corporation (OPIC) to Ukraine. The memorandum was signed by the governments of Ukraine and the United States on November 10, 2008. (See news articles number two, three, five, six and seven shown below.)

It has now been almostthree months since the Cabinet of Ministers passed the April 15 resolution. Recent reports from Kyiv indicate the private business entity in Ukraine appointed by the government on April 17 still needs some furtherauthorization documents from Ukraine’s Ministry of Defense before it can continue the work to complete the agreements with OPIC so OPIC can finally be open for business in Ukraine.

COMPLETE THE NEEDED WORK NOW

“USUBC, once again, strongly urges the government of Ukraine to complete the final authorization documents before Vice President Joe Biden arrives inUkraine, so the OPIC issue can finally be resolved and OPIC can be open for business in Ukraine,” according to Morgan Williams, Director, Government Affairs, Washington Office, SigmaBleyzer, who serves as USUBC president.

“USUBC ispleased to know that VPM Hryhoriy Nemyria is still very supportive of resolving the OPIC issue and is working to get the various ministries within the government to complete the needed documents before Vice President of the United States, Joe Biden, arrives in Kyiv.”

One of the top issues for the U.S.-Ukraine Business Council (USUBC) for the past several years has been that all the outstanding economic and business development programs of the U.S. government’s Overseas Private  Investment Corporation (OPIC) have been closed for Ukraine (http://www.opic.gov).

The claim came as the result of OPIC paying a political risk insurance claim to a U.S. business that invested in Ukraine in the early 1990’s.

Such settlements of claims between government are rather normal in the international community of nations when government backed political risk insurance programs pay out claims. Governments usually settled such claims rather quickly, but this has not happened in the case of Ukraine.

An article about this important outstanding issue, written by Jim Davis in Kyiv (see article four below) appeared in the Business Ukraine magazine in Kyiv on February 11, 2008.  Such an article, for the most part, could have been written most anytime during the past few years.

NOVEMBER 2008 MEMORANDUM OF UNDERSTANDING

The U.S. government and the government of Ukraine signed a Memorandum of Understanding about this issue in Kyiv on November 10, 2008 (see news releases number five and six below from the Embassy of the U.S. in Kyiv and from the Ministry of Economy of Ukraine).

The Memorandum of Understanding (MOU) was a step forward but it just laid a foundation for a future agreement that would actually lay out the details of exactly how, when and for how much the outstanding OPIC claim would be resolved between the two governments.  The steps specified in the memorandum have never been fulfilled though progress was made in April of 2009.

As the news release from the Ministry of Economy of Ukraine said, “The signing of the MOU between the two governments is considered to be the first step in establishing practical mechanisms of dispute settlement with the Overseas Private Investment Corporation.” (Item number seven below shows a copy of the draft of the MOU).

Many observers thought the MOU signed in November between the two governments actually resolved the issue and that OPIC was then going to open for business in Ukraine early in 2009.  Unfortunately this was not the case.  There have been several reports at various business meetings since November of 2008 that OPIC is actually open for business in Ukraine. Again this is not the case.

WIN-WIN FOR UKRAINE AND FOR U.S.

Settleing the OPIC program is a win-win for Ukraine and the U.S. USUBC urges both governments to keep working together to move this issue to final completion now.

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SEVEN SUPPORTING ARTICLES BELOW ——

1.  OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC)

Independent U.S. Government Agency Helps US Businesses Invest in Emerging Markets

By Gerald Stoltz, Esq., Partner, Thompson Coburn LLP, Wash, D.C. July 2009

WASHINGTON, D.C. – In the second part of our series, we discuss the Overseas Private Investment Corporation (“OPIC”), an independent U.S. Government agency established in 1971.

OPIC mobilizes and facilitates the participation of U.S. private capital and skills in the economic and social development of less developed countries, and countries transitioning from nonmarket to market economies. OPIC helps U.S. businesses invest in these emerging markets by providing financing, investment funds and political risk insurance, thereby assisting the private sector in managing risks associated with foreign direct investment.

When assessing a proposed financing, OPIC generally takes into consideration a project’s contribution to the host country’s development, the project’s financial requirements, and the extent to which the financial risks and benefits are shared among investors and lenders.
I. Financing Products: OPIC provides medium and long-term funding through direct loans and loan guarantees to eligible investment projects involving significant equity or management participation by U.S. businesses. For businesses with annual revenues less than $250 million, medium-term funding is generally available through direct loans from OPIC. For businesses with annual revenues of more than $250 million, medium- and long-term funding is available through direct loans from OPIC as well as loan guarantees from OPIC to qualified lenders.

Such long-term funding supports projects requiring large amounts of capital in such diverse areas as telecommunications, power, water, housing, airports, hotels, high-tech, financial services and mining. OPIC accommodates a variety of loan structures, including project finance loans, corporate finance loans, housing and mortgage financing, franchise loans, and commercial bank on-lending arrangements.
Borrower Qualification: In order to qualify for OPIC financing, a project must (i) be commercially and financially sound; (ii) be within the demonstrated competence of the proposed management, which must have a proven record of success in the same or a closely related business, as well as a significant continuing financial risk in the enterprise; (iii) have investors who are willing to establish sound debt-to-equity relationships that will not jeopardize the success of the project through excessive leverage (the normal debt-to-equity ratio is in the range of 60/40); and (iv) at least 25 percent of the project must be owned by U.S. companies.

Exceptions to ownership requirements may be made where U.S. brand name franchisers, operators or contractors are significantly involved in the project on a long-term basis.
Government-owned Borrowers: OPIC generally provides financing to the private sector; however, financing may be offered to an entity in which government owns a majority of the voting shares, if it is contractually agreed that management will remain in private hands and there is a strong showing of direct U.S. involvement in other respects.
Loan Amounts and Rates: OPIC provides financing at fixed and, in certain instances, at floating rates with commercially-feasible collateral arrangements. Loans offered may be as small as $100,000 and as large as the project may require. In the past, OPIC has guaranteed up to $350 million for a project, although the standard cap for OPIC financing is $250 million.

Interest rates for direct loans are generally based on OPIC’s underlying cost of capital (U.S. Treasury securities of comparable maturity) plus a premium of between two and six percent, based on OPIC’s assessment of the specific risks associated with the project. OPIC guaranteed loans typically bear interest at the rate of U.S. Treasury securities of comparable maturity plus an “agency” spread.
Term: The loan terms typically provide for a final maturity of three to 15 years, including suitable disbursement periods during which only interest is payable.
Repayment: The repayment schedules of direct or guaranteed loans take into consideration the purpose of the loan and the projected level of cash flows to be generated in the transaction. The cash flows must be sufficient to meet interest and principal payments, and also provide for an adequate return to equity investors.
Fees and Costs: OPIC’s lending practices are consistent with those of commercial lenders. As such, OPIC charges retainer fees (typically covering the cost of reviewing and processing the loan application, as well as the related due diligence), facility fees (one time fee generally ranging from one to two percent), commitment fees (approximately 0.5 percent of the undisbursed principal), maintenance fees and cancellation fees. Reimbursement is generally required for related out-of-pocket expenses, including fees for outside counsel and the services of experts or consultants.

In the case of guaranteed loans, OPIC also charges a loan guarantee fee of two to six percent, depending on OPIC’s assessment of the commercial and political risks involved.
Lender Qualification: A lender may be a recipient of an OPIC guarantee if it is a legal entity created under the laws of the U.S., the District of Columbia, or any state or territory that is more than 50 percent beneficially owned by U.S. citizens. Foreign corporations that are more than 95 percent U.S. owned are also eligible.
Collateral: OPIC generally participates on a senior lender basis, pari passu with the holders of other senior debt, sharing first lien status on fixed assets and any other appropriate collateral. OPIC does not normally require a host government guarantee, although a sovereign guarantee may be considered on a case-by-case basis.
II. Investment Funds: OPIC also provides support for the creation of privately-owned and managed investment funds (“Investment Funds”) that assist emerging market economies in obtaining long-term growth capital, accessing management skills and securing financial expertise. The Investment Funds are typically organized and structured like other private equity investment vehicles.
OPIC provides guarantees of long-term debt (typically with a 10- to 12-year maturity) to these Investment Funds. The debt is generally structured such that most of the interest expense is capitalized until the fund liquidates its investments, with the tenor often parallel to the fund’s life and repayment occurring in the later stages of a fund’s life.
Eligible investors generally include: U.S. citizens; U.S. corporations, partnerships and other organizations that are more than 50 percent beneficially owned by U.S. citizens; and foreign entities wholly owned by U.S. citizens. Investment Fund managers or general partners must be eligible investors. A significant percentage of the limited partner capital of the Investment Fund (typically an amount equal to at least 25 percent of the OPIC financing) must be provided by eligible investors.
OPIC-supported Investment Funds cover a variety of markets, including sub-Saharan Africa, Russia, Central and Eastern Europe, Latin America, the Middle East and Asia. Sector-specific Investment Funds are used worldwide and include investments in environmentally-friendly companies, water-related enterprises, maritime projects and independent power projects.
III. Political Risk Insurance: OPIC also offers political risk insurance to U.S. investors, contractors, exporters and financial institutions involved in international transactions. OPIC insurance generally covers currency inconvertibility, expropriation and political violence, and is available for investments in new ventures, expansions of existing enterprises, privatizations and acquisitions with positive developmental benefits.
OPIC typically insures up to 90 percent of eligible investments. However, loans and capital leases from financial institutions to unrelated third parties may be insured for 100 percent of principal and interest. OPIC also offers co-insurance and re-insurance with private market carriers, in order to increase capacity for large projects.
OPIC’s “Quick Cover” program provides expedited coverage for projects that are worth less than $50 million in eligible countries. Certain projects in the financial services, wireless telecommunications services, electricity distribution and hotel sectors, as well as bid bonds, may receive political risk insurance coverage within two weeks of receipt by OPIC of a completed qualifying application.
OPIC insurance rates are generally based on the risk profile of the project and are fixed for the life of the contract. Premiums are usually paid annually and in advance.
OPIC insurance is available to citizens of the United States; corporations, partnerships or other associations created under the laws of the United States, its states or territories that are beneficially owned by U.S. citizens; foreign corporations at least 95 percent owned by investors eligible under the foregoing criteria; and other foreign entities that are 100 percent U.S. owned.
For more information, please contact: Gerald Stoltz, Esq., Partner, Washington, D.C. Office, Thompson Coburn LLP, 202-585-6919. gstoltz@thompsoncoburn.com.
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2. GOVERNMENT INSTRUCTS DEFENSE, ECONOMY MINISTRIES
TO SETTLE SITUATION WITH OPIC ACTIVITIES IN UKRAINE

Interfax Ukraine, Kyiv, Ukraine, Thursday, April 23, 2009

KYIV – Ukraine’s government has instructed the Defense Ministry and the Economy Ministry to settle the situation with the U.S. Overseas Private Investment Corporation’s activities in Ukraine.

According to the resolution by the Cabinet of Ministers dated April 15, the Defense Ministry and the Economy Ministry should appoint an institution to provide for the implementation of a memorandum of mutual understanding laying the grounds for the return of Overseas Private Investment Corporation (OPIC) to Ukraine. The memorandum was signed by the governments of Ukraine and the United States on November 10, 2008.

As reported, OPIC suspended its activity in Ukraine in September 1998 in connection with the payment of insurance coverage to Alliant Techsystems (the United States).

As the issue has remained unsettled for over 10 years, the governments of Ukraine and the United States have decided to accompany the settlement of the dispute between the two economic entities – OPIC and CJSC Alliant Kyiv.

The Government of Ukraine and the Government of the United States signed a memorandum of understanding in November 2008 enabling OPIC to resume activity in the country, with a stipulation that the parties help settle an insurance claim on an OPIC-supported project in Ukraine.
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3.  UKRAINE: CABINET ORDERS DEFENCE MINISTRY AND ECONOMY

MINISTRY TO ENSURE FULFILLMENT OF OPIC AGREEMENTS WITH USA

Ukrainian News-on-line, Ukrainian News Agency, Kyiv, Ukraine, April 23, 2009
KYIV – The Cabinet of Ministers ordered the Defence Ministry and the Economy Ministry to ensure fulfillment of agreements with the United States of America to settle problems with the Overseas Private Investment Corporation (OPIC), reads the Cabinet directive No. 425 issued on April 15.
In particular, the government instructed the Defence Ministry jointly with the Economy Ministry to determine a company which will ensure the fulfillment of the memorandum of understanding signed by the Ukrainian and US government on November 10, 2008.
The Defence Ministry was also instructed to submit proposals to the Cabinet, in case of necessity, on making amendments to the legislation for the fulfillment of the memorandum provision.
As Ukrainian News earlier reported, Economics Minister Bohdan Danylyshyn and United States Ambassador to Ukraine William Taylor on November 10, 2008 signed a memorandum of understanding between Ukraine and the United States, which lays the foundation for re-start of OPIC’s operations in Ukraine.
Taylor forecast that investments totaling USD 500 million will flow into Ukraine during the period of 2009-2010 following the resumption of the OPIC operations in Ukraine.
In 2007, the Overseas Private Investment Corporation offered that the Ukrainian government pays USD 34 million as reimbursement for losses of Alliant Techsystems which with Alliant Kyiv serving as intermediary was engaged in recycling of Ukrainian ammunition from 1993 to 1999 when it left the Ukrainian market following business disagreements with the Ukrainian side.
The money invested by Alliant Techsystems into the project had an insurance cover from OPIC.  OPIC has for a long time requested the Ukrainian government to compensate for these losses.
OPIC is an independent agency of the federal government of the United States that provides commercial services, including insurance of American companies operating abroad against political and economic risks.

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4. UKRAINE’S OUTSTANDING OPIC DEBT: A BARRIER TO FOREIGN INVESTMENT

U.S. Overseas Private Investment Corporation (OPIC)

By Jim Davis, Business Ukraine magazine, Kyiv, Ukraine, Monday, February 11, 2008

Amid all the fanfare that has accompanied the signing of a protocol which will bring Ukraine WTO membership, it is worth noting that a disagreement over a relatively small amount of money has made it impossible for Ukraine to enjoy the benefits of an obscure but extremely important agency of the United States government, the Overseas Private Investment Corporation (OPIC).

Estimates made by well-informed persons involved in the process relating to OPIC would suggest that had the problem could have been resolved when it
first arose in 1999, Ukraine could have gained an absolute minimum of an additional USD 5 – 10 billion in foreign direct investment – and probably a lot more than that.

The issue could have been solved years ago, but it was as is so often the case it is a problem for which no one had primary responsibility on the Ukrainian side.

All those, i.e. the various ministers, who had parts of the responsibility within their jurisdictions failed to understand the overall importance of the issue and therefore guarded their own turf rather than that of the state as a whole.

The end result has been to deny the Ukrainian economy one of the tools that could have been attracting investment into the country ever since, with a potential opportunity cost running into the billions of dollars.
A SIMPLE PROBLEM MADE COMPLEX
The matter involves the non-payment of a state debt incurred by the Ministry of Defence about ten years ago at a time when the needs of various ministries were seriously under-funded and ministers were prone to making deals first and worrying about payment later.

The debt in question was covered by OPIC political risk insurance. OPIC paid the claim to the insured U.S. supplier and looked to Ukraine to ultimately
make good on the original agreement, as was called for in the Ukraine-OPIC agreement.

The amount of the claim, approximately USD 17 million, is quite small when viewed in the light of the overall budget of Ukraine. For the uninitiated, USD 17 million might appear to be a sum that could be dealt with in a simple meeting among ministers of any government.

However, there is no single ministry nor any single minister who has ever been tasked with dealing with the problem in a priority manner, so time and time again the issue has been discussed at seemingly high-level meetings between U.S. ambassadors and embassy staff on one side and various ministers and prime ministers on the other.

The matter is further complicated by the nature of Ukraine’s budget process. No government has wanted to debate the debt in parliament so it has never
been made a part of any annual state budget.

With no line item listing of the debt, some other mechanism would need to be found in order to keep a payment from being illegal under the existing
legislation of the state budget act. So far, no creative payment mechanism has been found that would meet the needs of both sides of the disagreement.

The most recent top-level discussions came during a visit to the United States by then-Prime Minister Viktor Yanukovych in late 2006. At the time Yanukovych promised U.S. officials during discussions that the matter would have his personal attention and would be settled in a very short time. However, the Yanukovych government neither paid the amount owed nor requested or agreed to negotiations to adjust the amount owed.
ABOUT OPIC
OPIC is an independent U.S. government agency whose mission is to mobilise and facilitate the participation of U. S. private capital and skills in the
economic and social development of less developed countries and areas, and countries in transition from non-market to market economies.

OPIC assists U.S. companies by providing financing (from large structured finance to small business loans), political risk insurance, and investment funds. OPIC complements the private sector in managing risks associated with foreign direct investment and supports U.S. foreign policy.

Since its establishment in 1971, OPIC programmes have grown and expanded to encompass the support of development in over 150 countries. In 2007, OPIC assisted 70 projects in 38 countries and regions involving a wide range of industries. Of all the projects underway around the world in 2006, 87% or 61 projects involved U.S. small businesses in 35 U.S. states.

Many OPIC projects involve U.S. procurements, but it is also small and medium-sized enterprise (SME) projects in recipient cooperating countries that receive the greatest benefits. For example, in Kazakhstan, OPIC provided debt financing for a USD 1.89 million investment in the Asian Credit Fund (ACF), a non-banking microfinance institution established by
the Mercy Corps.

In Azerbaijan, OPIC provided financing to SOAKredit LLC (SOA), an independent limited liability non-credit organisation. SOA’s purpose is to implement an innovative finance programme primarily designed to stimulate local business growth and facilitate Azerbaijan’s transition from a demand to a market economy.

In Russia, OPIC is providing financing to ZAO Europlan (Europlan), the leading leaser of equipment and vehicles to SMEs throughout the Russian Federation, to support a planned USD 450 million expansion.

CREATING CONFIDENCE, OFFERING SECURITY
Nadir Shaikh, Chairman of the Board of Citibank Ukraine, explained that SME firms and medium-sized projects are the ones that would benefit most if
Ukraine settles its dispute with OPIC.

Shaikh has been one of the persons most active in promoting a settlement with OPIC and as recently as two weeks ago participated in a meeting with
senior government officials where this matter was discussed.

“We know from experience that the largest foreign firms come here fully prepared to finance their own way into the Ukrainian market. Their investments are based on advice from the most sophisticated sources in their own companies or from professional advisors such as investment banks. It is the smaller foreign investors who need the type of help and risk coverage that OPIC is able to give.

“Making OPIC political risk insurance available would, for example, would give many smaller foreign investors the kind of backing that would first help convince their own boards of the viability of investments in Ukraine, and would also assist them in finding financing for projects here or in their home country.

“In addition, it would help Ukrainian companies to get access to financing that could be provided by such banks as Citibank, based on OPIC risk coverage programmes. Settling the current dispute requires a firm decision and political will on the part of government to find a financing mechanism to pay the current claim. I am optimistic that the efforts of the current government are more likely to find a solution to this problem,” Shaikh concluded.
A RELATIVELY TRIFLING DEBT
One of the most interesting elements in the OPIC-Ukraine issue is the flexibility exhibited by OPIC in attempting to settle the claim. On several occasions various Ukrainian governments have been told that while USD 17 million is the amount actually owed, OPIC is willing to engage in negotiations that could lead to a solution that would mean a substantially reduced settlement.

Even with the clearest signals possible from OPIC, no Ukrainian government over the last ten years has been willing or able to find the will to effect a settlement.

The issue has not been filed away in a long forgotten filing cabinet, either. Morgan Williams, president of the U.S.-Ukraine Business Council (USUBC) said that the OPIC issue has been a matter of discussion between the two governments in every meeting that he has attended in Washington or Kyiv in recent years.

“On January 31, while addressing a meeting of the USUBC that included representatives of the American Chamber of Commerce and U.S. embassy officials, Vice-Prime Minister Nemyrya made a point of telling the audience that he was fully aware of the problem and that he expects a solution to be found soon. We sincerely hope that is correct.

“OPIC programmes are being used all over the world to spur development and USUBC thinks that the inability of Ukraine to solve its OPIC problem has
cost the country at least one billion and perhaps several billions of dollars in lost investment opportunities. In effect, a failure to solve the OPIC issue has a negative effect on Ukraine’s ability to create jobs and wealth for all of Ukraine’s citizens.

“For example, in the autumn of 2005 OPIC conceived and was ready to implement a USD 100 million private equity fund programme for Ukraine. I have been told on the back channel by top U.S. government officials in Washington that the total value of OPIC programmes that could be implemented here within a relatively short time might have a total value of as much as USD 500 million.”

“However, it is the government of Ukraine that must turn the key to open what is literally a treasure trove of new investment and risk guarantee opportunities. I hope it will make the effort necessary to find the solution needed,” Williams concluded.

LINK: http://www.businessukraine.com.ua/ukraine-s-outstanding-opic-debt

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5. UKRAINE AND U.S. GOVERNMENT SIGN MEMORANDUM OF UNDERSTANDING

FOR RETURN OF U.S. OVERSEAS PRIVATE INVESTMENT CORPORATION TO UKRAINE

Public Affairs Section, United States Embassy Kyiv, November 12, 2008

KYIV, Ukraine – The U.S. Government and the Government of Ukraine signed a Memorandum of Understanding (MOU) on November 10, 2008.  The signing of this MOU lays the foundation for the return of the U.S. Overseas Private Investment Corporation (OPIC) to Ukraine.  William Taylor, U.S. Ambassador to Ukraine and Ukraine’s Minister of Economy Bohdan Danylyshyn acted as the signing parties of this agreement.
Ambassador Taylor believes the signing of the MOU is an important step toward securing OPIC’s return to Ukraine and an important sign of the faith the United States has in Ukraine and the Ukrainian economy.  Once the steps specified in the memorandum are fulfilled, over $500 million of new investments that will be made in Ukraine in the next 12-18 months with OPIC’s help, he says.
Ambassador Taylor underscores that OPIC’s return, like the IMF support package and  other positive economic news such as the widely unheralded recent passage of a Joint Stock Company Law, is evidence Ukraine can take steps to improve the economic and investment climate if the leadership of the major political forces work together for the good of the country.
OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets; complements the private sector in managing risks associated with foreign direct investment; and supports U.S. foreign policy.  OPIC has been absent from Ukraine for several years over the failure to resolve an insurance claim dating from the 1990s.  This MOU paves the way for a resolution of that issue.
The American Chamber of Commerce (AmCham) in Ukraine and the U.S.-Ukraine Business Council (USUBC) welcomed the news.  AmCham President Jorge Zukoski said he is pleased that concrete steps are being undertaken to re-establish the operations of OPIC. Mr. Zukoski noted that the MOU signing sends a positive signal to the business community that Ukraine is open for business, and that it will assist in attracting additional strategic investment into the marketplace.
“One of the top priorities of the U.S.-Ukraine Business Council (USUBC) the past few years has been to support the return of OPIC’s outstanding business and economic development programs to Ukraine.” said Morgan Williams, SigmaBleyzer, who serves as President of USUBC.  “USUBC members certainly welcome the signing of the MOU and hope all issues will be resolved quickly so OPIC can once again support U.S. businesses doing business with Ukraine.

LINK: http://kyiv.usembassy.gov/infocentral_eng.html

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Public Affairs Section, United States Embassy Kyiv
4 Hlybochytska St., Kyiv  04050  Ukraine
(380 44) 490-4026, 490-4090; Fax (380 44) 490-4050
http://kyiv.usembassy.gov/; info@usembassy.kiev.ua

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6. U.S. GOVERNMENT & UKRAINE GOVERNMENT SIGN OPIC

MEMORANDUM OF UNDERSTANDING, THE FIRST STEP

Signing of the Memorandum of Understanding (MOU) between the Government of Ukraine and the

Government of the United States of America on Overseas Private Investment Corporation activities in Ukraine

Ministry of Economy of Ukraine, Kyiv, Ukraine, Monday, November 10, 2008

KYIV – A Memorandum of Understanding [MOU] between the Government of Ukraine and the Government of the United States of America, which makes an important foundation for Overseas Private Investment Corporation (OPIC) to resume its work in Ukraine, has been signed on November 10, 2008.
On behalf of the Government of Ukraine the Memorandum has been signed by Bohdan Danylyshyn, the Minister of Economy of Ukraine, and on behalf of U.S. Government the MOU has been signed by the Ambassador of the United States of America to Ukraine William Taylor.

CONSIDERED TO BE THE FIRST STEP
The signing of the MOU between the two governments is considered to be the first step in establishing practical mechanisms of dispute settlement with the Overseas Private Investment Corporation.
Ukraine has a very strong interest in the further attraction of private American investors that can insure their risks with OPIC, stated the Minister of Economy of Ukraine.
At the same time, Ambassador William Taylor underlined that sighing of the MOU is a very important step for the return of OPIC to Ukraine and an important sign that the United States of America believes in Ukraine and its economy.
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7. LATEST AVAILABLE DRAFT OF THE MOU ON NOV 10, 2008

May not be the final copy that was signed.

MEMORANDUM OF UNDERSTANDING
between the Government of Ukraine and the Government of the United States of America

The Government of Ukraine and the Government of the United States of America (hereinafter “the Parties”),

Confirming their intention to cooperate with the aim of developing relations between the two countries in the area of investment;

Desiring to ensure favorable conditions for investment including the principles of equality and mutual benefits and the provisions of the Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment, with Annex, and Related Exchange of Letters, signed at Washington March 4, 1994; and

With regard to the situation which has developed in connection with the investment of Alliant Techsystems Inc. to ensure operation of closed- end Joint Stock Company Alliant Kyiv;

Achieved the following understanding:

Section 1

The Parties welcome and admit the importance of the agreements that are envisioned to be concluded between the U.S. Overseas Private Investment Corporation (hereinafter: OPIC) and an economic entity (hereinafter– the Enterprise), selected by the Government of Ukraine with OPIC’s approval, as described in Section 2 of this Memorandum of Understanding, and, in accordance with their respective national laws, intend to facilitate the implementation of these agreements.

Section 2

The Parties take into account the agreements (hereinafter – Agreements) regarding resolution of the situation involving the investments of Alliant Techsystems Inc. into Alliant Kyiv.  These Agreements envisage that:

(i) OPIC would transfer to the Enterprise the rights assigned by Alliant Techsystems Inc. to OPIC in connection with the payment made by the latter (hereinafter – the Rights).  The transfer of rights would be made in accordance with the legislation of Ukraine.

(ii) The Enterprise, in its turn, would transfer money in favor of OPIC in the amounts and during the time period specified by the Agreements.

The Parties support OPIC’s willingness to consider the full and proper performance by the Enterprise of the payment and due implementation of other obligations under the provisions of the Agreements, as mentioned in the paragraphs  (i) and (ii) of this Section as final resolution of the situation that emerged in connection with the investments of Alliant Techsystems Inc. in Alliant Kyiv.

Section 3

The U.S. Government confirms that OPIC will resume support of investment projects implemented in Ukraine by U.S. private investors, upon satisfaction of the conditions outlined in the Agreements for the resumption of such support.

Section 4

The Parties acknowledge that the provisions of this Memorandum of Understanding do not constitute and should not be considered as constituting any admission on behalf of the Ukrainian Side of any commitment, debt, complaint or other claim of any company, including those involved in the resolution of the situation with regard to the investments of the Alliant Techsystems Inc.

Section 5

Each Side will endeavor to resolve any differences regarding the interpretation and/or  application of provisions of this Memorandum of Understanding by holding consultations between the Parties.
Section 6

The Memorandum of Understanding enters into force upon signature by authorized representatives of the Parties.

Modifications and additions that are integral part of this Memorandum of Understanding can be incorporated into it upon mutual written consent of the Parties.

Signed in duplicate at Kyiv on November 10, 2008, in the Ukrainian and English languages.  Both copies have equal value.

For the Government of Ukraine:                                               For the Government of the United States of America:

Minister of Economy of Ukraine                                              U.S. Ambassador to Ukraine

==============================================

LINKS: http://www.mfa.gov.ua/usa/en

http://www.me.gov.ua/control/uk/publish/article?art_id=123973&cat_id=38461

http://www.kmu.gov.ua/control/uk/publish/article;jsessionid=21D3C39E347A8232481A93390763D1B6?art_id=169899787&cat_id=35884

==============================================

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