B3-0540, 0551, 0554, 0565, 0605 and 0606/93

Resolution on the situation in the republics of the former Soviet Union

The European Parliament,

I.CONCERNING THE SITUATION IN RUSSIA

A.having regard to the results of the referendum of 25 April 1993 in Russia,

B.having regard to the decision by the Council to give the Commission a broader mandate to negotiate a partnership and cooperation agreement with the Russian Federation,

C.concerned at the growing crisis in particular in Russia, where the vast majority of the people will find the reforms acceptable only when they experience improvements in their standard of living and real participation in the democratic process,

D.convinced that the effective support should be given to Russia and the States of the former Soviet Union by the Community and other members of the G7 to help integration of these States into the world economic system,

1.Is of the opinion that elections for Parliament and President constitute an important step in the process of political reform on the basis of pluralism; they will moreover lead to a clear definition of and separation between legislative, judicial and executive powers;

2.Notes that a relapse into previous nationalist or even chauvinistic attitudes will place a considerable strain on democracy in Russia, both internally and externally, and will make it much more difficult to activate international support for that country;

3.Stresses the need for the West to make its economic aid effective rather than to repeat promises already made on paper and therefore supports the Council decision for a broader mandate to the Commission to negotiate a partnership and cooperation agreement with Russia;

4.Strongly emphasizes that such an agreement should contribute to further democratization and economic reform in the States of the former Soviet Union;

5.Believes that an effective and important form of economic assistance would be wider access to exports from the former Soviet Union to Western markets;

II.CONCERNING THE CONFLICT BETWEEN ARMENIA AND AZERBAIJAN

A.appalled by the suffering caused by the spreading conflict between Armenia and Azerbaijan,

B.alerted by the worsening of hostilities which led to the occupation of Kelbadjar at the beginning of April 1993, causing the flight in dramatic circumstances of over 60 000 Armenian and Azeri refugees,

C.fearing an escalation of the conflict following threats of intervention by neighbouring countries,

D.recalling the positions adopted by the UN Security Council and European Political Cooperation in favour of a ceasefire and the evacuation of Azeri territory occupied by Armenia with a view to the resumption of negotiations,

1.Calls for an immediate halt to hostilities, an end to the blockade of Nagorno-Karabakh and the reopening of roads in order to enable emergency humanitarian aid to be sent to the refugees and calls on the Commission to implement the aid measures pursuant to its ECHO programme;

2.Hopes that the negotiations, under the auspices of the CSCE, between the governments of Armenia and Azerbaijan will lead to a peaceful and lasting solution to the crisis which will protect the interests of all peoples in the region;

3.Calls for a halt to all foreign military aid and urgently calls on the governments of neighbouring countries not to contribute by threat or specific action to an increase in tension but, on the contrary, to take part in the search for peace within the international organizations; welcomes the initiatives taken by citizens' organizations such as the 'Helsinki citizens' Assembly';

III. CONCERNING THE SITUATION IN GENERAL IN THE FORMER SOVIET UNION

A.having regard to the need to give full support to the process of democratization and economic reform in all States of the former Soviet Union,

B.deeply concerned about the many conflicts taking place on the territory of the former Soviet Union which not only cause grievance amongst the civilian population, but also have a negative impact on the economic development of the States of the former Soviet Union,

C.especially concerned by the environmental disasters that have occurred in the States of the former Soviet Union,

D.recalling that the Community and its Member States have contributed the majority of the aid to former Soviet Union,

1.Emphasizes the need for a comparable mandate to the one on a partnership and cooperation agreement with Russia for negotiation with the other States of the former Soviet Union;

2.Stresses that a full review of the TACIS programme is needed to direct this programme more towards the reforms needed for further cooperation between the European Community and the States of the former Soviet Union; stresses also that a closer scrutiny of the European Bank for Reconstruction and Development by the European Parliament should be established;

3.Stresses once more that programmes for environmental conservation should be an essential part of the Community's programme for cooperation with the States of the former Soviet Union;

4.Stresses the need to accelerate negotiations on the Energy Charter, because this charter is essential for the development of the economies of the States of the former Soviet Union;

5.Expects the Russian Federation and the other successor states of the former Soviet Union to make disarmament, and in particular the reliable control of nuclear weapons and other weapons of mass destruction, hazardous nuclear power stations and other comparable sources of danger, the priority of all government policies;

6.Accepts the attached conclusions of the hearing organized on 28 and 29 April by its Committees on Foreign Affairs and Security, External Economic Relations, Budgets, Economic and Monetary Affairs and Industrial Policy and its Delegation for Relations with the republics of the Commonwealth of Independent States (CIS);

7.Instructs its President to forward this resolution to the Commission, the Council, EPC, the CSCE, the Secretary-General of the UN, the governments of the Twelve, the governments of Canada, Japan and the United States, the republics of the former Soviet Union, Turkey and Iran.

CONCLUSIONS OF THE HEARING

-having regard to its resolutions of 9 July 1992 on economic cooperation between the European Community and the Commonwealth of Independent States and 17 September 1992 on relations with the CIS,

-having regard to the evidence submitted at the hearings on 10-11 September 1992 and 28-29 April 1993 on the economic and political problems of the CIS, organized jointly by its Committees on Foreign Affairs and Security, External Economic Relations, Budgets, Economic and Monetary Affairs and Industrial Policy and its Delegation for Relations with the Republics of the Commonwealth of Independent States (CIS),

-having regard to the proposed aid package agreed in April 1993 in Tokyo by the Group of Seven (G7),

A.having regard to the EBRD's evidence at the hearing of 28-29 April 1993 that:

(i)in 1989 the military-industrial complex accounted for 50% of Russia's industrial output and 7.8 million of its workers; by 1992 military procurement had dropped by 85%m,

(ii)this complex could not convert to civil production on its own, because no military enterprise had the credit to borrow,

(iii)the EBRD and similar organizations could not maintain their own credit rating and lend to those without a credit rating, and it was not possible to find western partners,

(iv)joint ventures with western partners were needed to provide international management experience,

(v)an 'early-stage equity fund' for joint ventures was needed,

B.having regard to the evidence from European and American defence industry that:

(i)they also believed that joint ventures between the appropriate sectors of western and eastern companies would be the best way to convert the eastern defence industry to civil production,

(ii)the current conditional aid was not viable as it produced a situation in which, 'without stability there would be no credits and without credits there would be no stability' (Deutsche Aerospace)

(iii)in the absence of any finance for projects, the TACIS programme produced those who 'are still unemployed but at a higher level of education' (Deutsche Aerospace),

(iv)to cover the initial political and economic risk, aid finance was needed,

(v)western defence industries had the technical and management expertise to help in specific projects needed to equip the key sectors of the Eastern industries which could quickly produce a viable economy,

(vi)the key industries were food processing, agricultural support, transport (including air traffic), communications and oil and gas,

(vii)western companies should set up trading houses on the Japanese model, to find joint venture partners and to provide training and financial engineering,

(viii)to follow up with private equity, these companies would need to have a secure legal and fiscal base, with protection of intellectual property and free movement of currency,

C.having regard to the evidence from NATO and Dr Wulf (University of Hamburg) on the level of western military expenditure, that:

(i)it was still necessary to keep a strategic balance in Europe, defend any Member State, and act under UN mandate, and that cuts further than those now planned would undermine NATO's credibility (NATO),

(ii)in 1992, NATO was still spending $100bn on defence procurement and $50bn on research into new weapons (in contrast with the IMF's $1bn on aid to Russia),

(iii)this level was falling very slowly and that the procurement was not based on a careful assessment of what was needed in new circumstances: with a 5% reduction: $750bn could be saved between 1993 and 2000 with a 5% reduction (Dr Wulf),

D.having regard to the evidence of the Commission that:

(i)the TACIS training programme was going well, but it would be helpful to have finance for projects as well as for training,

(ii)the Tokyo G7 pacakge included $13bn for macroeconomic stabilization, though less than $3bn was effectively unconditional, the rest being conditional on the Russians fulfilling the conditions fixed at Tokyo,

(iii)the ultimate aim of accords now being negotiated with Russia was free trade, when the Russians were able to join GATT,

E.having regard to the evidence of the Russian government, parliament and defence industry that:

(i)though the Russians needed help, the approach should be one of working together rather than of aid, since there was a mutual interest,

(ii)Russia now had state guarantees for investment and a legal base,

(ii)since military orders had been cut by two-thirds, the government had paid subsidies for profit loss and given soft loans for technical retooling and social support,

(iv)state funds had been contracted and support was now needed from the West,

(v)there were enormous natural resources in Russia, providing great scope for western investment,

(vi)the Russian parliament was finalizing the laws needed to make western investment secure, but there was still no major flow of investment because of political instability,

(vii)joint ventures which used both West and East European technology would be welcome,

(viii)Russia was still a large country, with 170 million people; it had been a superpower for 70 years and the loss of that status was a trauma, so despite enormous potential it was in a crisis; it has been an atheisitc state and was now left in a vacuum and could not be expected to implement new ideas overnight; the government was walking a cliff edge and a false step could be fatal: it could not put millions out of jobs; it could not risk a repetition of Yugoslavia; it needed equipment and know-how, but it could not be colonized and it could not be left out in the cold, and time was moving fast (Malej);

E.having regard to the evidence of the UN Economic Commission for Europe that:

(i)'what appears to be needed is a commitment to a long-term programme of reform on the scale of the post-war European Recovery Programme. On the other hand, the western countries would commit themselves to a sustained level of technical and financial assistance over a period of, say, 8 to 10 years, while the Russian government would undertake to draw up a long-term programme of structural reform and accept that continued aid would be subject to intermediate targets being met',

(ii)'a much broader regional perspective of the transition process is needed' to restore trade relations and create a payments union,

G.whereas, since the adoption of its above-mentioned resolution in September 1992, it has become much clearer that the severe structural imbalance caused by the huge defence industry in Russia and Ukraine has made it impossible for those republics to meet the financial conditions required by the IMF and other financial institutions,

H.whereas the international financial institutions cannot keep their own first-class credit rating while lending to countries or companies with no credit rating,

I.whereas to leave these key countries of eastern Europe without aid would be a political risk of the first order,

J.whereas it is in the commercial interest of the West as well as the political interest to open up the immense natural resources of the CIS,

1.Resolves that the G7 countries should be asked to provide initial grant aid of at least $20bn, financed by the faster reduction of arms procurement and research;

2.Resolves that $15bn should be allocated to the provision of a social security net for redundancies in the defence industries of the CIS and to the support of the key currencies;

3.Resolves that an initial $5bn should be allocated to the provision of equipment, management and start-up costs for joint ventures between those parts of companies of the donor countries and those of the recipient country suitable for joint ventures;

4.Resolves that the World Bank and the EBRD should continue to use their skills and resources in putting together suitable partners;

5.Resolves that the G7 countries should consider giving priority to aid to western partners where it would help companies suffering from defence run-down or provide employment in areas of high unemployment;

6.Resolves that, to encourage the reform process, the G7 countries should give a political commitment to partnership with the Republics of the CIS in an 8 to 10 year programme of reform with a sustained and adequate level of financial and techncial assistance;

7.Resolves that the republics of the CIS should undertake to draw up a long-term programme of strucural reform and accept that continued aid would be subject to intermediate targets being met;

8.Resolves that the partnership between the G7 and the republics of the CIS should be used as a framework to restore regional trading flows and to create a regional payments union.