(Japanese Note)

　Tokyo, November 27, 1994

　Excellency,
I have the honour to refer to the recent negotiations between the representatives of the Government of Japan and of the Government of the Russian Federation that were held on the basis of the conclusions reached during the consultations between the representatives of the Government of the Russian Federation and of the Governments of the creditor countries concerned held in Paris on June 2, 3 and 4, 1994, and the Declaration by the Government of the Russian Federation, acknowledging the foreign debts of the Union of Soviet Socialist Republics (hereinafter referred to as "the USSR") described therein, signed on April 2, 1993 (hereinafter referred to as "the Declaration"), as well as the Statement by the Representatives of the Governments of the Participating Creditor Countries issued in connection therewith, signed on April 2, 1993. I have further the honour to confirm the following understanding reached in the course of the said negotiations:

1.(1) The present arrangements will apply to the total amount of the principal of and contractual interest (excluding late interest) on the commercial debts with a repayment period of more than one year, contracted or guaranteed by the Government of the USSR or its legally authorized entities under the contracts concluded before January 1, 1991 between the Government of the USSR or its legally authorized entities on the one hand and the creditors concerned resident in Japan (hereinafter referred to as "the Creditors") on the other, and insured by the Government of Japan, having fallen or falling due between January 1, 1994 and December 31, 1994, both dates inclusive, to the extent covered by the Declaration. The commercial debts mentioned above are hereinafter referred to as "the Rescheduled Commercial Debts".

(2) The Rescheduled Commercial Debts consist of debts contracted in Japanese yen and in United States dollars. The total amount of the Rescheduled Commercial Debts is estimated at eight hundred fifteen million six hundred two thousand one hundred and thirty yen (815,602,130) for the debts contracted in Japanese yen and sixty-two million eight hundred seventeen thousand one hundred and sixty-four United States dollars and thirty-seven cents ($62,817,164.37) for the debts contracted in United States dollars.

(3) Modifications may be made to the total amounts referred to in sub-paragraph (2) above by agreement between the authorities concerned of the Government of Japan and of the Government of the Russian Federation, after the final verification to be made by the authorities concerned of the Government of Japan and Vnesheconombank of the USSR (hereinafter referred to as "VEB").

2.(1) The Government of the Russian Federation will notify the Government of Japan, through VEB, of the amount and the dates of payments which will be made in order to settle the Rescheduled Commercial Debts in accordance with the payment scheme as set out in sub-paragraph (4) below.

(2) The Government of the Russian Federation will pay the total amount of the Rescheduled Commercial Debts to the Creditors in the currency or currencies designated in the contracts concerned through VEB in accordance with the payment scheme as set out in sub-paragraph (4) below.

(3) The Government of Japan will take necessary measures, within the scope of the relevant laws and regulations in force in Japan, to facilitate the settlement of the commercial debts concerned by the payment to be made in accordance with the payment scheme as set out in sub-paragraph (4) below.

(4) Each of the debts composing the Rescheduled Commercial Debts will be paid in twenty-six (26) semiannual installments beginning on September 30, 1997 in accordance with the payment schedule shown in Annex I attached to this Note.

3.(1) The Government of the Russian Federation will pay to the Creditors, on March 31 and September 30 each year, interest to be calculated as described in sub-paragraph (2) below, accruing on or after January 1, 1995 on each of the debts composing the Rescheduled Commercial Debts to the extent that they have not been settled. The first payment will be made on March 31, 1995.

(2)(a) The rate of interest on the Rescheduled Commercial Debts will be nought point three seven five per cent (0.375%) per annum above the applicable Japanese yen long-ten prime lending rate (hereinafter referred to as "the prime rate") for the debts contracted in Japanese yen and nought point five per cent (0.5%) per annum above the applicable London inter-bank offered rate (hereinafter referred to as "the LIBOR") on United States dollar deposits for the debts contracted in United States dollars.

(b)(i) The dates March 31 and September 30 each year are hereinafter referred to as "the base dates". The period between a base date and the day immediately preceding the next base date (both dates inclusive) is hereinafter referred to as "the rate fixation period".

(ii) The applicable prime rate with respect to a particular rate fixation period means, whenever used in this Note, the rate applied as such by banks of Japan on the first business day in the rate fixation period.

(iii) The applicable LIBOR on United States dollar deposits with respect to a particular rate fixation period means, whenever used in this Note, the LIBOR applied for six months lending in United States dollars on the second business day preceding the first day of the rate fixation period.

(iv) Each prime rate or LIBOR on United States dollar deposits is applicable only during the corresponding rate fixation period, insofar as the debt concerned remains unsettled.

(c) The amount of interest to be paid with respect to a particular rate fixation period will be calculated by multiplying the amount of the debts unsettled by the product of the number of the days the debt has not been settled in the said rate fixation period and the applicable daily interest rate. The applicable daily interest rate is calculated by dividing the rate of interest referred to in (a) above by three hundred and sixty-five (365).

(d) In case where the debt concerned has remained unsettled beyond one rate fixation period, the amount of interest to be paid will be the total of the amount of interest calculated with respect to each of the rate fixation periods concerned.

(3)(a) In case where any payment under the payment scheme set out in sub-paragraph (4) of paragraph 2 above, including the payment schedule of interest set out in sub-paragraph (1) above, is delayed for not more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (a) of sub-paragraph (2) above.

(b) In case where any Payment under the payment scheme set out in sub-paragraph (4) of paragraph 2 above, including the payment schedule of interest set out in sub-paragraph (1) above, is delayed for more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (a) of sub-paragraph (2) above in the first fifteen (15) days following the due date, and at the rate of nought point five per cent (0.5%) per annum above the rate of interest referred to in (a) of sub-paragraph (2) above on or after the sixteenth (16th) day following the due date.

4.(1) The Government of the Russian Federation will pay to the Creditors, in accordance with the payment scheme as set out in sub-paragraph (7) below, the principal of and contractual interest (excluding late interest) on the commercial debts with a repayment period of one Year or less, contracted before January 4, 1992, having fallen or falling due between January 1, 1994 and December 31, 1994, both dates inclusive, to the extent covered by the Declaration (hereinafter referred to as "the Deferred Commercial Debts").

(2) The Deferred Commercial Debts consist of debts contracted in Japanese yen and in United States dollars. The total amount of the Deferred Commercial Debts is estimated at one billion six hundred twenty million ninety-four thousand and thirty-two yen (1,620,094,032) for the debts contracted in Japanese yen and seventy-five million eight hundred forty-one thousand two hundred and sixty-one United States dollars and twenty-six cents ($75,841,261.26) for the debts contracted in United States dollars.

(3) Modifications may be made to the total amounts referred to in sub-paragraph (2) above by agreement between the authorities concerned of the Government of Japan and of the Government of the Russian Federation, after the final verification to be made by the authorities concerned of the Government of Japan and VEB.

(4) The Government of the Russian Federation will notify the Government of Japan, through VEB, of the amount and the dates of payments which will be made in order to settle the Deferred Commercial Debts in accordance with the payment scheme as set out in sub-paragraph (7) below.

(5) The Government of the Russian Federation will pay the total amount of the Deferred Commercial Debts to the Creditors in the currency or Currencies designated in the contracts concerned through VEB in accordance with the payment scheme as set out in sub-paragraph (7) below.

(6) The Government of Japan will take necessary measures, within the scope of the relevant laws and regulations in force in Japan, to facilitate the settlement of the commercial debts concerned by the payment to be made in accordance with the payment scheme as set out in sub-paragraph (7) below.

(7) Each of the debts composing the Deferred Commercial debts will be paid in ten (10) equal semi-annual installments beginning on September 30, 1997.

(8)(a) The Government of the Russian Federation will pay to the Creditors, on March 31 and September 30 each year, interest to be calculated as described in (b) below, accruing on or after January 1, 1995 on each of the debts composing the Deferred Commercial Debts to the extent that they have not been settled. The first payment of the interest will be made on March 31, 1995.

(b)(i) The rate of interest on the Deferred Commercial Debts will be nought point three seven five per cent (0.375%) per annum above the applicable prime rate for the debts contracted in Japanese yen and nought point five per cent (0.5%) per annum above the applicable LIBOR on United States dollar deposits for the debts contracted in United States dollars.

(ii) The amount of interest to be paid with respect to a particular rate fixation period will be calculated by multiplying the amount of the debts unsettled by the product of the number of the days the debt has not been settled in the said rate fixation period and the applicable daily interest rate. The applicable daily interest rate is calculated by dividing the rate of interest referred to in (b)(i) above by three hundred and sixty-five (365).

(iii) In case where the debt concerned has remained unsettled beyond one rate fixation period, the amount of interest to be paid will be the total of the amount of interest calculated with respect to each of the rate fixation periods concerned.

(c)(i) In case where any payment under the payment schedule set out in sub-paragraph (7) above, including the payment schedule of interest set out in (a) above, is delayed for not more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(i) above.

(ii) In case where any Payment under the payment schedule set out in sub-paragraph (7) above, including the payment schedule of interest set out in (a) above, is delayed for more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(i) above in the first fifteen (15) days following the due date, and at the rate of nought point five per cent (0.5%) per annum above the rate of interest referred to in (b)(i) above on or after the sixteenth (16th) day following the due date.

5.(1)(a) The Government of the Russian Federation will pay to the Creditors the interest on the Rescheduled Commercial Debts and the Deferred Commercial Debts, having accrued or accruing during the period between January 1, 1994 and December 31, 1994, both dates inclusive (hereinafter referred to as "the Specified Interest I"), in accordance with the following schedule:

(i) Sixty per cent (60%) will be paid on March 31, 1995.

(ii) The remaining forty per cent (40%) will be paid in ten (10) equal semi-annual installments beginning on September 30, 1997.

(b) The amount of the Specified Interest I will be calculated in accordance with the method of calculation shown in the Annex II attached to this Note,

(2) Interest on the sixty per cent (60%) of the Specified Interest I will be paid on March 31, 1995. The amount of such interest will be calculated in accordance with the method of calculation shown in the Annex III attached to this Note.

(3) Interest on the forty per cent (40%) of the Specified Interest I will be paid on March 31 and September 30 each year, beginning on March 31, 1995. The amount of such interest will be calculated in accordance with the method of calculation shown in the Annex IV attached to this Note.

(4)(a) In case where any payment under the payment schedule set out in (a) of sub-paragraph (1) above, including the payment schedule of interest set out in sub-paragraph (2) and (3) above, is delayed for not more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(i) of sub-paragraph (8) of paragraph 4 above.

(b) In case where any payment under the payment schedule set out in (a) of sub-paragraph (1) above, including the payment schedule of interest set out in sub-paragraph (2) and (3) above, is delayed for more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(i) of sub-paragraph (8) of paragraph 4 in the first fifteen (15) days following the due date, and at the rate of nought point five per cent (0.5%) per annum above the rate of interest referred to in (b)(i) of sub-paragraph (8) of paragraph 4 on or after the sixteenth (16th) day following the due date.

6.(1)(a) The Government of the Russian Federation will pay to the Creditors, in accordance with the schedule set out in sub-paragraph (b) below, the interest on the following debts having accrued, in accordance with the provisions of the Notes exchanged between the Government of Japan and the Government of the Russian Federation on February 28, 1994 (hereinafter referred to as "the Previous Notes"), during the period between April 1, 1994 and June 30, 1994, both dates inclusive (hereinafter referred to as "the Specified Interest II"), and the interest on the above-mentioned debts having accrued or accruing in accordance with the provisions of the previous Notes during the period between July 1, 1994 and December 31, 1994, both dates inclusive (hereinafter referred to as "the Specified Interest III").

(i) The debts reschduled in accordance with the provisions of paragraphs 1 and 2 of the Previous Notes,

(ii) the debts deferred in accordance with the provisions of paragraph 4 of the Previous Notes, and

(iii) the sixty per cent (60%) of the Specified Interest deferred in accordance with the provisions of paragraph 5 of the Previous Notes.

(b)(i) Eighty per cent (80%) of the Specified Interest II and III will be paid in ten (10) equal semi-annual installments beginning on September 30, 1997.

(ii) The remaining twenty per cent (20%) of the Specified Interest II and III will be paid in accordance with the relevant provisions of the Previous Notes.

(c) The amount of the Specified Interest II and III will be calculated in accordance with the relevant methods of calculation stipulated in the Previous Notes.

(2) (a) Interest on the eighty per cent (80%) of the Specified Interest II and III above will be paid on March 31 and September 30 each Year, beginning on March 31, 1995.

(b) (i) The rate of interest on the eighty per cent (80%) of the Specified Interest II, applied for the period between July 1, 1994 and the previous day of the date of exchange of the present Notes, both dates inclusive, will be the rate equal to the rate of late interest referred to in (c)(ii) of sub-paragraph (8) of paragraph 4 of the Previous Notes.

(ii) The rate of interest on the eighty per cent (80%) of the Specified Interest II, applied for the period between the date of exchange of the present Notes and September 29, 1995, both dates inclusive, will be the applicable prime rate for the debts contracted in Japanese yen, the applicable LIBOR on United States dollar deposits for the debts contracted in United States dollars and the applicable LIBOR on German mark deposits for the debts contracted in German marks.

(iii) The rate of interest on the eighty per cent (80%) of the Specified Interest II, applied on and after September 30, 1995 will be nought point three seven five per cent (0.375%) per annum above the applicable prime rate for the debts contracted in Japanese yen, nought point five per cent (0.5%) per annum above the applicable LIBOR on United States dollar deposits for the debts contracted in United States dollars and nought point five per cent (0.5%) per annum above the applicable LIBOR on German mark deposits for the debts contracted in German marks.

(iv) The rate of interest on the eighty per cent (80%) of the Specified Interest III, applied from January 1, 1995, will be the rate equal to the rate of interest referred to in (b)(iii) above.

(v) The applicable LIBOR on German mark deposits with respect to a particular rate fixation period means, whenever used in this Note, the LIBOR applied for six months lending in German marks on the second business day preceding the first day of the rate fixation period.

(vi) Each LIBOR on German mark deposits is applicable only during the corresponding rate fixation period, insofar as the debt concerned remains unsettled.

(vii) The amount of interest on the eighty per cent (80%) of the Specified Interest II and III to be paid on March 31, 1995 is the sum of;

(A) the amount of interest on the eighty per cent (80%) of the Specified Interest II having accrued between July 1, 1994 and the previous day of the date of exchange of the present Notes, both dates inclusive, calculated at the rate of interest referred to in (i) above,

(B) the amount of interest on the eighty per cent (80%) of the Specified Interest II accruing between the date of exchange of the present Notes and March 30, 1995, both dates inclusive, calculated at the rate of interest referred to in (ii) above, and

(C) the amount of interest on the eighty per cent (80%) of the Specified Interest III accruing between January 1, 1995 and March 30, 1995, both dates inclusive, calculated at the rate of interest referred to in (iv) above.

　The above mentioned amounts of interest accruing on and after the date of exchange of the present Notes will be calculated by multiplying the amount of the eighty per cent (80%) of the Specified Interest II or III respectively by the product of the number of the days between the date of exchange of the present Notes for the Specified Interest II or January 1, 1995 for the Specified Interest III and March 30, 1995, both dates inclusive, and the applicable daily interest rate. Such applicable daily interest rate is calculated by dividing the rate of interest referred to in (ii) and (iv) above by three hundred and sixty-five (365).

(viii) The amount of interest on the eighty per cent (80%) of the Specified Interest II and III to be paid after the first payment on March 31, 1995 will be calculated by multiplying the amount of the debts unsettled by the product of the number of the days the debt has not been settled in the relevant rate fixation period and the applicable daily interest rate. The applicable daily interest rate is calculated by dividing the rate of interest referred to in (ii), (iii) or (iv) above, as applicable, by three hundred and sixty-five (365).

(ix) In case where the debt concerned has remained unsettled beyond one rate fixation period, the amount of interest to be paid will be the total amount of interest calculated with respect to each of the rate fixation periods concerned.

(3)(a)(i) In case where any payment under the payment schedule set out in (b) of sub-paragraph (1) above, including the payment schedule of interest set out in (a) of sub-paragraph (2) above, is delayed for not more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(iii) of sub-paragraph (2) above.

(ii) In case where any payment under the payment schedule set out in (b) of sub-paragraph (1) above, including the payment schedule of interest set out in (a) of sub-paragraph (2) above, is delayed for more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(iii) of sub-paragraph (2) above in the first fifteen (15) days following the due date, and at the rate of nought point five per cent (0.5%) per annum above the rate of interest referred to in (b)(iii) of sub-paragraph (2) above on or after the sixteenth (16th) day following the due date.

(b)(i) Notwithstanding the provisions of (a)(i) above, in case where the payment of the interest on the eighty per cent (80%) of the Specified Interest II to be made on March 31, 1995 and September 30, 1995 is delayed for not more than fifteen (15) days, the Government of the Russian Federation will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(ii) of sub-paragraph (2) above.

(ii) Notwithstanding the provisions of (a)(ii) above, in case where the payment of the interest on the eighty per cent (80%) of the Specified Interest II to be made on March 31, 1995 and September 30, 1995 is delayed for more than fifteen (15) days, the Government of the Russian Federation Will pay the late interest accruing on the overdue amount at the rate of interest referred to in (b)(ii) of sub-paragraph (2) above in the first fifteen (15) days following the due date, and at the rate of nought point five per cent (0.5%) per annum above the rate of interest referred to in (b)(ii) of sub-paragraph (2) above on or after the sixteenth (16th) day following the due date.

7. The interest paid will be exempted from all taxes and duties of the Russian Federation.

8. The Government of the Russian Federation will pay bank charges incurred outside Japan incidental to the settlement of the debts concerned.

9. It is confirmed that the tens and conditions of the contracts concerned will remain applicable, except to the extent inconsistent with the terms and conditions of this Note or unless otherwise agreed upon by the parties to the contracts concerned.

10. If the Government of the Russian Federation accords to creditors resident in any third country terms and conditions more favourable than those referred to in sub-paragraph (4) of paragraph 2, sub-paragraph (7) of paragraph 4, (a)(ii) of sub-paragraph (1) of paragraph 5 or (b) (i) of sub-paragraph (1) of paragraph 6 with regard to the payment schedule for corresponding categories of external debt, the Government of the Russian Federation will forthwith accord to the Creditors terms and conditions not less favourable than those accorded to the creditors resident in such third country.

11. If the representative of the Government of the Russian Federation and the representatives of the Governments of the creditor countries concerned come to a new conclusion in connection with reorganization of the Russian debts including the debts covered by the present arrangements, consultations will be held between the Government of Japan and the Government of the Russian Federation, in order to discuss the matter of continuation or modification of the present arrangements.

12. Notwithstanding the provisions of the preceding paragraphs, the Government of Japan may notify in writing the Government of the Russian Federation that the provisions of this Note are null and void, provided that the creditor countries concerned have declared that the Agreement with the Government of the Russian Federation on the Debt due to Foreign Official Creditors signed by the representatives of the Government of the Russian Federation and of the Governments of the creditor countries concerned in Paris on June 4, 1994 is null and void. The understanding contained in this Note shall be null and void from the date of exchange of the present Notes when such a notification is made by the Government of Japan.

　I should be grateful if Your Excellency would confirm the foregoing understanding on behalf of the Government of the Russian Federation.

　I avail myself of this opportunity to extend to Your Excellency the assurances of my highest consideration.

　(Signed) Koji Watanabe
Ambassador Extraordinary
and Plenipotentiary of Japan
to the Russian Federation

　His Excellency
Mr. Lyudvig Aleksandrovich CHIZHOV
Ambassador Extraordinary and
plenipotentiary of the Russian Federation
to Japan

ANNEX I

　0.96%   on September 30, 1997

　1.11%   on March     31, 1998

　1.26%   on September 30, 1998

　1.43%   on March     31, 1999

　1.60%   on September 30, 1999

　1.78%   on March     31, 2000

　1.97%   on September 30, 2000

　2.18%   on March     31, 2001

　2.39%   on September 30, 2001

　2.61%   on March     31, 2002

　2.84%   on September 30, 2002

　3.09%   on March     31, 2003

　3.35%   on September 30, 2003

　3.61%   on March     31, 2004

　3.90%   on September 30, 2004

　4.19%   on March     31, 2005

　4.51%   on September 30, 2005

　4.83%   on March     31, 2006

　5.17%   on September 30, 2006

　5.53%   on March     31, 2007

　5.90%   on September 30, 2007

　6.30%   on March     31, 2008

　6.71%   on September 30, 2008

　7,14%   on March     31, 2009

　7.58%   on September 30, 2009

　8.06%   on March     31, 2010

ANNEX II

　Numerical formula of the method of calculation of the amount of the Specified Interest I

　I = A × D × R × 1/365

　I: The amount of the interest

　A: The amount of the debts unsettled

　D: The number of the days the debt has not been settled

　R: The rate of interest (per annum)

　(NOTE)

　(1) D is equal to the number of the days from each original due date to December 31, 1994 (both dates inclusive).

　(2) A for the Rescheduled Commercial Debts applied from each original due date is equal to the rate of interest referred to in (a) of sub-paragraph (2) of paragraph 3.

　(3) A for the Deferred Commercial Debts applied from each original due date is equal to the rate of interest referred to in (b)(i) of sub-paragraph (8) of paragraph 4.

ANNEX III

　Numerical formula of the method of calculation of the amount of the interest on the sixty per cent (60%) of the Specified Interest I

　I = A × D × R ×1/365

　I: The amount of the interest

　A: The amount of the debts unsettled

　D: The number of the days the debt has not been settled

　R: The rate of interest (per annum)

　(NOTE)

(1) D is equal to the number of the days from January 1,1995 to March 30, 1995 (both dates inclusive).

(2) R is equal to the rate of interest referred to in (b)(i) of sub-paragraph (8) of paragraph 4.

ANNEX IV

　Numerical formula of the method of calculation of the amount of the interest on the forty per cent (40%) of the Specified Interest I

　I = A x D x R x 1/365

　I: The amount of the interest

　A: The amount of the debts unsettled

　D: The number of the days the debt has not been settled

　R: The rate of interest (per annum)

　(NOTE)

(1) With respect to the first payment of the interest (March 31, 1995), D is equal to the number of the days from January 1, 1995 to March 30, 1995 (both dates inclusive). 

(2) With respect to the consecutive payments of interest after the first payment, D is equal to the number of days from the day of the previous payment to the day Preceding the current payment date (both dates inclusive).

(3) A is equal to the rate of interest referred to in (b)(i) of sub-paragraph (8) of paragraph 4.

(Russian Federation)

　Tokyo, November 27, 1994

　Excellency,
I have the honour to acknowledge the receipt of Your Excellency's Note of today's date, which reads as follows:

"(Japanese Note)"

　I have further the honour to confirm on behalf of the Government of the Russian Federation the understanding set forth in Your Excellency's Note.

　I avail myself of this opportunity to extend to Your Excellency the assurance of my highest consideration.

　(Signed) Lyudvig Aleksandrovich CHIZHOV
Ambassador Extraordinary and
Plenipotentiary of the Russian Federation
to Japan

　His Excellency
Mr. Koji Watanabe
Ambassador Extraordinary
and Plenipotentiary of Japan
to the Russian Federation