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CONFORMED COPY           
LOAN NUMBER 4144 RU
Loan Agreement
(St. Petersburg Center City Rehabilitation Project)
between
RUSSIAN FEDERATION
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
Dated October 29, 1997
LOAN NUMBER 4144 RU
LOAN AGREEMENT
AGREEMENT, dated October 29, 1997, between RUSSIAN FEDERATION (the Borrower) and 
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).
WHEREAS (A) the Bank received a letter dated June 10, 1996 from the City of St. 
Petersburg (the City) describing a program of legislative development to create an 
efficient private real estate market in the City;
(B)
the Borrower, having satisfied itself as to the feasibility and priority 
of the Project described in Schedule 2 to this Agreement, has requested the Bank to 
assist in the financing of the Project;
(C)
in order to assist in financing of the Project, the Borrower:  (i) has 
obtained a grant from the Government of Finland (Finland)  in an amount equivalent to 
two million Dollars ($2,000,000) on the terms and conditions set forth in the 
agreement between the Borrower and Finland (the Finnish Grant Agreement) dated 
December 6, 1996; and (ii) has obtained a grant assistance from the United States 
Agency for International Development (USAID) in an amount equivalent to one million 
five hundred thousand Dollars ($1,500,000) for the purposes of carrying out a 
strategic plan for the City pursuant to the exchange of letters dated July 10, 1996 
and October 21, 1996 between the Borrower and USAID; 
(D)
Parts A, B and C of the Project will be carried out by the City with the 
Borrower’s assistance and, as part of such assistance, the Borrower will make 
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available to the City a portion of the proceeds of the Loan as provided in this 
Agreement; and
WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to 
extend the Loan to the Borrower upon the terms and conditions set forth in this 
Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01. The “General Conditions Applicable to Loan and Guarantee 
Agreements for Single Currency Loans” of the Bank, dated May 30, 1995, with the 
modification set forth below (the General Conditions) constitute an integral part of 
this Agreement:
Section 6.03 is modified to read:
 “Section 6.03.  Cancellation by the Bank.  If (a) the right of 
the 
Borrower to make withdrawals from the Loan Account shall have been 
suspended 
with respect to any amount of the Loan for a continuous period 
of thirty (30) days, 
or (b) at any time, the Bank determines, after 
consultation with the Borrower, 
that an amount of the Loan will not be 
required to finance the Project’s costs to be 
financed out of the 
proceeds of the Loan, or (c) at any time, the Bank 
determines, with 
respect to any contract to be financed out of the proceeds of the 
Loan,  that corrupt or fraudulent practices were engaged in by representatives 
of the 
Borrower or of a beneficiary of the Loan during the procurement 
or the execution of 
such contract, without the Borrower having taken 
timely and appropriate action 
satisfactory to the Bank to remedy the 
situation, and establishes the amount of 
expenditures in respect of such 
contract which would otherwise have been eligible for 
financing out of 
the proceeds of the Loan, or (d) at any time, the Bank determines 
that 
the procurement of any contract to be financed out of the proceeds of 
the 
Loan is inconsistent with the procedures set forth or referred to in 
the Loan 
Agreement and establishes the amount of expenditures in respect 
of such contract 
which would otherwise have been eligible for financing 
out of the proceeds of the 
Loan, or (e) after the Closing Date, an 
amount of the Loan shall remain 
unwithdrawn from the Loan Account, or 
(f) the Bank shall have received notice from 
the Guarantor pursuant to  Section 6.07 with respect to an amount of the Loan, the Bank 
may, by 
notice to the Borrower and the Guarantor, terminate the right of the 
Borrower to make withdrawals with respect to such amount.  Upon the 
giving of 
such notice, such amount of the Loan shall be canceled.”
Section 1.02. Unless the context otherwise requires, the several terms defined 
in the General Conditions and in the Preamble to this Agreement have the respective 
meanings therein set forth and the following additional terms have the following 
meanings:
(a)
“Affected Persons” means persons who, on account of the execution of the 
Project, had or would have to be relocated from their current residential premises; 
and “Affected Person” means individually all those who qualify as “Affected Persons”;
(b)
“Beneficiary” means a cultural organization owned by the Borrower to 
which the Borrower proposes to provide or has provided a Sub-grant in accordance with 
the provisions of the Cultural Fund Operational Manual;
(c)
“Block 130” means the city block of which administrative boundaries are 
determined along: Nevsky Prospect, Zhukovsky Street, Mayakovsky Street and Vosstanya 
Street;
(d)
“Cultural Fund” means a special fund account to be opened by the Borrower 
for the purposes of making Sub-grants to Beneficiaries under Part D of the Project in 
accordance with the provisions of the Cultural Fund Operational Manual;
(e)
“Cultural Fund Operational Manual” means the manual referred to in 
paragraph 1(a) of Schedule 6 to this Agreement, as such Cultural Fund Operational 
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Manual may be changed from time to time upon agreement between the Bank and the 
Borrower;
(f)
“Developer” means a private entity engaged in the business of development 
of residential real estate, and such entity is not directly or indirectly controlled 
by the Borrower or a political or administrative subdivision thereof, or by any 
regional or local governmental body;
(g)
“Housing Sub-loan” means a loan made or proposed to be made out of the 
proceeds of the Loan to a Developer through the Special Housing Fund for financing the 
activities under Part C of the Project, on the terms and conditions set forth in the 
Housing Fund Operational Manual, including, without limitation, the principal terms 
and conditions referred to in Annex to Schedule 6 to this Agreement;
(h)
“Kapella” means the city block at the address 11, Konjushennaya Street;
(i)
“Minstroi” means the Borrower’s Ministry of Construction;
(j)
“MOF” means the Borrower’s Ministry of Finance;
(k)
“Housing Fund Operational Manual” means the manual referred to in 
paragraph 2(g)(i) of Schedule 6 to this Agreement, as such Housing Fund Operational 
Manual may be changed from time to time upon agreement between the Bank, the the City 
and MinstroiMinstroi and the City;
(l)
“PIU” means a Project Implementation Unit established as the St. 
Petersburg City Investment Foundation, pursuant to the City’s Governor’s Decree No. 
331-p dated October 28, 1996;
(m)
“Project Account” means the City’s account referred to in paragraph 2(b) 
of Schedule 6 to this Agreement;
(n)
“Special Account” means the account referred to in Section 2.02 (b) of 
this Agreement;
(o)
“Sub-grant” means a grant made or proposed to be made out of the proceeds 
of the Loan to a Beneficiary under Part D of the Project, on the terms and conditions 
set forth in the Cultural Fund Operational Manual;
(p)
“Special Housing Fund” means a special revolving fund account to be 
opened and administered by the City for the purposes of making Housing Sub-loans under 
Part C of the Project  in accordance with the provisions of the Housing Fund 
Operational Manual;
(q)
“Subsidiary Financing Agreement” means the agreement to be entered into 
between the Borrower and the City pursuant to Section 3.01 (c) of this Agreement, as 
the same may be amended from time to time, and such term includes all schedules to the 
Subsidiary Financing Agreement; and
(r)
“The City” means the City of St. Petersburg, a political subdivision of 
the Borrower, which is a subject of the Russian Federation.
ARTICLE II
The Loan
Section 2.01. The Bank agrees to lend to the Borrower, on the terms and 
conditions set forth or referred to in the Loan Agreement, an amount equal to 
thirty-one million dollars ($31,000,000).
Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account 
in accordance with the provisions of Schedule 1 to this Agreement for: (i) 
expenditures made (or, if the Bank shall so agree, to be made) in respect of the 
reasonable cost of goods, works and services required for the Project described in 
Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan; and 
(ii) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on 
account of withdrawals made by a Developer under a Housing Sub-loan to meet the 
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reasonable cost of goods, works and services in respect of which the withdrawal from 
the Loan Account is requested.
(b)
The Borrower may, for the purposes of the Project, open and maintain in 
Dollars a special deposit account in a bank on terms and conditions satisfactory to 
the Bank, including appropriate protection against set-off, seizure or attachment. 
Deposits into, and payments out of, the Special Account shall be made in accordance 
with the provisions of Schedule 4 to this Agreement.
Section 2.03. The Closing Date shall be December 31, 2000 or such later date as 
the Bank shall establish. The Bank shall promptly notify the Borrower of such later 
date.
Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate 
of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the 
Loan not withdrawn from time to time.
Section 2.05. (a) The Borrower shall pay interest on the principal amount of the 
Loan withdrawn and outstanding from time to time, at a rate for each Interest Period 
equal to LIBOR Base Rate plus LIBOR Total Spread.
(b)
For the purposes of this Section:
(i)
“Interest Period” means the initial period from and 
including the date of this Agreement to, but excluding, the 
first Interest Payment Date occurring thereafter, and after 
the 
initial period, each period from and including an 
Interest Payment 
Date to, but excluding the next following 
Interest Payment Date.
(ii)
“Interest Payment Date” means any date specified in Section 
2.06 of this Agreement.
(iii)
“LIBOR Base Rate” means, for each Interest Period, the 
LONDON interbank offered rate for six-month deposits in 
Dollars for value the first day of such Interest Period 
(or, in the 
case of the Initial Interest Period, for value 
the Interest Payment 
Date occurring on or next preceding 
the first day of such Interest 
Period), as reasonably 
determined by the Bank and expressed as a 
percentage per 
annum.
(iv)
“LIBOR Total Spread” means, for each Interest Period: (A) 
one-half of one percent (1/2 of 1%); (B) minus (or plus) 
the 
weighted average margin, for such Interest Period, 
below (or above) the 
London interbank offered rates, or 
other reference rates, for 
six-month deposits, in respect 
of the Bank’s outstanding borrowings or 
portions thereof 
allocated by the Bank to fund single currency loans 
or 
portions thereof made by it that included the Loan; as 
reasonably determined by the Bank and expressed as a 
percentage per annum.
(c)
The Bank shall notify the Borrower of LIBOR Base Rate and LIBOR Total 
Spread for each Interest Period, promptly upon the determination thereof.
(d)
Whenever, in light of changes in market practice affecting the 
determination of the interest rates referred to in this Section 2.05, the Bank 
determines that it is in the interest of its borrowers as a whole and of the Bank to 
apply a basis for determining the interest rates applicable to the Loan other than as 
provided in said Section, the Bank may modify the basis for determining the interest 
rates applicable to the Loan upon not less than six (6) months’ notice to the Borrower 
of the new basis.  The basis shall become effective on the expiry of the notice period 
unless the Borrower notifies the Bank during said period of its objection thereto, in 
which case said modification shall not apply to the Loan.
Section 2.06. Interest and other charges shall be payable May 15 and November 15 
in each year.
Section 2.07. The Borrower shall repay the principal amount of the Loan in 
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accordance with the amortization schedule set forth in Schedule 3 to this Agreement.
ARTICLE III
Execution of the Project
Section 3.01. (a) The Borrower declares its commitment to the objectives of the 
Project as set forth in Schedule 2 to this Agreement, and, to this end:
(i)
shall carry out Part D of the Project, with due diligence 
and efficiency and in conformity with appropriate 
administrative, financial and organizational practices and 
shall 
provide, promptly as needed, the funds, facilities, 
services and other 
resources required for such Part of the 
Project;
(ii)
without any limitation or restriction upon any of its other 
obligations under the Loan Agreement, shall cause the City 
to perform in accordance with the provisions of the 
Subsidiary 
Financing Agreement all the obligations of the 
City therein set 
forth, shall take or cause to be taken all 
actions, including the 
provision of funds, facilities, 
services and other resources, necessary 
or appropriate to 
enable the City to perform such obligations, and 
shall not 
take or permit to be taken any action which would prevent 
or interfere with such performance.
(b)
Without limitation upon the provisions of paragraph (a) of this Section, 
and except as the Borrower and the Bank shall otherwise agree, the Borrower shall 
carry out Part D of the Project and shall cause the City to carry out Parts A, B and C 
of the Project in accordance with the implementation program set forth in Schedule 6 
to this Agreement.
(c)
The Borrower shall make available a portion of the proceeds of the Loan 
to the City under a subsidiary financing agreement to be entered into between the 
Borrower, represented by MOF, the Minstroi, and the City, under terms and conditions 
acceptable to the Bank and which shall include, without limitation: (i) a portion of 
the Loan in an amount equivalent to $5,000,000 shall be provided to the City on a 
grant basis; (ii) a portion of the Loan in amount equivalent to $25,000,000 shall be 
provided to the City as a loan (the Subsidiary Loan) on the following terms:  (A) 
15-year maturity, including a 5-year grace period; (B) an interest rate equivalent to 
the rate applicable to the Loan pursuant to the provisions of Section 2.05 of this 
Agreement, plus a margin of one-half of one percent (1/2 of 1%); and (C) the repayment 
of principal amount of the Subsidiary Loan shall be the equivalent to the value 
(determined as of the date or respective dates of repayment) of currency or currencies 
withdrawn from the Loan Account or paid out of the Special Account on account of 
expenditures under Parts A, B and C of the Project;  and (iii) the terms and 
conditions set forth in paragraph 2 of Schedule 6 to this Agreement.
(d)
The Borrower shall exercise its rights under the Subsidiary Financing 
Agreement in such manner as to protect the interests of the Borrower and the Bank and 
to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, 
the Borrower shall not assign, amend, abrogate or waive the Subsidiary Financing 
Agreement or any provision thereof.
Section 3.02. Except as the Bank shall otherwise agree, procurement of the 
goods, works and consultants’ services required for the Project and to be financed out 
of the proceeds of the Loan shall be governed by the provisions of Schedule 5 to this 
Agreement.
Section 3.03.  For the purposes of Section 9.08 of the General Conditions and 
without limitation thereto, the Borrower shall:
(a)
prepare, on the basis of guidelines acceptable to the Bank, and furnish 
to the Bank not later than six (6) months after the Closing Date or such later date as 
may be agreed for this purpose between the Borrower and the Bank, a plan for the 
future operation of the Project; and
(b)
afford the Bank a reasonable opportunity to exchange views with the 
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Borrower on said plan.
ARTICLE IV
Financial Covenants
Section 4.01. (a)  The Borrower shall  maintain or cause to be maintained 
records and accounts adequate to reflect in accordance with sound accounting practices 
the operations, resources and expenditures in respect of Part D of the Project of the 
departments or agencies of the Borrower responsible for carrying out  Part D of the 
Project.
(b)
The Borrower shall:
(i)
have the records and accounts referred to in paragraph (a) 
of this Section for each fiscal year audited, in accordance 
with appropriate auditing principles consistently applied, 
by 
independent auditors acceptable to the Bank;
(ii)
furnish to the Bank as soon as available, but in any case 
not later than six (6) months after the end of each such 
year, 
the report of such audit by said auditors, of such 
scope and in such 
detail as the Bank shall have reasonably 
requested; and
(iii)
furnish to the Bank such other information concerning said 
records and accounts and the audit thereof as the Bank 
shall 
from time to time reasonably request.
(c)
For all expenditures with respect to which withdrawals from the Loan 
Account were made on the basis of statements of expenditure, the Borrower shall:
(i)
maintain or cause to be maintained in accordance with sound 
accounting practices, records and accounts reflecting such 
expenditures;
(ii)
ensure that all records (contracts, orders, invoices, 
bills, receipts and other documents) evidencing such 
expenditures are retained until at least one year after the 
Bank 
has received the audit report for the fiscal year in 
which the last 
withdrawal from the Loan Account was made; 
and
(iii)
enable the Bank’s representatives to examine such records.
Section 4.02. (a)  The Borrower shall cause the City to maintain records and 
accounts adequate to reflect in accordance with sound accounting practices the 
operations, resources and expenditures in respect of Parts A, B and C of the Project 
of the departments or agencies of the City responsible for carrying out said Parts of 
the Project.
(b)
The Borrower shall cause the City to:
(i)
have the records and accounts referred to in paragraph (a) 
of this Section for each fiscal year audited, in accordance 
with appropriate auditing principles consistently applied, 
by 
independent auditors acceptable to the Bank;
(ii)
furnish to the Bank as soon as available, but in any case 
not later than six (6) months after the end of each such 
year, 
the report of such audit by said auditors, of such 
scope and in such 
detail as the Bank shall have reasonably 
requested; and
(iii)
furnish to the Bank such other information concerning said 
records and accounts and the audit thereof as the Bank 
shall 
from time to time reasonably request.
(c)
 For all expenditures with respect to which withdrawals from the Loan 
Account were made on the basis of statements of expenditure, the Borrower shall cause 
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the City to:
(i)
maintain or cause to be maintained in accordance with sound 
accounting practices, records and accounts reflecting such 
expenditures;
(ii)
ensure that all records (contracts, orders, invoices, 
bills, receipts and other documents) evidencing such 
expenditures are retained until at least one year after the 
Bank 
has received the audit report for the fiscal year in 
which the last 
withdrawal from the Loan Account was made; 
and
(iii)
enable the Bank’s representatives to examine such records.
ARTICLE V
Remedies of the Bank
Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the 
following additional events are specified:
(a)
The City shall have failed to perform any of its obligations under the 
Subsidiary Financing Agreement.
(b)
As a result of events which shall have occurred after the date of the 
Loan Agreement, an extraordinary situation shall have arisen which shall make it 
improbable that the City will be able to perform its obligations under the Subsidiary 
Financing Agreement.
(c)
(i) 
Subject to subparagraph (ii) of this paragraph, the right 
of the Borrower to withdraw the proceeds of any grant made 
to the 
Borrower for the financing of the Project shall have 
been suspended, 
canceled or terminated in whole or in part, 
pursuant to the terms of 
the agreement providing therefor.
(ii)
Subparagraph (i) of this paragraph shall not apply if the 
Borrower establishes to the satisfaction of the Bank that: 
(A) 
such suspension, cancellation, termination or 
prematuring is not 
caused by the failure of the Borrower to 
perform any of its 
obligations under such agreement; and 
(B) adequate funds for the 
Project are available to the 
Borrower from other sources on terms and 
conditions 
consistent with the obligations of the Borrower under 
this Agreement.
Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the 
following additional event is specified, namely, an event specified in paragraph (a) 
of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty 
(60) days after notice thereof shall have been given by the Bank to the Borrower.
ARTICLE VI
Effective Date; Termination
Section 6.01. The following events are specified as additional conditions to the 
effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the 
General Conditions:
(a)
the Subsidiary Financing Agreement has been executed by the Borrower, 
represented by MOF, the Minstroi, and the City; and
(b)
the City has signed a contract with a firm, whose qualifications and 
experience shall be satisfactory to the Bank, for carrying out activities under Part A 
(1) of the Project.
Section 6.02. The following are specified as additional matters, within the 
meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion 
or opinions to be furnished to the Bank, namely, that the Subsidiary Financing 
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Agreement has been duly authorized by the Borrower and the City and is legally binding 
upon the Borrower and the City in accordance with its terms.
Section 6.03. The date ninety (90) days after the date of this Agreement is 
hereby specified for the purposes of Section 12.04 of the General Conditions.
ARTICLE VII
Representative of the Borrower; Addresses
Section 7.01. The Minister of Finance or an authorized Deputy Minister of 
Finance of the Borrower is designated as representative of the Borrower for the 
purposes of Section 11.03 of the General Conditions.
Section 7.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Borrower:
Ministry of Finance
Ilyinka, Street 9
103009 Moscow
Russian Federation
Telex:
112008
For the Bank:
International Bank for
 Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INTBAFRAD
248423 (MCI)
Washington, D.C.
 64145 (MCI) 
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
the District of Columbia, United States of America, as of the day and year first above 
written.
RUSSIAN FEDERATION
By /s/ Yuli Vorontsov
Authorized Representative
INTERNATIONAL BANK FOR
  RECONSTRUCTION AND DEVELOPMENT
By /s/ Anil Sood
Acting Regional Vice President
Europe and Central Asia
SCHEDULE 1
Withdrawal of the Proceeds of the Loan
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1.
The table below sets forth the Categories of items to be financed out of the 
proceeds of the Loan, the allocation of the amounts of the Loan to each Category and 
the percentage of expenditures for items so to be financed in each Category:
Amount of the
% of
Loan Allocated
   Expenditures
(Expressed in
to be
Category
   Dollars)
     Financed
(1)
Goods 
 
   100% of foreign 
 
   expenditures, 
(a) under Part D
   500,000  
   100% of local 
of the Project
   expenditures 
   (ex-factory 
(b) under Parts A   4,7200,000 
   cost) and 80% 
and B (1) and B (2) 
   of local 
of the Project
   of local 
 
   expenditures for 
   other items 
(c) under Part B (3)   500,000 
   procured locally
of the Project
(2)
Civil Works 
 
   80%
(a) under Part D of    500,000
the Project
(b) under Parts A 9,27,400,000
 and B of the Project
(1) and B (2) 
of the Project
(c) under Part B (3) 1,800,000
of the Project
(3)
Consultants’ 
11,300,000
   100% 
Services and 
Training
(4)
Housing Sub-loans 
 1,800,000
   100%
      under Part C of the
      Project
(5)
Unallocated
 3,000,000
__________
TOTAL
       31,000,000
==========
2.
For the purposes of this Schedule:
(a)
 the term “foreign expenditures” means expenditures in the currency of 
any country other than that of the Borrower for goods or services supplied from the 
territory of any country other than that of the Borrower; and
(b)
the term “local expenditures” means expenditures in the currency of the 
Borrower or for goods or services supplied from the territory of the Borrower.
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made in respect of: 
(a)
payments made for expenditures prior to the date of this Agreement, 
except that withdrawals, in an aggregate amount not to exceed $3,100,000, may be made 
in respect of Categories (1)(b), 2(b) and (3) on account of payments made for 
expenditures before that date but after June 1, 1996; 
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(b)
payments made under Category (4) for Housing Sub-loans under Part C of 
the Project unless: (i) the Housing Fund Operational Manual has been adopted by the 
City and approved by MOF and Minstroi and furnished to the Bank; (ii) a Special 
Housing Fund account referred to in paragraph 2(g)(ii) of Schedule 6 to this Agreement 
has been opened; and (iii) the Housing Sub-loan in respect of which withdrawal is 
requested has been made by the City in accordance with the procedures and on the terms 
and conditions set forth or referred to in the Housing Fund Operational Manual, 
including the principal terms and conditions referred to in Annex to Schedule 6 to 
this Agreement; and
(c)
payments made under Categories (1)(a) and (2)(a) unless: (i) the Cultural 
Fund Operational Manual has been adopted by the Borrower and furnished to the Bank; 
and (ii) the Inter-Ministerial Grant Approval Committee referred to in paragraph 1(c) 
of Schedule 6 to this Agreement has been established.; and
(d)
payments made under Categories 1(c) and 2(c) unless the Bank has received 
a resettlement action plan in respect of Part B(3) of the Project in accordance and 
consistent with paragraph 2(j) of Schedule 6 to this Agreement.
4.
The Bank may require withdrawals from the Loan Account to be made on the basis 
of statements of expenditure for expenditures for: (i) goods under contracts costing 
less than $300,000 equivalent; (ii) works under contracts costing less than $1,000,000 
equivalent; (iii) services provided by consulting firms under contracts costing less 
than $100,000 equivalent; and (iv) services provided by individual consultants under 
contracts costing less than $50,000 equivalent, under such terms and conditions as the 
Bank shall specify by notice to the Borrower.
SCHEDULE 2
Description of the Project
The objectives of the Project are to: (i) further develop a strategic plan for 
rehabilitation of the center of the City; (ii) continue reforms to develop competitive 
real estate markets and a competitive business environment in the City and public 
participation;  (iii) develop a City investment  program for rehabilitating the center 
of the City; (iv) carry out physical improvements which can be replicated on a larger 
scale in the future; and (v) assist cultural organizations in the City to improve 
their ability to generate non-budgetary revenues.
The Project consists of the following parts, subject to such modifications 
thereof as the Borrower and the Bank may agree upon from time to time to achieve such 
objectives:
Part A:
Technical Assistance
1.
Planning, Administration and Detailed Engineering:
(a)
Provision of consultants’ services to assist in devising detailed plans, 
and carrying out design and engineering for the project and the future rehabilitation 
programs for the center of the City; and administrative support in managing and 
implementing the Project.
(b)
Provision of consultants’ services for managing the Project.
2.
Institutional and Regulatory Support:
Provisions of consultants’ services to the City for assisting in data gathering 
and analyses, institution building and regulatory reform.
3.
Institutional Strengthening:
Provision of consultants’ services, training and equipment to departments of the 
City Government to upgrade their human resources skills, procedures and equipment.
Part B:
Pilot Projects
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1.
Rehabilitation of Block 130:
(a)
Construction of a new pedestrian walkway and related infrastructure 
necessary for the retail shopping mall, including the carrying out of resettlement of 
Affected Persons.
(b)
Construction of a new heating system and replacement of the corroded 
sections of the internal heat distribution system and the above and under ground 
sections with new heating pipes.
(c)
Removal of the soil in open spaces on Block 130, and replacement with 
noncontaminated soil and landscaping.
(d)
Construction of new apartments for elderly residents (above the 
retirement age as specified in the Borrower’s laws and regulations) in the center of 
the City.
2.
Nevsky Prospekt Upgrading:
(a)
Replacement of old lamp posts, including the use of more energy efficient 
lamps.
(b)
Replacement of sidewalks offering handicapped access at street corners, 
and improvement of landscaping and signage.
(c)
Carrying out of small projects along and adjacent to Nevsky prospect, as 
agreed upon between the Bank, the Minstroi and the City.
(d)
Provision of infrastructure and related site improvements and planning 
documentation for a vacant site in the center of Nevsky Prospect (“Dumskaya Ulitsa”) 
or other sites acceptable to the Bank, for auctioning to private developers.
3.
Rehabilitation of Kapella:
(a)
Construction of a new heating system.
(b)
Carrying out of infrastructure and site improvements.
(c)
Carrying out of resettlement of Affected Persons.
Part C:
Special Housing Fund
Provision of Housing Sub-loans to Developers through the Special Housing Fund 
for the relocation of residents from buildings requiring major rehabilitation in the 
center of the City.
Part D:
Cultural Fund
Provision of Sub-grants to Beneficiaries through the Cultural Fund for financing 
upgrading of their facilities and improving their financial and administrative 
management.
* * *
The Project is expected to be completed by June 30, 2000.
SCHEDULE 3
Amortization Schedule
Payment of Principal
Date Payment Due 
(expressed in dollars)*
On each May 15 and November 15
beginning November 15, 2002
Page  12
through November 15, 2013
       1,290,000
and on May 15, 2014
       1,330,000
_____________________________
*
The figures in this column represent the amount in Dollars to be repaid,  except 
as provided in Section 4.04 (d) of the General Conditions. 
SCHEDULE 4
Special Account
1.
For the purposes of this Schedule:
(a)
the term “eligible Categories” means Categories (1), (2), (3) and (4) set 
forth in the table in paragraph 1 of Schedule 1 to this Agreement;
(b)
the term “eligible expenditures” means expenditures in respect of the 
reasonable cost of goods and services required for the Project and to be financed out 
of the proceeds of the Loan allocated from time to time to the eligible Categories in 
accordance with the provisions of Schedule 1 to this Agreement; and
(c)
the term “Authorized Allocation” means an amount equivalent to $1,200,000 
to be withdrawn from the Loan Account and deposited in the Special Account pursuant to 
paragraph 3(a) of this Schedule.
2.
Payments out of the Special Account shall be made exclusively for eligible 
expenditures in accordance with the provisions of this Schedule.
3.
After the Bank has received evidence satisfactory to it that the Special Account 
has been duly opened, withdrawals of the Authorized Allocation and subsequent 
withdrawals to replenish the Special Account shall be made as follows:
(a)
For withdrawals of the Authorized Allocation, the Borrower shall furnish 
to the Bank a request or requests for a deposit or deposits which do not exceed the 
aggregate amount of the Authorized Allocation. On the basis of such request or 
requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account 
and deposit in the Special Account such amount or amounts as the Borrower shall have 
requested.
(b)
(i)
For replenishment of the Special Account, the Borrower 
shall furnish to the Bank requests for deposits into the 
Special Account at such intervals as the Bank shall 
specify.
 
(ii)
Prior to or at the time of each such request, the Borrower 
shall furnish to the Bank the documents and other evidence 
Page  13
required pursuant to paragraph 4 of this Schedule for the 
payment or 
payments in respect of which replenishment is 
requested.  On the basis 
of each such request, the Bank 
shall, on behalf of the Borrower,  
withdraw from the Loan 
Account and deposit into the Special Account 
such amount as 
the Borrower shall have requested and as shall have 
been 
shown by said documents and other evidence to have been 
paid out of the Special Account for eligible expenditures.
All such deposits shall be withdrawn by the Bank from the Loan Account under the 
respective eligible Categories, and in the respective equivalent amounts, as shall 
have been justified by said documents and other evidence.
4.
For each payment made by the Borrower out of the Special Account, the Borrower 
shall, at such time as the Bank shall reasonably request, furnish to the Bank such 
documents and other evidence showing that such payment was made exclusively for 
eligible expenditures.
5.
Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall 
not be required to make further deposits into the Special Account:
(a)
if, at any time, the Bank shall have determined that all further 
withdrawals should be made by the Borrower directly from the Loan Account in 
accordance with the provisions of Article V of the General Conditions and paragraph 
(a) of Section 2.02 of this Agreement; or
(b)
if the Borrower shall have failed to furnish to the Bank, within the 
period of time specified in Section 4.01 (b)(ii) of this Agreement, any of the audit 
reports required to be furnished to the Bank pursuant to said Section in respect of 
the audit of the records and accounts for the Special Account; or
(c)
if, at any time, the Bank shall have notified the Borrower of its 
intention to suspend in whole or in part the right of the Borrower to make withdrawals 
from the Loan Account pursuant to the provisions of Section 6.02 of the General 
Conditions; or
(d)
once the total unwithdrawn amount of the Loan allocated to the eligible 
Categories, less the amount of any outstanding special commitment entered into by the 
Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, 
shall equal the equivalent of twice the amount of the Authorized Allocation.
Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of 
the Loan allocated to the eligible Categories shall follow such procedures as the Bank 
shall specify by notice to the Borrower.  Such further withdrawals shall be made only 
after and to the extent that the Bank shall have been satisfied that all such amounts 
remaining on deposit in the Special Account as of the date of such notice will be 
utilized in making payments for eligible expenditures.
6.
(a)
If the Bank shall have determined at any time that any payment out of the 
Special Account: (i) was made for an expenditure or in an amount not eligible pursuant 
to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished 
to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such 
additional evidence as the Bank may request; or (B) deposit into the Special Account 
(or, if the Bank shall so request, refund to the Bank) an amount equal to the amount 
of such payment or the portion thereof not so eligible or justified.  Unless the Bank 
shall otherwise agree, no further deposit by the Bank into the Special Account shall 
be made until the Borrower has provided such evidence or made such deposit or refund, 
as the case may be.
(b)
If the Bank shall have determined at any time that any amount outstanding 
in the Special Account will not be required to cover further payments for eligible 
expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the 
Bank such outstanding amount.
(c)
The Borrower may, upon notice to the Bank, refund to the Bank all or any 
portion of the funds on deposit in the Special Account.
(d)
Refunds to the Bank made pursuant to paragraphs 6(a), (b) and (c) of this 
Page  14
Schedule shall be credited to the Loan Account for subsequent withdrawal or for 
cancellation in accordance with the relevant provisions of this Agreement, including 
the General Conditions.
SCHEDULE 5
Procurement and Consultants' Services
Section I.
Procurement of Goods and Works
Part A:
General
Goods and works shall be procured in accordance with the provisions of Section I 
of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the 
Bank in January 1995 and revised in January and August 1996 (the Guidelines) and the 
following provisions of this Section, as applicable.
Part B:
International Competitive Bidding
1.
Except as otherwise provided in Part C of this Section, goods and works shall be 
procured under contracts awarded in accordance with the provisions of Section II of 
the Guidelines and paragraph 5 of Appendix 1 thereto.
2.
The following provisions shall apply to goods and works to be procured under 
contracts awarded in accordance with the provisions of paragraph 1 of this Part B.
(a)
Notification and Advertising
The invitation to prequalify or bid for each contract estimated to cost 
$10,000,000 equivalent or more shall be advertised in accordance with the procedures 
applicable to large contracts under paragraph 2.8 of the Guidelines.
(b)
Prequalification
Bidders for works estimated to cost $1,000,000 equivalent or more per contract 
shall be prequalified in accordance with the provisions of paragraphs 2.09 and 2.10 of 
the Guidelines.
(c) 
Preference for domestic manufacturers
The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix  2 
thereto shall apply to goods manufactured in the territory of the Borrower.
Part C: Other Procurement Procedures
1.
National Competitive Bidding
Works estimated to cost less than $1,000,000 equivalent per contract, up to an 
aggregate amount not to exceed $6,300,000 equivalent, may be procured under contracts 
awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines.
2.
International Shopping
Goods estimated to cost less than $300,000 equivalent per contract, up to an 
aggregate amount not to exceed $2,000,000 equivalent, may be procured under contracts 
awarded on the basis of international shopping procedures in accordance with the 
provisions of paragraphs 3.5 and 3.6 of the Guidelines.
3.
National Shopping
Goods estimated to cost less than $50,000 equivalent per contract, up to an 
aggregate amount not to exceed $5,000,000 equivalent, may be procured under contracts 
awarded on the basis of national shopping procedures in accordance with the provisions 
of paragraphs 3.5 and 3.6 of the Guidelines.
4.
Procurement of Small Works
Page  15
Works estimated to cost less than $100,000 equivalent per contract, up to an 
amount not to exceed $5,000,000 equivalent, may be procured under lump-sum, 
fixed-price contracts awarded on the basis of quotations obtained from three (3) 
qualified domestic contractors in response to a written invitation. The invitation 
shall include a detailed description of the works, including basic specifications, the 
required completion date, a basic form of agreement acceptable to the Bank, and 
relevant drawings, where applicable. The award shall be made to the contractor who 
offers the lowest price quotation for the required work, and who has the experience 
and resources to complete the contract successfully.
5.
Housing Sub-loans under Part C of the Project
The services to be financed through Housing Sub-loans under Part C of the 
Project shall be procured in accordance with the provisions of the Housing Fund 
Operational Manual.
Part D:
Review by the Bank of Procurement Decisions
1.
Procurement Planning
Prior to the issuance of any invitations to prequalify for bidding or to bid for 
contracts, the proposed procurement plan for the Project shall be furnished to the 
Bank for its review and approval, in accordance with the provisions of paragraph 1 of 
Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken 
in accordance with such procurement plan as shall have been approved by the Bank, and 
with the provisions of said paragraph 1.
2.
Prior Review
With respect to each contract for: (i) goods estimated to cost $300,000 
equivalent or more per contract; and (ii) the first three contracts for works awarded 
in accordance with the provisions of Part C.1 of this Schedule, the procedures set 
forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this Part, the 
procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.
Section II.  Employment of Consultants
1.
Consultants' services shall be procured under contracts awarded in accordance 
with the provisions of the "Guidelines for the Use of Consultants by World Bank 
Borrowers and by The World Bank as Executing Agency" published by the Bank in August 
1981 (the Consultant Guidelines).  For complex, time-based assignments, such contracts 
shall be based on the standard form of contract for consultants' services issued by 
the Bank in June 1995, with such modifications as shall have been agreed by the Bank.  
Where no relevant standard contract documents have been issued by the Bank, other 
standard forms acceptable to the Bank shall be used.
2.
Notwithstanding the provisions of paragraph 1 of this Section, the provisions of 
the Consultant Guidelines requiring prior Bank review or approval of budgets, short 
lists, selection procedures, letters of invitation, proposals, evaluation reports and 
contracts shall not apply to: (a) contracts for the employment of consulting firms 
estimated to cost less than $100,000 equivalent each; or (b) contracts for the 
employment of individuals estimated to cost less than $50,000 equivalent each.  
However, said exceptions to prior Bank review shall not apply to: (a) the terms of 
reference for such contracts, (b) single-source selection of consulting firms, (c) 
assignments of a critical nature, as reasonably determined by the Bank, (d) amendments 
to contracts for the employment of consulting firms raising the contract value to 
$100,000 equivalent or above, or (e) amendments to contracts for the employment of 
individual consultants raising the contract value to $50,000 equivalent or above.
SCHEDULE 6
Implementation Program
Page  16
1.
For the purposes of carrying out Part D of the Project, the Borrower shall:
(a)
adopt a Cultural Fund Operational Manual, acceptable to the Bank, which 
shall set forth the terms and conditions of Sub-grants, including, without limitation, 
the following: (i) eligibility criteria for selecting Beneficiaries and approval 
procedures for Sub-grants; (ii) management and operational procedures for the Cultural 
Fund; and (iii) appraisal and supervision procedures for Sub-grants;
(b)
open a Cultural Fund account which shall provide Sub-grants to 
Beneficiaries on terms and conditions set forth in the Cultural Fund Operational 
Manual; and
(c)
establish an Inter-Ministerial Grant Approval Committee with the 
composition and terms of reference acceptable to the Bank.
2.
The Borrower shall cause the City to carry out Parts A, B and C of the Project 
in accordance with the following provisions to be included in the Subsidiary Financing 
Agreement:
 (a)
The City declares its commitment to the objectives of the Project as set 
forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out Parts A, 
B and C of  the Project with due diligence and efficiency and in conformity with 
appropriate administrative, financial, engineering and environmental practices, and 
shall provide, or cause to be provided, promptly as needed, the funds, facilities, 
services and other resources required for said Parts of the Project.
(b)
Without limitation upon the provisions of paragraph (a) hereof, the City 
shall: (i) not later than February 1, 1997, open a Project Account in a commercial 
bank on terms and conditions acceptable to the Bank with an initial deposit equivalent 
to $100,000;  (ii) thereafter maintain and replenish said account at the beginning of 
each month to ensure that adequate funds, as deemed necessary by the Bank, are 
available to meet expected local expenditures for the next two months; and (iii) use 
the funds so deposited on said account exclusively for financing the implementation of  
Parts A, B and C of the Project.
(c)
Except as the Bank shall otherwise agree, procurement of the goods, works 
and consultants' services required for the Project and to be financed out of the 
proceeds of the Loan shall be governed by the provisions of Schedule 5 to the Loan 
Agreement.
(d)
The City shall carry out the obligations set forth in Sections 9.04, 
9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use 
of goods and services, plans and schedules, records and reports, maintenance and land 
acquisition, respectively) in respect of  Parts A, B and C of the Project.
(e)
The City shall:
(i)
at the request of the Bank, exchange views with the Bank 
with regard to progress of the Project, the performance of 
its 
obligations under the Subsidiary Financing Agreement, 
and other 
matters relating to the purposes of the Loan.
(ii)
promptly inform the Bank of any condition which interferes 
or threatens to interfere with the progress of the Project, 
the accomplishment of the purposes of the Project, or the 
performance 
by the City of its obligations under the 
Subsidiary Financing 
Agreement.
(f)
The City shall, during the execution of the Project, maintain the PIU 
with staff and other resources and terms of reference satisfactory to the Bank, which 
shall be responsible for the implementation of Parts A, B and C of the Project.
(g)
For the purposes of carrying out Part C of the Project, the City shall: 
(i)
adopt a Housing Fund Operational Manual, as approved by the 
Minstroi and the Bank, which shall set forth the terms and 
conditions of Housing Sub-loans, including, without 
limitation, 
Page  17
the principal terms and conditions referred to 
in the Annex to this 
Schedule, as well as the 
administrative rules and 
procedures to be followed by the 
Special Housing Fund; and 
(ii)
open an Special Housing Fund account for the Special 
Housing Fund which shall provide Housing Sub-loans to 
Developers on terms and conditions set forth in the Housing 
Fund 
Operational Manual, including, without limitation, the 
principal 
terms and conditions referred to in the Annex to 
this Schedule.
(h)
The City shall:
(i)
maintain policies and procedures adequate to enable it to 
monitor and evaluate on an ongoing basis, in accordance 
with 
indicators agreed with the Bank, the carrying out of 
the Project and the 
achievement of the objectives thereof;
(ii)
prepare, under terms of reference satisfactory to the Bank, 
and furnish to the Bank, on or about December 31, 1998, a 
report integrating the results of the monitoring and 
evaluation 
activities performed pursuant to sub-paragraph 
(a) above, on the 
progress achieved in the carrying out of 
the Project during the 
period preceding the date of said 
report and setting out the 
measures recommended to ensure 
the efficient carrying out of the 
Project and the 
achievement of the objectives thereof during 
the period 
following such date; and
(iii)
review with the Bank, by January 31, 1999, or such later 
date as the Bank shall request, the report referred to in 
sub-paragraph (b) above, and, thereafter, take all measures 
required to ensure the efficient completion of the Project 
and the 
achievement of the objectives thereof, based on the 
conclusions and 
recommendations of the said report and the 
Bank's views on the 
matter.
(i)
Not later than December 31, 1997, the City shall submit to the Bank a 
plan and a timetable of specific measures to improve its financial management system, 
acceptable to the Bank.
(j)
The City shall carry out the resettlement of the Affected Persons in 
accordance with  principles and guidelines agreed with the Bank and pursuant to a 
time-bound action plan, satisfactory to the Bank, which shall be prepared  on the 
basis of said guidelines and furnished to the Bank not later than three months prior 
to the expected date of  the proposed resettlement. 
(k)
Not later than three months prior to the commencement of activities under 
Part C of the Project, the City shall furnish to the Bank a policy statement defining 
principles and procedures applicable to the relocation of residents, from buildings 
requiring major rehabilitation in the center of the City under Part C of the Project. 
(l)
The City shall:
(i)
submit to the Bank, not later than December 31, 1998, a 
report on adoption of cost-recovery measures for the 
investments financed under the Project; and 
(ii)
review with the Bank, by January 31, 1999, the report 
referred in sub-paragraph (a) above, and, thereafter, take 
all 
the necessary measures to implement the recommendations 
of such 
review.
(m)
Prior to the commencement of any activities under Part B.1(d) of the 
Project, the City shall submit to the Bank a detailed plan acceptable to the Bank, 
which shall include, inter alia, the provisions on disposal of units, recovery of 
costs, building operations and recurrent cost financing, monitoring of the continued 
operation and the use of the buildings to be financed under Part B.1(d) of the 
Project.
Page  18
ANNEX
Terms and Conditions of Housing Sub-loans 
under Part C of the Project
Pursuant to the provisions of Schedule 6 to the Loan Agreement, the principal 
terms and conditions set forth or referred to in this Annex shall apply to Housing 
Sub-loans:
A.
Eligibility Criteria
1.
Housing Sub-loans shall be made for financing the costs of relocation of 
residents from buildings requiring major rehabilitation, including the costs of newly 
constructed apartments, and legal, administrative and moving expenses associated with 
such relocation.
2.
 Each Housing Sub-loan shall be made to a Developer which shall have entered 
into an agreement with the City on carrying out a rehabilitation project of selected 
buildings approved by the Bank.
3.
Housing Sub-loans shall not finance the acquisition of any interest in land.
4.
The maximum amount of each Housing Sub-loan shall be determined by the City in 
accordance with a methodology satisfactory to the Bank.
B.
Terms
1.
Each Housing Sub-loan shall be charged interest, on the principal amount thereof 
withdrawn and outstanding from time to time, at a rate to be determined by the City in 
respect of each Housing Sub-loan, taking into account a prevailing market rate and the 
City’s costs of administering the Special Housing Fund.
2.
Each Housing Sub-loan shall be made for a period not exceeding four (4) years.
C.
Other Conditions
1.
No expenditures requested for financing under Housing Sub-loans shall be 
eligible for financing out of the proceeds of the Loan unless:
(a)
the Housing Sub-loan shall have been approved by the Bank, and such 
expenditures shall have been made not earlier that sixty (60) days prior to the date 
on which the Bank shall have received the application and information required under 
paragraph C.3(a) of this Annex; or
(b)
the Housing Sub-loan  shall have been a free-limit Housing Sub-loan for 
which the Bank has authorized withdrawals from the Loan Account and such expenditures 
shall have been made not earlier that sixty (60) days prior to the date on which the 
Bank shall have received the request and information required under paragraph C.3(b) 
of this Annex in respect of such free-limit Housing Sub-loan. 
For the purposes of this Agreement, a free-limit Housing Sub-loan shall be:
(i)
a Housing Sub-loan other than the first three Housing 
Sub-loans; and
(ii)
a Housing Sub-loan not exceeding $250,000 equivalent.
2.
The City shall approve Housing Sub-loans to Developers upon presentation of the 
following documents:  (i) an agreement between the City and a Developer referred to in 
paragraph A.2 of this Annex; (ii) a description of the expenditures proposed to be 
financed out of the proceeds of the Loan; (iii) the proposed terms and conditions of 
the Housing Sub-loan, including the schedule of amortization of the Housing Sub-loan; 
(iv) security arrangements (collateral, guarantee, etc.) proposed for the Housing 
Sub-loan; (v) a relocation agreement concluded between the Developer and the tenant; 
(vi) documentary evidence confirming the tenant’s title to an apartment to which the 
Page  19
tenant, in accordance with the principles referred to in paragraph 2(j) of Schedule 6 
to this Agreement, is to be relocated; and (vii) such other information as the City 
shall reasonably request.
3.
(a)
When presenting a Housing Sub-loan to the Bank for approval, the City 
shall furnish to the Bank an application, in form satisfactory to the Bank, together 
with the documents referred to in paragraph C.2 of this Annex.
(b)
Each request by the City for authorization to make withdrawals from the 
Loan Account in respect of a free-limit Housing Sub-loan shall contain: (i) a 
description of the expenditures proposed to be financed out of the proceeds of the 
Loan; and (ii) the terms and conditions of the Housing Sub-loan, including the 
schedule of amortization therefor.
4.
Housing Sub-loans shall be made on terms whereby the City shall obtain, by 
written contract with a Developer or by other appropriate legal means, rights adequate 
to protect the interests of the City, the Borrower and the Bank, including the right 
to suspend or terminate the right of a Developer to the use of the proceeds of the 
Loan upon failure by such Developer to perform its obligations under its contract with 
the City.