IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental /social information submitted by the project sponsor. The following potential environmental, social and health and safety issues associated with this project include: - Environmental impact and safety management of associated facilities; - Plant site past contamination and HAZOP review; - Occupational health and safety issues; - Corporate capacity in environmental management and monitoring; and - Sustainable community relations and HIV initiatives. An Environmental, Social, Health and Safety (ESHS) audit is currently underway, and subsequent corrective actions will be included in the Environmental and Social Action Plan (ESAP) to be completed by the end of October 2004.

The sponsor has demonstrated that the proposed expansion project will comply with applicable Russian Federation regulatory framework and meet IFC requirements. The information provided about how these potential impacts are addressed in the development of the project is summarized in the paragraphs that follow. IFC is satisfied with Kuibyshevazot’s current social, environmental, health and safety performance. Kuibyshevazot has developed an Environmental Policy, which says that “Kuibyshevazot strives to protect the environment while dealing with different production challenges and boosting its capacities”. There is a team of professionals in charge of the environmental, health and safety aspects of the operation, under the responsibility of the Deputy Chief Engineer. Kuibyshevazot will upgrade the environmental function to ensure proper environmental monitoring and implement all appropriate mitigation measures included in the ESAP. Kuibyshevazot will formalize and develop a capacity building program and training plan on environmental issues for company management, employees and contractors. The existing scope and purpose of, as well as data from, environmental monitoring, will be broadened to provide an assessment of the impacts of production operations on the environment. It will also incorporate recommendations for preventive measures in case of emergency situations. During the last few years, an effort was made to reduce: - process water consumption (by using recycling techniques), - gaseous emissions (by generating less dust, using new scrubbersand containing nitric acid off gas) and - waste generation (waste here includes sludge, sewerage and specific production waste). Over the last two years Kuibyshevazot has spent about $1 million annually for environmental improvements. The company is looking at using phenol as a substitute to benzene. As part of the project, KuAz will upgrade its various emergency response, contingency plans and HAZOP for the plant and associated operations to international best practice. Kuibyshevazot will update its health and safety management system in accordance with international standards. Necessary additions, adjustments and rethinking of the safety training system will be done in the framework of the company’s adopted health and safety policies. It will include restatement of procedures and work instructions. The focus will be to develop a work-related risk assessment plan, conduct training, implement additional work-place monitoring, perform equipment/machinery preventive maintenance, and introduce constant monitoring of the most dangerous activities in the production cycle. A medical monitoring system is in place, based on physical capability requirements for the various occupations, and general routine medical examination. Kuibyshevazot has agreed to review its organizational structure for Occupational Health and Safety (OHS) management and to improve prevention measures (such as appropriate personal protective equipment and posting) rather then being responsive to accident. In order to improve its relationship with all stakeholders, a Public Consultation and Disclosure Plan (PCDP) is currently being prepared, which will be disclosed. Included in the ESAP will be a requirement that its implementation be closely monitored in the next month. Kuibyshevazot conducts regular worker and union meetings at the plant site; it also maintains open communication with local citizens, municipal authorities and community organizations. Based on the audit findings and action plan (ESAP), Kuibyshevazot will develop and implement a complete set of environmental, occupational health and safety activities and management tools to meet best practices. The ESAP will include a number of activities (as outlined above) that will be implemented during the life of the IFC project. Additionally, as part of its partnership with IFC, Kuibyshevazot will consider programs or projects to improve energy efficiency and minimize discharges to the natural environment. Kuibyshevazot has expressed interest to work with IFC Against AIDS (an IFC program), although it was mentioned that there are cultural sensitivities on the AIDS issue in Togliatti.

This ERS contains the full environmental and social documentation prepared for the project.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: - the status of implementation of any measures contained in the Environmental and Social Action Plan and - ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.