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BOX-FOLDER-REPORT: 122-1-230
TITLE:             Yugoslav-Rumanian Iron Gates Project
BY:                Stankovic
DATE:              1960-5-3
COUNTRY:           (n/a)
ORIGINAL SUBJECT:  Yugoslav Special No.887/1960

--- Begin ---

"E" DISTRIBUTION - 450 3 MAY 1960

RFE EVALUATION AND ANALYSIS DEPARTMENT
Background Report
Yugoslav Special
No. 887/1960

YUGOSLAV-RUMANIAN IRON GATES PROJECT
(A Yugoslav View)

Munich, May 3 (Stankovic) -- The construction of two
hydroelectric power stations would cost more than 450 million
US dollars at the Danube "Iron Gates" section of the
Yugoslav-Rumanian border, said the Belgrade weekly "Ekonomska Politika"
of 27 February 1960. Writing under the title "The Iron Gates
(Djerdap)", N. Eomnenic said that "a joint (Rumanian-Yugoslav)
Technical-Economic Memorandum... will be sumbitted to the
Governments of Yugoslavia and Rumania." The Memorandum was worked out
by the Belgrade firm "Energoprojekt" and the Bucharest "Institute
for Power and Project Study" after long research work aimed at
finding the solution to smooth navigation in the Iron Gates sector,

The Yugoslav-Rumanian commission has found that the Iron
Gates sector is "the most suitable place for the erection of a
dam by means of which a age-long problem of navigation on the
Danube River would be solved, and at the same time exploit the
water power in this section of the Danube for the production of
8.3 billion kWh of electric current." Komnenic admitted that even
for the first stage of construction of the Sip-Masusi Boba (in
Rumanian version Sip-Gura Vaii) hydroelectric power station "the
volume of investments of 278 million dollars... certainly
represents a difficult capital investment venture for both countries."
He added that Yugoslavia and Rumania would request "favorable loans
primarily from the countries interested in smooth navigation on the
Danube River, From Komnenic's explanations one can see that the whole
project is still in the negotiating phase and that it "poses the need
for further concrete talks and analyses by means of which the problem
offinancing as well as all other, mostly economic and legal, problems
stemming from such a grandiose venture would be solved."

Following is the full translation of Komnenic's article
published under the titles

[page 2]

YUGOSLAV BACKGROUND REPORT No. 887,

THE IRON GATES (DJERDAP)
Economic and Technical Solution

The "Egergoprojekt", Belgrade, and the Institute for
Power and Project Study, Bucharest, have completed all
technical-economic documentation on the regulation of the Danube River in
the Iron Gates (Djerdap) sector. This is the first extensive study
of the technical-economic possibilities and technical solutions
for a smooth development of navigation and for exploitation of
the water power in the Iron Gates sector for the production of
electric power. A joint Technical-Economic Memorandum (after the
carrying out of corrections during the month of March by a
Yugoslav-Rumanian commission) will be submitted to the governmenis of
Yugoslavia and Rumania. 

It can be seen from the geologic explorations carried out
up till now, that the so-called Sipska Klisura (Sip Gorge), in the
close proximity of Tekija, known under the name of "Iron Gates",
represents, in the geologic sense, the most suitable place for the
erection of a dam, by means of which the age-long problem of
navigation on the Danube River would be solved, and at the same time
exploit the water power in this section of the Danube for the
production of 8.3 billion kWh of electric current.

Based on the examined geo-morphological, geological and
hydrological characteristics of the Iron Gates sector, there are
three possibilities, rather, there are three possible solutions
which may serve as the basis for regulation of the (flow) of the
Danube River for the purpose of smooth navigation and production of
electric current.

First Variant: building of a hydroelectric power station
in the Sip-Masusi Boba section, with elevation line of from 63 to
67, and a hydroelectric power station at Gruja near Radujevac with
elevation line of from 38 to 40;

Second Variant: building of a hydroelectric power station
in the Orsava section with elevation line of from 63 to 67, and a
hydroelectric power station in the Gruja section with elevation line
of from 46 to 48;

Third Variant: building of three hydroelectric power
stations: first in the section upstream from the mouth of the
Porecka Reka (river.) near Juce with elevation line 63 to 67; second
in Sip-Masusi Boba section, elevation line 49 to 51; and third in
Gruja section near Radujevac, elevation line 38 to 40.

[page 3]

YUGOSLAV BACKGROUND REPORT No. 887, page 3

The amount of investments, as well as all other value
indicators, have been calculated on the basis of world market
prices in US dollars. This has been done for practical reasons,
in view of the fact that considerable difficulties had existed
in connection with the. conversion of prices of various kinds of
materials, equipment etc. in "both countries into one of the
domestic or foreign currencies.

By means of analyzing a number of basic economic
indicators, it is not difficult to notice that regulation
of the Danube River in the Iron Gates sector represents a very
interesting investment venture which deserves serious
consideration.

The main economic effect should be viewed primarily
from the standpoint of the ever-growing needs of cheap electric
power. From past data on development of electric current
consumption, it can be seen that a doubling of consumption of electric
current in both countries takes place nearly every fifth or sixth
year, which considerably departs from the world average. On the
average, electric current consumption doubles in the world every
10th year.

Profitability of Investments

During the discussions carried on so far, agreement
has been reached to recommend to the Yugoslav-Rumanian Mixed
Commission on Coordination of Work in the Iron Gates Sector,
and thereby also to the governments of both countries, to choose
the first variant with two stages of electric power stations
(at Sip and Radujevac), in view of the fact that the following
economic advantages are gained by such a technical solution of
the problem of regulation of the Danube River in the Iron Gat'es
sector:

- lowest investments and greatest general economic
effect;

- highest possible insurance of power of the electric
power stations;

- the greatest power and economic effect achieved
already during the first stage of development of
the Sip Power Station;

- the best distribution of the quality of the electric
current.

[page 4]

YUGOSLAV BACKGROUND REPORT No. 887,

The profitability of the proposed technical solution
(first stage: building of hydroelectric power station in the
Sip-Masusi Boba section; second stage: building of hydroelectric
power station in the Radujevac-Gruja section) can be seen from
the following few basic power-economic indicators:

(value in 1,000 US dollars)
Power Power Total
station station
M.Boba-Sip Radujevac-
elevation Gruja
 elevation
 40

a) funds: I stage II stage Total

- investments, without
interest 278,514	174,727	453,241
Of which:

- damage and insurance	64,296	27,360	91,656
- % of participation
of damage compared
with investments for
power and navigation	23.08%	15.56%	19.78%
-interest	40,432	25,569	66,001
- volume of investments
together with interest	327,947	201,297	529,244

b):

- installed power in MW	1,450	364	1,814
- annual output in GWh	8,337	1,790	10,127
- cost price with 4%
interest on investments
and repayment period of
50 years
(US cents/kWh)	0.41	1.1	0.56

- Cost price (at rate of
632 din. for 1 US dollar)
dinars/kWh	2.59	6.95	3.53

It is very difficult to compare specific investments
by kilowatts of installed power with other projects in the

[page 5]

YUGOSIAY BACKGROUND REPORT No. 887,

country, in view of hydroenergetic and technical characteristics,
as well as the quality of electric power of this project.
Meanwhile, in the TVA power system in the United States there is a
very similar power project which, from the technical-economic
viewpoint, may be compared with the chosen variant in the Iron
Gates sector. These comparisons may be seen from the following
table:

Hydroelectric power Installed Dollar price
stations power in kW per kW

Sip, elevation	63	1,450,000	213
Gruja, elevation	40	364,000	553
Sip plus Gruja	1,814,000	281
TVA in United States	966,000	284

H.E. Power Stations
in Yugoslavia:
(at rate of 632 din for
1 dollar)

H.E.P.S. Vlasina-Vrlo I	22,000	530
" Valsina-Vrlo II	22,200	301'
" Zvornik	84,000	361
" Ovcar Banja, Ras and
Medjuvrsje	19,000	800
" Vuzenica	48,600	253
" Mariborski Otok	54,000	240
" Jablanica	144,000	377
" Mavrovo	102,000	238
" Eokin Brod	127,000	170
" Tuhred	60,000	242
" Ozbalt	60,000	272
" Perucica	216,000	197
" Split	212,000	177
" Trebisnjica	576,000	148

Easier Navigation on the Danube

In view of the fact that, with the investments in
electric power, the problem of navigation in the Iron Gates
sector of the Danube would also be solved, all the analyses
which have been made show that the proposed technical solution
deserved serious attention not only on the part of Yugoslavia

[page 6]

YUGOSLAV BACKGROUND REPORT, No.887,
and Rumania, but also on the part of all the other countries which
are interested in smooth navigation in the Iron Gates sector.

Profitability of this capital investment venture must
therefore be viewed also from the angle of improved navigation.

The building of just one hydroelectric power station in
the Sip section would solve all the present-day difficulties of
navigation. This for the fact that, the building of this
hydroelectric power station would, by holding the water back, flood
the entire sector of the so-called "Iron Gates" as the lowest
sector where great difficulties for navigation have existed up
till now. In addition to this a number of townships would be
flooded: Orsava on the Rumanian side (population about 8,000):
Tekija and a part of Donji Milanovac (population about 50,000;
on the Yugoslav side - which would make possible the elevation
of the water to the necessary level and thereby do away with all
limitations in navigation on the upstream sectors. In this way
the main improvement factors are:

- full utilization of shipping space, because there would
be no limitation of draught for the floating craft;

- free formation of towing convoys;

- free overtaking and by-passing without any limitation;

- extension of navigation period during low water time,
because sufficient draught would be ensured;

- full possibility for night navigation;

- cancellation of the present obligation of piloting
vessels;

- increase in capacity in both directions from 10 to 24
million gross tons. 

Problem of Financing and Participation

The volume of investments of 278,000,000 dollars for the
Sip-Masusi Boba hydroelectric power station, as the first stage,
certainly represents a difficult capital investment venture for
both countries. For this reason it will be necessary to examine
by means of further analyses the possibility of obtaining of
favorable credits (loans), primarily from those countries which
are interested in smooth navigation on the Danube river. Provided
favorable loans are obtained and provided sound work teams are
gotten, a possibility exists for putting the Sip-Masusi Boba
hydroelectric power station into operation during the year 1970
with a production of 8.3 billion kwh of electric current, one
half of which would belong to Yugoslavia and the other half to
Rumania.

YUGOSLAV BACKGROUND REPORT, No.887, No.7

As regards Yugoslavia, it should be pointed out that we
have enormous power available on the rivers Neretva, Rama, Vrbas,
Drina, Recina, Sava and so on, which are all in the electric
power consumption regions. Besides, the price of this electric
current, both for the installed kw and for the produced kWh and its
quality, is close to the price and quality of the current produced
in the Iron Gates sector. Therefore, it is understandable that
Yugoslavia would prefer to invest capital from its national income
in the exploitation of the available power of domestic rivers, in
view of the smaller volume of investments, easier linking up of
power stations and smaller risk of possible surprises.

As to Rumania, with the exception of the Danube river
and some other smaller rivers, she does not have suitable water
sources available for the production of cheap hydroelectric power.

The economic interests of Yugoslavia and Rumania as well
as of the other countries which are interested in smooth navigation
on the Danube, impose the need of further concrete talks and
analyses by means of which the problem of financing as well as all
other, mostly economic and legal, problems stemming from such a
grandiose venture would be solved.

End

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