The maturity of the Ukrainian Eurobonds purchased by Russia, is coming December 20, 2015. The Declaration of default on Russian debt may become an obstacle for Ukraine’s bailout private creditors, but not from the IMF, says Ukrainian expert Volodymyr Sidenko
KYIV, 16 Dec. The situation with the Ukrainian debt to Russia $ 3 billion is likely to grow by a court scenario, however it is not excluded that Russia in the last moment will come out with new proposals for restructuring, according to the expert on economic issues of the Ukrainian center for economic and political studies named after Alexander Razumkov center Vladimir Sidenko.
The maturity of the Ukrainian Eurobonds for $ 3 billion, bought by Russia in late 2013, comes December 20 of the current year. Russia has previously expressed a willingness to restructure the debt, allowing it to repay one billion in 2016-2018, subject to the provision of guarantees for it from the authorities of the United States or the EU, or one of the international financial institutions.
However, official proposals to the Kiev Russia was not sent, because, according to international rules, such proposals must first go the borrower and not the lender. Russia said it would resort to international arbitration if the debt is repaid on time.
“The President of Russia Vladimir Putin announced agreement in principle of Russia concerning the postponement of payment of this debt, the initiative was launched with one condition that the U.S., EU, or any reputable international organization such as IMF, guarantee the payment by Ukraine of deferred debt. Because, as I understand it, today there is no evidence of such assurances, the Finance Ministry took the position that they are prepared to transfer the case to the international court of justice, so now the real prospect is that there will be an international court,” Sidenko said on Wednesday, answering the question of what he sees as the most probable scenario of development of the situation on the Russian debt.
The expert believes that the Declaration of default on Russian debt could theoretically be an obstacle for Ukraine’s bailout private creditors, but the main financial partner of Ukraine, which is the IMF to continue lending.
“It (the default — ed.) will impact theoretically on the conditions of access to international private financial markets, but how much will be affected, hard to say, because in the West the perception of Russia’s actions (on Ukrainian debt — ed.) in General, such that it is politically motivated, so perhaps such a regime of default will have catastrophic consequences, because you will understand that it is some political games”, — the expert believes.
“The IMF regarding this specific case decided that it (the default — ed.) will not influence in a negative way, i.e. it will not slow down the allocation of Ukraine the next tranche, and if it falters, it falters for other reasons and not due to non-payment of Russian debt,” said Sidenko.
The analyst believes that the continuation of IMF lending depends largely on the adoption of the Kyiv budget for 2016, which would meet the requirements of the Fund.
The chances of success in court
Thus Sidenko found it difficult to give a definite forecast which party has more chances to win international court of the Russian debt of Ukraine.
“It is difficult to say given the fact that Russia has more experience, there are certain channels of influence on these things, Ukraine has here a lesser experience, but it can increase your potential and even ask for technical assistance from the EU in order to hire consultants who would help her solve this issue. In any case, I think that the General political context gives us perspective a definite loss, but the situation is ambiguous”, — he stressed.
While the analyst believes that the default on Russian debt will not lead to the deepening domestic economic crisis.
“I think that Ukraine has already passed the acute stage purely monetary collapse and the macroeconomic state, which is today, when the tight monetary policy of the Central Bank of a collapse of the hryvnia should not expect” — summed up the expert.
However, he did not exclude that “at the last moment Russia will come out with some new variations of possible restructuring to influence the situation.”