The Cabinet of Ministers of Ukraine on December 18 imposed a moratorium on the payment of debt to Russia for 3,075 billion, maturing on December 20. The government is prepared to sue the city of Moscow.
The court to be
Russia has previously expressed a willingness to restructure 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.
As noted earlier, Finance Minister Anton Siluanov, foreign partners refused to give such guarantees. After that the Russian President Vladimir Putin instructed the Cabinet to sue the Ukraine, if that will not repay the debt.
Storchak on Friday explained that in accordance with the loan documentation the fact of non-payment is recognized after the 10-day grace period after the date of payment of the obligations on external debt, which Ukraine begins on December 20.
“Thus, despite the moratorium… we continue to proceed from feasibility to proceed to trial only after the expired 10-day grace period,” he said.
However, he expressed confidence that colleagues from Ukraine as potential participants in a trial have no chances to win this process.
After the speech Storchak Minister of Finance of Ukraine Natalie Jaresko said that Ukraine is ready to negotiations with Russia on the debt, and expressed the hope the pre-judicial decision of the question. Prime Minister of Ukraine Arseniy Yatsenyuk earlier on Friday claimed that the Ukrainian authorities are ready to sue Russia because of a debt in 3 billion dollars.
Under the new rules
In early December, the IMF Board of Directors approved a reform that allow the Fund to lend to debtors, even in case of default on sovereign debt (indebted to the lender).
Commenting on the decision, the Minister of Finance of the Russian Federation Anton Siluanov called it hasty, biased, taken exclusively at the expense of Russia and to legalize the possibility of Kiev to pay its debt.
However, as noted Storchak, at the moment, Ukraine is unlikely to find new sources for refinancing the debt, and limits of financial assistance by such institutions as the IMF, the EBRD, is likely to be exhausted in 2016.
“Of course, we can assume that someone perkreditan Ukraine or, as they say, to refinance its accumulated debt, but with the commencement of trials of the willing from the private sector, most likely, will not be”, — told reporters Storchak.
He noted that he did not see, “at the expense of what additional resources the Ukrainian government will carry out structural reforms”, such as the reform of “Naftogaz” and distributive networks of Ukraine, requiring huge investments.
Interpretation of stumbling
The Ukrainian government interpreted this duty to the Russian Federation as commercial, as it was formed as a result of the redemption of the bonds on the Irish stock exchange, and included bonds purchased by Russia in the list of securities the holders of which are private creditors, and on which the decision of restructuring.
However, according to the IMF rules, the instrument of acquisition in this case does not matter: the status of the debt qualifies for the purchaser. The Russian Federation also indicates that Ukraine’s bonds have been purchased at non-market conditions (low interest rate).
The IMF previously confirmed that the debt of Ukraine to Russia is official, not private, and therefore, according to the rules of the IMF cannot be renegotiated on the same terms as the debt to private creditors.
Ukraine on 13 November, completed the restructuring part of the debt, which affected securities to $ 15 billion, of which $ 3 billion was written off.
“Unfortunately, this erroneous point of view that the Eurobonds of Ukraine belonging to Russia and to private creditors, are one and the same, brought the situation to this judicial impasse. But it so happened. The court will look, in my opinion, is very simple,” — said Storchak.
Go to the end
The Deputy Minister noted that after a positive court decision in favor of Russia will enter into force, the question arises of its execution, and it will be difficult to implement.
“As usually happens with any judicial decision taken in respect of the sovereign creditor (the prospects of repayment of Ukraine misty — ed.). Assets under sovereign immunity, and if they voluntarily want to return the money, to enforce a judgment, the creditor or the plaintiff in this case will have to look for these assets… and unprotected by sovereign immunity,” — said Storchak.
According to him, it is quite time-consuming, hard work. “If Ukraine as a sovereign state, the international assets of 3 billion dollars, I don’t know. Most likely, there is no money, so the process is long (will — ed.)”, he continued.
He noted that Ukraine is experiencing a real financial hardship. “We always said we didn’t want these financial difficulties make it worse. And the offer that was made in Antalya, suggests that Russia is sincerely acted. On the present value of the proposal announced by the President (Putin – ed.) very close to that, on what terms private creditors restructured the debt. It is the opinion of IMF experts,” — said the Deputy head of the Ministry of Finance of the Russian Federation.