British court suspends its judgment on Ukraine’s USD 3 bln debt to Russia

A British court ruled to fully suspend its March
ruling that concluded that Ukraine has no grounds to avoid repayment of a USD
3.0 bln debt to a Russian state fund, Ukraine’s Finance Ministry reported on
July 26. The suspension will hold unitl a court of appeal rules on the issue.
Ukraine’s appeal is scheduled to be heard by the Court of Appeal of England and
Wales in January 2018, according to the press release.

According to its press release, the judge “recognized
that this was clearly a case where the threshold conditions for permission to
appeal were satisfied, namely that the appeal had real prospects for
success.” Also, the judge has reportedly refused to safisfy the Russian
side’s demand that Ukraine submit a USD 325 mln security deposit for its claim,
according to the Ukrainian News agency.

Recall, a Russian state-owned fund refused to take
part in the restructuring of Ukrainian sovereign Eurobonds in fall 2015. The
USD 3 bln in bonds that the fund held (the “Russian debt”) matured in December
2015, though the Ukrainian government has yet to repay them, citing a
moratorium imposed by the Ukraine’s parliament.

Alexander Paraschiy: We have too
little information to share MinFin’s optimism about “the prospect of success”
in Ukraine’s litigation against the Russian fund. In the best case, Ukraine can
prove that this is not a simple debt issue, but an argument in the context of a
bigger geopolitical conflict.

Even if Ukraine is faced with a negative ruling in
appeals, we remain confident that the government will find ways to avoid
repaying this debt to Russia in the coming years, citing its deal with the IMF,
with Eurobond holders, as well as referring to a repayment moratorium imposed
by Ukrainian parliament.