Ukraine, Russian MinFin meet to discuss USD 3 bln debt payment

The finance ministers of Russia and Ukraine held talks at the annual IMF/World Bank meeting in Lima, Peru, on Oct. 10, Ukraine’s Finance Ministry reported. Ukrainian Finance Minister Natalie Jaresko said she outlined the details of the debt operation and called upon Russia to participate in the offered restructuring. From his end, Russian Finance Minister Anton Siluanov told the TASS news agency, “We voiced the position that debt of the Russian Federation should be repaid… We are not commercial creditors, we are a sovereign lender, therefore, such restructuring conditions are not acceptable for us”. At the same time, both sides agreed to continue the dialogue, TASS reported.

Recall, USD 3 bln in Eurobonds that were purchased by the Russian state “National Welfare Fund”, due on Dec. 20, 2015, was included in Ukraine’s USD 24 bln debt operation. The first bondholder vote to approve the restructuring of the Ukrainian Eurobonds will occur on Oct. 14. Throughout the talks, Russia has insisted on its treatment as an official lender, whom, according to IMF rules, Ukraine cannot default to. Meanwhile, the IMF implicitly recognized the “Russian” debt as private by allowing it to be included in Ukraine’s debt operation. Though, the IMF it failed to explicitly determine the status of this debt.

Alexander Paraschiy: The willingness of both sides to continue their talks is encouraging, even though their positions are far from a consensus. It looks like neither Ukraine nor Russia is going to officially ask the IMF board to determine the status of “Russian” debt as both sides are afraid to lose.

Clearly, we do not expect the Russian fund will vote in favor of restructuring of Ukrainian Eurobonds on Oct. 14, though what is also clear to us is that Ukraine won’t repay the USD 3 bln this year. The ultimate outcome of the Ukraine-Russia discussion is hard to predict at this stage.