This is the story of Vladimir Putin... forgetting to consult his calendar. The Russian president’s approaches have long been famous for being firmly stuck somewhere in middle years of past century. However, the G20 Antalya Summit saw Putin painfully stumbling over current affairs... Or maybe not...
At first glance, Putin’s ‘proposal’ to resolve the fate of the Russian loan, which the Kremlin provided to a risky borrower, I mean the Azarov government of Ukraine, on particularly favorable terms, obviating Russia’s own safeguards (it is known that the agreement required a special order of Prime Minister of the Russian Federation Dmitry Medvedev to go forward), looks like an attempt to “jump on the bandwagon of the train that is about to leave...” All the while, the head of the Russian state pretends that he is not only not late, but controls the train driver as well...
The Russian loan to Ukraine is up for final repayment on December 25. The Ukrainian government has repeatedly made it clear that in case of Russia’s failure to join restructuring on terms common to all creditors, Ukraine will not repay the debt at all, but declare “a technical default.” If it comes to that, the fate of this loan would likely be for the courts to decide, which would be time-consuming and demand additional resources for questionable prospects.
Ukraine completed the partial restructuring of foreign debt on November 12, following the issue of new bonds to commercial lenders. The restructuring did not affect only one security of these listed by the government as subject to revision of terms, and this exception is the three-billion-dollar Russian loan, as covered in the relevant resolution of the Cabinet of Ministers of Ukraine adopted on November 12, 2015. The day before, the Finance Ministry said that Ukraine would not issue new securities for Russia, because the Russian side rejected the restructuring.
Ukraine’s three-billion-dollar debt to Russia appeared in the last months of the Yanukovych presidency. In December 2013, Mykola Azarov’s Cabinet issued Eurobonds worth three billion dollars and carrying a higher coupon than the market rate, which were then bought out in full by the Russian National Wealth Fund.
President of Ukraine Petro Poroshenko called the Russian loan “the bribe to compensate Yanukovych for rejecting the course of European integration.” Even so, the Ukrainian side still listed the Russian loan among securities, which it aimed to restructure under the four-year cooperation program with the IMF. We are talking here about 17.5 billion dollars of financial assistance, which had as one of the key conditions for its disbursement Ukraine partially restructuring its commercial public debt.
Now, negotiations on restructuring began back in March and ended on October 14 in London when the meeting of creditors of Ukraine approved the restructuring terms. They include a write-off amounting to 20 percent (three billion dollars in total) and restructuring of further 8.5 billion dollars. The parties have agreed that Ukraine will not pay its creditors for four years, which are needed for economic recovery. According to signatories of these agreements, this time should be enough for the Ukrainian economy to deal with the crisis’s consequences and become able to pay bills again. Actually, the November 12 issue of new Ukrainian government Eurobonds was the final confirmation of these agreements.
Andrii NOVAK, chairman of the Committee of Economists of Ukraine: Ukraine should not repudiate the loan, but has to declare the complete moratorium on the repayment of this debt until the complete withdrawal of Russian troops from the Donbas and Crimea
Russia did not participate in the London meeting of creditors. Its leaders said that they expected Ukraine to pay on time, that is on December 25, or face default. Such categorical position of the Russian side, as reported previously by The Day, was based on the understanding that for Ukraine, such a scenario would actually mean the end of cooperation with the IMF, as the Fund’s rules are clear: no debtor in technical default on even one of its obligations is to be provided IMF loans.
Ukraine still did not succumb to blackmail. Prime Minister of Ukraine Arsenii Yatseniuk told German newspaper Handelsblatt that Ukraine “cannot treat Russia differently from the rest of the international lenders.” “We offer Russia identical terms,” the prime minister said, and set the deadline for reaching an agreement on October 29.
And now, when all the deadlines have been missed, the Russian president appears in the talks and declares: “we have reconsidered this issue” and decided to offer you “better terms” than you have asked for. They say that the Russian side, taking into account the economic situation of Ukraine, is ready to wait a year. Moreover, it “allows” Ukrainian to repay the debt not at once, but in one-billion installments, to be paid annually for three years. They have one condition, though, asking that the EU or the US act as the “guarantor” of Ukraine in these difficult “charity-financial” matters. This gesture, according to Putin, would be seen by Russia as a guarantee that the West itself believes in the Ukrainian economy and its ability to repay debts in the future. Putin allegedly already discussed this proposal with US President Barack Obama and IMF head Christine Lagarde.
It was November 16. Putin was aware of all negotiations and deadlines, but still suddenly brought up the Yanukovych loan at the G20 summit, even though Ukraine as well as the West had ostensibly dealt with the issue in full. And no one dared to say to him: “Sir, your train has gone! You are late.” “Shit happens,” but a meeting of the Board of Directors of the IMF is scheduled for November 23, which is expected to consider lifting the ban on providing loans to countries in arrears to official creditors. But no... The silence continues.
Chairman of the Committee of Economists of Ukraine Andrii Novak told The Day that in this Yanukovych loan affair one thing was clear: Ukraine had to get out of the corner it is being painted into by the Kremlin. “Should we confront Russia in financial or legal field, we will lose,” he said. The only correct step for us, in his opinion, is to declare that we do not repudiate our obligations, but announce a moratorium on their repayment until Russia returns Crimea and leaves the Donbas.
