Russia refuses Ukrainian debt restructuring without guarantee from West

RIA Novosti reported that the United States government has refused to guarantee Ukraine’s liabilities on debt to Russia. The report stated that the US has officially refused to guarantee the $3 billion in debt that Russia was considering restructuring to relieve Ukraine from paying it back by the December 20 deadline. The Russian Ministry of Finance issued a statement saying that if the debt were not paid back by the deadline, a legal suit would be filed against Ukraine.

Russian Minister of Finance Siluanov reported on November 16 that an “interesting” deal was extended to Ukraine at the G20 summit in Antalya, Turkey, but did not specify any other details. The Ukrainian government reached a deal in October with all bondholders excepting Russia to restructure its debt to ease financial burden, as its economy recovers from the blow taken after the 2014 Maidan protests and ensuing conflict with separatists in the east. Russia insisted on full repayment of the bonds by the original December 20 deadline, but Siluanov’s deal proposed a restructuring of the debt so that Ukraine would pay $1 billion each year for the next three, contingent upon guarantees from the West in case Ukraine were to default. Media reported that the deal offered to Ukraine left Russia better off than Ukraine’s private bondholders. A partner at the law firm advising Ukraine’s ad hoc creditor committee commented to Reuters that if Ukraine were to consider accepting the deal, it would have to consult its other bondholders.

A Russian Ministry of Finance (MoF) official stated on November 20 that Russia will not offer the deal officially until the International Monetary Fund (IMF) confirms Western guarantees of Ukraine’s debt. As of yet, there have been no media reports of IMF response to the statement, only Russian confirmation of US refusal to guarantee the debt. Observers reported that the deal showed Russia was keen on softening relations with the West, yet still demanded special treatment in the case of Ukraine’s debt. Russia Today reported that Russia has not yet received an official answer from Ukraine about the deal. A MoF official stated that there has been no official proposal sent to Ukraine, as Russia expects Ukraine as the debtor to officially approach Russia first.

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