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Published in Stream:
Ukraine Live Day 624
Press by
The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
After Russia Rejects Debt Restructuring IMF May Change Rules So Ukraine Won't Have To Pay Russian Debt
5 years
What Do Russian OSCE Monitors Say When Drunk?

Ukraine is scheduled to pay Russia $3 billion on December 20, a repayment for a Eurobond which was purchased by Russia in a deal between now-ousted Ukrainian President Viktor Yanukovych and Russian President Vladimir Putin. But now that Russia has rejected a deal to restructure the debt, the bill may not get paid on time, if at all.

While the current Ukrainian government has been able to restructure the majority of its debt deals with private debt owners, Russia has refused to accept those same terms and is instead demanding that Ukraine repay its debt by December 20.

Voice of America reports:

Ukraine had agreed the debt exchange with a group of its largest creditors in August in order to plug a $15-billion funding gap under an International Monetary Fund-led $40-billion bailout program, but bondholders still needed to approve the plan by vote on Wednesday.

"More than 75 percent of creditors on each bond voted for the restructuring," Prime Minister Arseny Yatseniuk said. "As expected, the only country that didn't take part in the voting was the Russian Federation."

A $3-billion Eurobond held entirely by Russia is included in the 14 sovereign and sovereign-guaranteed bonds earmarked for restructuring, but the Kremlin has repeatedly said it will not participate in the process, arguing the debt has the status of an official loan as opposed to a commercial one.

If Ukraine defaults on its loan repayment to Russia it could be seen as a direct violation of Ukraine's deal with the International Monetary Fund, which is not allowed to lend money to any country which is in default of its payments to another government.

The IMF which pressed Ukraine to restructure its debt and encouraged creditors to accept the new conditions, on the other hand, is working to change the above policy in order to continue to aid Ukraine even if it defaults on its payments to its one hold out -- Russia. AFP reports:

The IMF is working on a reform of its lending policies to ease the rule in "carefully circumscribed circumstances," said Fund spokesman Gerry Rice.

"This has been part of a broader program of work related to the reform of our lending framework governing sovereign debt restructuring," Rice said.

The final decision on the ongoing work will come from the IMF's executive board, which should take up the matter in the near future, he said, without providing further details.

Under pressure from the IMF, Ukraine has reached an agreement with private creditors that wipes out $3.6 billion in debt and reschedules repayment on $8.5 billion.

In a statement Thursday, the Ukrainian finance ministry said that creditors involved in the debt restructuring should expect to receive new Ukrainian sovereign securities on November 12.

Russia, of course, has raised concern over the possible IMF rule change.

Anders Aslund of the Atlantic Council argues that the debt Ukraine owes to Russia is "odious debt" and Ukraine, therefore, has no legal obligation to repay it, especially since russia has refused the restructuring deal. In fact, his article goes even further -- Ukraine Must Not Pay Russia Back:

In February 2014, the Kremlin launched military aggression against Ukraine, first annexing Crimea and later pursuing military subversion in southern and eastern Ukraine. For more than a year, Russian-commanded troops with a mixture of volunteers and regular Russian soldiers have occupied 3 percent of Ukraine's easternmost territories.

Moscow's war has caused major damage to Ukraine. Russia has not only usurped the territory of Crimea but also many enterprises, goods in storage, cash, and other bank assets. In eastern Ukraine, Russian troops have devastated buildings, factories, and bridges. The war has cost Ukraine at least 7 percent of GDP in lost production, and foreign investors have been scared off. Russia has also pursued a trade war against Ukraine, eliminating 18 percent of the country's prior exports. Ukraine has no reason to pay such an aggressor; in fact, Russia ought to pay reparations to Ukraine.

Putin negotiated this deal personally with former President Viktor Yanukovych to provide him with a lifeline. It was never meant to benefit the Ukrainian nation.

Read it here:

Ukraine Must Not Pay Russia

The Atlantic Council promotes constructive leadership and engagement in international affairs based on the central role of the Atlantic Community in meeting global challenges. Founded in 1961, the Council provides an essential forum for navigating the dramatic shifts in economic and political influence that are shaping the twenty-first century by educating and galvanizing its uniquely influential, nonpartisan network of international political, business, and intellectual leaders.

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Nov 03, 2015 23:07 (GMT)
-- James Miller