Ukraine Defaults on $3 Billion Bond to Russia
Source: Bloomberg
By Natasha Doff
December 18, 2015
Ukraine said it won’t repay $3 billion in bonds due to Russia, moving a step closer to a court battle amid a new wave of economic tension between the two ex-Soviet neighbors.
Prime Minister Arseniy Yatsenyuk said Kiev is imposing a moratorium on the note due Dec. 20, which Russian President Vladimir Putin bought two years ago as part of an abortive bail-out for Ukraine’s former leader just months before he was toppled. Russia said on Friday it will wait until a 10-day grace period on the bond expires on Dec. 30 before starting legal action.
Ukraine, its finances reeling from a two-year-old conflict with Russian-backed separatists in the east of the country, had pushed Russia to join a $18 billion restructuring with commercial creditors this year. But Russia argued the debt was sovereign, despite its unusual Eurobond form, and proposed its own repayment terms.
The default “is just confirmation of the unimproved relations between the countries," said Simon Quijano-Evans, the London-based chief emerging-market strategist at Commerzbank AG. “The hope is that backstage negotiations will succeed in finding a solution. Otherwise, a legal case would probably ensue, unnecessarily complicating the ongoing political discussions surrounding eastern Ukraine and the sanctions."
Read more: http://www.bloomberg.com/news/articles/2015-12-18/ukraine-defaults-on-3-billion-russia-bond-as-court-battle-looms
= new reply since forum marked as read
Highlight:
NoneDon't highlight anything
5 newestHighlight 5 most recent replies
Duckhunter935
(16,974 posts)Much more than 3 billion for the property and land they have stolen
Purveyor
(29,876 posts)
Duckhunter935
(16,974 posts)
Xithras
(16,191 posts)We'll forgive xxx billions in debt and offer you yyy in exchange for you giving up your claims to the territory you've lost.
The problem here is very real. The risk scoring agencies tend not to pay too much attention to politics and will dramatically increase Ukraines risk profile if they default. This will substantially increase the cost of taking on new debt and has the potential to be financially painful for Ukraine. The IMF has also officially stated that the Russian debt is official and not private, meaning that the Ukrainian government is on the hook for it. Under IMF rules, any default on official national debt triggers automatic defaults on their other debts, which would be an economic catastrophe for Ukraine. While there would undoubtably be a massive amount of political pressure applied to the IMF to prevent that from happening, the IMF tends to be fairly hardline on this stuff (see: Greece and Argentina).
The question, at this point, is whether Russia can make Ukraine a sweet enough deal so that the Ukrainian leadership can sell it to it's own people as a "Ukrainian win". Writing off vast chunks of debt, if combined with other concessions, could potentially get them there. Especially if the other option is fighting on with this ugly war which will, under the best of circumstances, simply result in them reclaiming territory in which half the population is openly hostile to the central government.
newthinking
(3,982 posts)the country is again under assault by roaming bands of neo-nazis threatening judges and the like and terrifying the population; I don't think that there is much concern about the welfare of the people themselves.
See below (Right sector is also taking over border positions in Ukraine).
Ukraine: When the Right Sector Runs the Courtroom
In Ukraine there is almost daily right-wing violence against the police and judiciary.
http://www.counterpunch.org/2015/12/18/ukraine-when-the-right-sector-runs-the-courtroom/
