Putin Pans Ukraine’s Debt Moratorium As “De Facto Default”, Threatens Court
In exactly a month, Ukraine will owe Russia a $75 million debt coupon payment. Finance Minister Anton Siluanov told reporters in Moscow today that “if they miss the payment, we will use our right to go to court.” Then it got serious, as Vladimir Putin instructed Russian Prime Minister Dmitry Medvedev to assume control of Ukraine’s repayment of its $3-billion debt in Eurobonds that Russia bought in 2013, slamming Ukraine’s bill allowing them to impose a moratorium on foreign debt repayments as a de facto announcement of default. As one market participant warned, “I would wait until after June 20 to go forward with” any moratorium, as “if Russia takes Ukraine to court, that might be an incentive for other creditors to go down the same route.”
As we previously noted, on Tuesday, Ukraine’s parliament adopted a bill allowing Ukraine to freeze repayments of its foreign debt. As RT notes,
Experts agree that Tuesday vote meant a technical default for the country and would impede Ukraine’s ability to raise private investment from the EU and the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), a European source told TASS on Wednesday.“Suspension of debt payments not coordinated with creditors results in a technical default, and in the case of Ukraine, it threatens to undermine Kiev’s ability to attract private investment through EU programs,“ the source said.As part of the underpinning of Kiev’s bailout plan, the International Monetary Fund said in March that Russia would not receive the $3 billion bond repayment from Ukraine this year.
IMF is looking for cooperation from creditors to accept a restructuring on Kiev’s debt. That includes Russia.
