Thursday, July 28 2016 10:40 EEST
Ukraine is not going to return to Russia Yanukovych's $3 billion loan
Ukraine, return, not going, Russia, 3 billion loan, Yanukovich, finances, money, credit, IMF, payment

Ukrainian Finance Minister Oleksandr Danyliuk said Ukraine is not going to return to the Russian Federation a $3 billion loan that Russian President Vladimir Putin and then Ukrainian President Viktor Yanukovych agreed to in December 2013.

'Our position is that they forced Ukraine to borrow that loan under political pressure. Therefore, our position is that we do not have to return it,' the minister stated on Tuesday evening, Unian reports.

He also added that the Russian aggression had translated into the annexation of the Ukrainian Crimea and the breakup of Donbas in east Ukraine, as a result of which the country lost a considerable share of its economy.

'I see no reason why Ukraine should return that money. This is our position in court, and we will prove it,' he said.

Russia lodged with the London High Court a suit against Ukraine after it defaulted in paying the principal amount and interest on a $3 billion loan. The fact that the bonds were purchased via the Irish Stock Exchange makes the disbursement a private creditor debt. However, the Russian side insisted that this was an interstate debt, as the buyer was the state-owned National Wealth Fund. Ukraine wanted the $3 billion eurobond to be restructured under sovereign and sovereign-guaranteed bonds, but Russia reiterated it did not consider the debt to be commercial.

In the course of negotiations, Russian authorities insisted on better restructuring terms than those offered to other creditors, which is prohibited by the bond swap memorandum between Ukraine and the bond holders.

Ukraine has restructured the debt under the IMF's Extended Fund Facility program approved by the IMF Executive Directors in March last year. In December 2015, the IMF decided that the claim arising from the $3 billion eurobond issued by Ukraine on December 24, 2013, and held by Russia's National Wealth Fund was an official claim for the purposes of the fund's policy on arrears to official bilateral creditors. At the same time, the fund revised its lending policy with respect to debtor countries with payment problems, including Ukraine, enabling the IMF to continue its lending program even in the case of non-repayment of Russia's loan.

Following Russia's refusal to participate in the debt operation, Ukraine on December 18 announced a moratorium on any payments of the Russian debt, including repayment of $3 billion, which was due in December 2015. The Justice Ministry was tasked to hire lawyers to defend Ukraine in court. Subsequently, Ukraine's parliament declared that the moratorium had no fixed term.

Upcoming trial with Russia will be cumbersome and may take several years. Experts also say the trial itself does not pose a threat to Ukraine and a court ruling in Russia's favor will not be sufficient grounds for instant payment of the debt. In addition, Ukraine is not likely to have problems with access to new loans from the IMF and other official creditors.

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