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Russia against IMF providing new tranche for Ukraine

Russia against IMF providing new tranche for Ukraine

Russia against IMF providing new tranche for Ukraine
September 12
18:48 2016

The IMF is likely to provide another tranche to Ukraine despite Kiev’s $3 bln debt to Russia

Russia is disappointed over the International Monetary Fund’s new approach to providing the next tranche for Ukraine, Finance Minister Anton Siluanov said Monday. The IMF aid program to Ukraine till 2018 implies no repayment of the country’s debt to Russia.

“The International Monetary Fund has made changes to its policy on the provision of funds to a country, which is in arrears to an official creditor,” he said.

“The fund set the indicators for reduction of Ukraine’s debt without taking into account the interests of Russia, and our $3 billion of debt was included in the list of liabilities which are to be restructured. Until 2018, the program was made in such a way that Russia will receive no single penny of that debt from Ukraine,” the minister said.

Siluanov said that Russia’s state-owned banks took part in capitalization of its “subsidiaries” in Ukraine and invested about $3 billion in them. In 2014-2015, Russia was also involved in the decision to abolish the export duty on gas supplies to Ukraine, the Minister said.

“We were going to meet halfway with our neighbors and partner even amid such tensions. As the result of zero export duties Russia’s contribution to the stabilization of the Ukrainian economy amounted to more than $1 bln, while the total international assistance to Ukraine amounted to $3.6 bln, Siluanov said.

“Today, we will give the necessary orders to our representative in the International Monetary Fund – during the consideration of the International Monetary Fund’s loan to Ukraine we will vote against this decision, because we believe that it was made in non-compliance with the regulations,” the minister said.

“It is possible that the fund did not have the full information on negotiations, though, it would seem strange – our negotiating position was entirely open,” he noted.

According to the minister, the IMF is likely to provide another tranche to Ukraine though Moscow is doubtful of this decision’s fairness. The Russian Finance Ministry plans to submit its proposals on Kiev’s debt to the IMF head later on Monday. However, Russia’s vote is unlikely to be determinative at the IMF board on Ukraine’s case on September 14.

The official pointed out that Moscow was set to continue intensive interaction with IMF regardless of the situation with Ukraine.

Siluanov has also expressed hope for unbiased consideration of Ukraine’s debt issue by London High Court in January 2017, adding that Moscow stands ready for pretrial agreements.

According to the official, Russia had all grounds to announce default on Kiev’s sovereign bonds but did not do it.

The minister also said that Moscow’s proposals on restructuring had not gained understanding of Ukraine. The official has called Kiev’s attempts to negotiate with Russia on a debt restructuring “fake.”

“We have not received an official request from the Ukrainian side to start the negotiation process, the process of debt restructuring,” Siluanov added.

“All attempts to conduct any negotiations both at the ministerial level, level of consultants, in fact, were fake,” he said at a briefing, stressing that Moscow does not seriously consider the proposal of Ukraine to write off 36% of its debt.

“Colleagues presented us a proposal to write off through restructuring 36% of the debt. This is Ukraine’s negotiating position – we do not seriously consider such proposals,” the Minister said.

“Ukraine has to provide the Russian side with offers surely on more favorable terms than those proposals made and agreed with commercial creditors,” he also noted, adding that “this is common and usual practice.”

According to him, Russia plans to advocate its interests on Ukraine debt in court in future. Siluanov pointed out that debt repayment could have positive effect on the Russian economy.

In December 2013, the presidents of Russia and Ukraine, Vladimir Putin and Viktor Yanukovich, agreed that Moscow would issue a $15-billion credit to Kiev by offering Ukrainian securities. Under the program, bonds worth $3 billion were placed at the Irish Stock Exchange on December 20, 2013. Russia repurchased them by using the money from the National Welfare Fund.

Ukraine’s previous government set a moratorium on the payment of the state debt to Russia on December 18, 2015. The then Ukrainian Prime Minister Arseniy Yatsenyuk explained that the move had been prompted by Russia’s refusal to strike a debt restructuring deal with Ukraine on a par with private creditors.

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Irina Dashkina

Irina Dashkina

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