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Tuesday, December 6, 2016

Indexation of pensions of Russians “tied” to debt of Ukraine at $3 billion


The battle for the Russian $3 billion that we lent to Ukraine in December 2013, escalates. Kiev finally said he was ready for talks with Moscow on pre-trial settlement of the dispute. But, as stated by the head of the Ukrainian Finance Minister Alexander danyluk, if only to be found “reasonable grounds”. What is this base — clear. Kyiv demands to write off from 20 to 36% of its obligations. As the Ukrainians have not paid us the debt in time, the Russian veterans never saw the indexation of pensions in early August of this year, because the money was allocated from the Fund of national security. As you know, the Fund covers the deficit of the pension budget.

Ukraine simply can’t pay the 3 billion Even the miners salary six months are not paid. (The Minister — the former Minister of energy and coal industry of Ukraine.)
Photo: e-news.su

This story began in December 2013 when, in order to Ukraine was able to close the hole in the state budget, Russia bought placed on the Irish stock exchange Kiev Eurobonds worth $3 billion. terms of the transaction were as follows: 5% per annum and a refund in December 2015.

Even then, many experts say that this step of Moscow unnecessarily risky, especially since the money to purchase “bonds” allocated from the national welfare Fund. In addition, all this occurred against the backdrop of the outbreak of the Kiev Euromaidan. Critics of this deal were told either that it is better not to buy Ukrainian bonds, or to take them at least 10% per annum.

The Kremlin has reassured opponents, saying that the conditions of placing of Eurobonds the most reliable in the world financial market. Though, because their guard is the IMF. According to the rules of the past, neither the Fund nor other financial institutions do not have the right to continue to lend to debtor countries if they did not return their debts or at least have not agreed on a scheme of refinancing.

If Eurobonds purchased by any government, then such a debt is considered “sovereign” — and it is not covered the condition for the write-off of loans applicable to private creditors. This is all extremely important in the context of debt obligations of Ukraine before Moscow.

The new Ukrainian authorities began to assert that this deal is a political “bribe” to Yanukovych, and threatened not to return the money. The Ministry of Finance of Ukraine consistently paid interest on bonds (just had to pay up to $150 million) until mid-2015.

Last autumn, the situation has deteriorated. Kiev with the support of the US government and the IMF failed to reach an agreement with the club of private creditors to write off 20% of debts owed to them (20 billion) and extension of loan payments from 2020 to 2027.

To some extent it could be called a victory for Kiev, because it was an important condition for the continuation of financial assistance to Ukraine from the IMF. Recall that in March 2015, the Fund has decided to allocate Square $17.5 billion within 5 years. The first tranche ($5.5 billion) was transferred in March, and the second ($1.7 billion) in August last year.

But the issue with Russia froze again. Kiev offered Moscow to join the club of private creditors to write off at least 20% of the debt ($600 million). Of course, Moscow has refused, insisting that sovereign loans are not written off. We proposed another option — to stretch the debt repayment for 3 years (from 2016 until 2018), and without the repayment of additional interest. But Kiev stood in the position and stated that it will not pay anything.

Our Finance Ministry had to file a lawsuit in London’s High court. In it, Moscow decided to punish the Ukrainians in full. In the lawsuit included: the requirement of return of the debt, fines and court costs. The prospect of winning Russia, experts say, is very high. As a result, we can strebovat from Ukraine $3 billion and $4 billion the First court session scheduled for January 17, 2017.

But Kyiv continues to resist, and the IMF is actually helping him. So, on September 14, a meeting of the Board of governors of the Fund (which includes representatives of Russia) which will consider the allocation of Ukraine of the third tranche.

According to the head of the Ministry of Finance of Russia Anton Siluanov, we will vote against. Indeed, in the case of approval of the IMF tranche will break your own rules. However, to block a positive decision alone, Russia will not work — not enough votes. But I feel that Ukraine is shaking hamstring. According to Alexander Danilyuk, Kiev is ready to negotiations with Moscow on a pre-trial settlement of the dispute. A meeting on this issue could take place in Washington in October.

But, obviously, that the Ukrainian government’s right hand knows what the left is doing. At the same time, the Minister of foreign Affairs of Ukraine Pavlo Klimkin said that Kiev will file a lawsuit against Russia in the international court of justice concerning violations of the UN Convention on law of the sea. Apparently, it concerns the coastal waters of the Crimea. But in such conditions any pre-trial agreements in other areas, however.

Although in recent years, actively rumors that Moscow will write off part of the Ukrainian debt, although we are talking about 20%, of course, is not. However, as stated by the press Secretary of Vladimir Putin Dmitry Peskov: “the Kremlin’s Position has not changed. We are talking about sovereign debt, confirmed the sovereign debt of Ukraine, which is subject to return”.

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