Russia doesn’t intend to send restructuring offer to Ukraine

Макроэкономика 23.11.2015 The Russian Finance Ministry has not sent and has no intention to send Ukraine any restructuring offer on the USD 3 bln Eurobond due on Dec. 20, ministry spokesperson Svetlana Nikitina told journalists on Nov. 20, as reported by the Interfax news agency. She said that Ukraine as a borrower should address the Russian side with a restructuring offer ”according to international practice.” “The IMF has agreed upon the status of the debt,” Nikitina said. “We repeat that this is sovereign debt, and it cannot have the same status as commercial debt.” With this vague phrase, a lot of Russian media, then later cited by the international media, concluded that the IMF has recognized Ukraine’s USD 3 bln Eurobond as “official debt.” Alexander Paraschiy: Nikitina’s comments contradict those of Russian PM Dmitry Medvedev, who said the day before that the Russian Finance Ministry is conducting negotiations with its Ukrainian counterparts on possible debt restructuring. (Recall, Putin suggested on Nov. 16 that Ukraine will repay USD 3 bln in three annual installments in 2016-2018). Now it’s clear that Russia is not going to approach Ukraine and expects Ukraine has to offer something special to Russia’s MinFin. Recall, the Ukrainian side has already directed a restructuring offer to the Russian holder of the USD 3 bln Eurobond, as well as the holders of the other Eurobonds worth USD 15 bln in September 2015. The Russian state fund, the bondholder, failed to appear at the two meetings to consider the restructuring offer. As both the Russian and Ukrainian ministries are waiting for the first move from each other, it’s very unlikely that a restructuring solution will be reached before the bond’s maturity on Dec. 20. Yet another portion of contradictory information from Nikitina was that the IMF recognized this debt as official. Nikitina only said that the IMF has decided on the status of this debt, offering no details. That this debt is “sovereign” (not official, as interpreted by some international media) was Nikitina’s interpretation of the Russian position. We agree with Nikitina that the USD 3 bln bond is Ukraine’s sovereign debt indeed, but this does not mean it’s official.