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In Ukraine inexorably approaching a full-scale default on public debt, which amounts to 70 billion USD, with about 40 billion USD is external public debt. It, in turn, about equally divided between private creditors and the official creditors (foreign states and international financial institutions).
Actually, default in Ukraine has already come, because Kiev on September, 23 did not do the next payment on the debt on Eurobonds in the amount of 500 mln USD. Financial experts with regard to this situation use the term “technical default”, but this is a stretch. The reason for it is that it is a question of default to private (not official) holders of Eurobonds. These private holders, according to some sources are funds Aurelius and Elliott, which became famous as the financial vultures.
In early October, expired 10 days, which, according to international practice, the debtor is given to he changed his mind and pay its obligations. Kiev is not changed its mind. International Swaps and Derivatives Association (ISDA) October, 5 issued its verdict: “technical default”, but soon the word “technical” will be removed.
Funds Aurelius and Elliott will demand their money and their requirements Kiev cannot get away. Under the rules of the creditors start to “cannibalize” the debtor immediately, but only after three months after the declaration of default. We give comment about this of Mikhail Delyagin: “… after Ukraine announced a technical default, Aurelius and Elliott later, exactly 90 days (the period in which Ukraine can still begin to repay the debt), will begin to tear the property of the country into pieces, such as the port of Odessa, who all still belongs to Ukraine, can go to them. Over the next 90 days to Ukraine do not apply any sanctions or lawsuits, but after this period, all debtors are entitled to apply to the Ukraine all accepted methods of recovery of debt”. In other words, Ukraine will be “smooth out” in early January, 2016.
And in December, they will have a payment of 3 billion dollars for liquidation of the debt on the loan of the Russian Federation. In Kiev there is no money. Missed payment will qualify as a full-fledged default. Before the momentous moment there are two months. Kiev is frantically looking for a way to solve this problem.
About one such seizure attempt, I already wrote. Recently in Lima was held the annual summit of the IMF and the World Bank, in its fields there was a meeting of finance ministers of Russia and Ukraine, where Natalia Yaresko offered Anton Siluanov to join the decision to restructure the debt of Ukraine, which allegedly had been reached in the end of August, that is begging for consent to not to pay the 3 bln dollars. This, as you might expect, was refused. Moscow’s position was fixed firmly: “Ukraine’s debt to Russia is official. And it cannot be considered as commercial debt, on which negotiations are ongoing leadership of Ukraine. It is the duty of the government to the government, it is provided on market terms, about two times lower than the cost of debt of Ukraine in the period of given this money”. It is not necessary to speak about the so-called restructuring of the Ukrainian debt is highly questionable. In the negotiations on the issue of debt securities holders participated Ukraine, which accounted for only about half of the commercial debt. It is very small. They must be at least 90%, preferably 100%. From my perspective, this is a bluff.
After the fiasco of Mistress Jaresko in Lima, Arseniy Yatsenyuk joined to the case, who on October 15 stunned all by the following statement: “Creditors of Ukraine by the majority, which is more than 75% of the votes in the Committee of creditors decided to write off the debts of Ukraine for the total amount of $ 3 billion and debt restructuring for a total amount of 8.5 billion dollars”. So the Prime Minister commented on the results of the next round of negotiations with creditors, which were spent on the 14th of October. At the same time Yatsenyuk said that the new round of talks will be held on October, 29 in London, and he urged the Russian Federation to join a scheduled meeting and to agree with the general conditions of “restructuring” of the Ukrainian debt.
Here there are several questions. Firstly, if the negotiations on the restructuring were successfully completed at the end of August, why the Finance Ministry held talks on October, 14? Secondly, if the talks on October, 14 ended successfully, why they need to spend another meeting in two weeks? Thirdly, about the negotiations on the 14th of October on the website of the Ministry of Finance of Ukraine, it is indistinct. It shows that Yatsenyuk has once again lied. It’s not just my opinion. In an interview with RIA “Novosti” President of the Ukrainian Analytical Center Alexander Okhrimenko said: “There is no agreement. To date, the Assembly has not taken place, there was no quorum. It must have been present 75% of the bondholders, but many of them were not. Now, on October 29, we will need everyone to collect, and it is hoped that it will be possible to collect them all. Then will begin the process of exchange (Eurobonds for new securities. — V. K.) On the website of the Ministry of Finance literally it is reported that on the 29th of October in London will be held a repeated meeting of the owners of the bonds maturing in December 2015, because at the meeting on October 14 was not achieved a quorum. Why do they gather again on October, 29? Most likely, it’s because of on October 14, no one voted for. I do not understand why we are talking about the owners of securities maturing in December 2015. I understand that today there is no vote. Therefore, on October, 29 we will wait for a new vote”.
I think that at the end of this month in London, a quorum will not be. And the Russian representatives there are just nothing to do.
Yatsenyuk cannot understand anything of all this, so he frantically pushes “unconventional initiatives” that would pre-empt the full catastrophe of default in December 2015. One of such initiative was the statement of the Prime Minister that Kiev intends to request in the European Court of Human Rights (ECHR) more than 1 billion UAH from the Russian Federation for the accession of the Crimea. In addition, he expects the court to get from Moscow compensation for the damage caused to Donetsk and Lugansk. Yatsenyuk mentioned about the claims of Ukraine to Gazprom: “Separately, there are two key disputes in court against “Gazprom” as the contract of purchase and sale of gas and transit”. Yatsenyuk finished his statement on a threatening note: Kiev is ready to start against Moscow “legal war”.
It is difficult to understand what the overall intent of such statements is. Whether it needs for to assist Moscow psychological pressure and force to make to defer for settlement and restructuring 3-billion debts on Eurobonds. Whether to impose on Moscow the scheme of “mutual offsetting” counter-claims and to remove the burden of all debts to Russia (and they are several times more than the debt on Eurobonds). Or simply exacerbate Russian-Ukrainian relations and under this aggravation cajole from the West next portion of the money. Have a clear plan of Kiev, apparently, no, they operate on the principle “which will burn out.” And in the question with the plea Yatsenyuk, as usual, was bluffing. According to experts, the claims do not fall within the mandate of the ECHR. If claims would be adopted (for political reasons), their review is for a very long period. During this time, it can be not only a full-scale default in Ukraine, but 100 percent stripping of assets by foreign creditors of the country. Caricature requirements of Yatsenyuk immediately were canceled by the press secretary of the Russian president D.Peskov: “Crimea
– is the territory of Russia. Donbas – is the territory of Ukraine. And what is 1 trillion for? It is not clear … As for the public debt of Ukraine, it is in the position of the Russian side and nothing has changed”.
In my opinion, Moscow is demanding repayment of the Ukrainian debt does not have to wait for 20 December 2015, i.e. the date of final repayment of the loan. Under the terms of the loan, Moscow received the right to demand repayment by Kiev of entire amount of debt back in March of this year, when as a result of the collapse of the UAH relative level of sovereign debt has crossed the red line at 70% of GDP. And we can’t wait any longer, because already in early January 2016, the financial vultures will come out the arena and the debt history of Ukraine will enter to a critical phase.
The other day President Vladimir Putin invited the International monetary Fund to provide Kiev loan in the amount of $ 3 billion, so that these money went to pay off the debt of Ukraine to Russia in December. This is a simple and effective scheme to prevent the financial collapse of Ukraine. It’s been a few days; however, the IMF keeps completely silent about the proposal.
According to some sources, behind the scenes of the IMF under strong pressure from Washington they are working on an urgent redesign of the international rules in favor of Kiev. We are talking about a loan of the Russian Federation to Ukraine in the form of the purchase of Eurobonds in December 2013 to equate to commercial credit. Washington through the IMF tries to help Kiev to impose Moscow a debt restructuring. It is noteworthy that in recent months, when Kiev did Moscow offers to join the restructuring of debt on Eurobonds, the IMF kept silence, though had to explain to Kiev that the debt of Ukraine to the Russian Federation is official and is not subject to restructuring.
In the Ukrainian question, the IMF acts as an obedient tool of Washington. I wouldn’t be surprised if, being to date the largest official creditor of Ukraine, the tomorrow Fund at the direction of Washington will announce that it will be ready to participate in the restructuring of Ukrainian debt, although over 70 years of its existence the IMF this was not the case.
The debt situation in Ukraine is a manifestation of the agony of the Ukrainian economy, but not only. It is significant that the maturity date of the debt of Ukraine to Russia in the third week of December 2015 falls exactly on the anniversary of the IMF, which was created in December 1945. So the debt situation in Ukraine reflects the agony and the International monetary Fund, and I do not exclude that after its anniversary, the Fund may suddenly die.
