Jaresko is hoping for an out of court settlement that would see Russia forgive a part of the debt
Natalie Jaresko, the Chicago native in charge of Ukraine’s Finance Ministry says she has hopes she can settle her country’s $3 billion debt with the Russians before it goes to court.
Russia said it would sue Kyiv for lack of payment on the loan, a loan that Jaresko and her government said was a private debt and not a sovereign debt, and therefore was not a priority payment. The International Monetary Fund disagreed late last year however, giving Russia the legal authority to claim Ukraine was in default on a loan granted from another country.
Jaresko, who took over as Finance Minister in Dec. 2014, told Bloomberg newswire Saturday in Davos that “It’s still possible to reach a consensual agreement out of court with Russia. We have dialog.”
That dialog consists of the usual European mediation. Russia and Ukraine are going through a bitter divorce and cannot seem to talk to one another without a Belgian, German or American in the room.
According to Siluanov, Kyiv continues to insist that their bonds purchased by Russia on the Irish Stock Exchange in December 2013 is not an official loan even after the IMF said it indeed was an official loan. The National Wealth Fund of Russia acquired the bonds in the market.
Jaresko said that Treasury officials of both countries may meet in the “near future” with their lawyers. Russian Finance Minister Anton Siluanov said on Friday that his government was already preparing the finishing touches on their lawsuit in hopes to recover the $3 billion Kyiv defaulted on last year.
“We are confident that will recover the entire amount on our eurobonds to Ukraine, as well as legal fees associated with filing the claim,” said Siluanov in an article byVedomosti, Russia’s most important business daily.
“According to the established international practice, official credit of the Russian Federation should not have been included in the recent restructuring of debt owed to private creditors,” said Siluanov.
Fund managers holding Ukrainian debt are not willing to sit for a haircut either.
Franklin Templeton, the largest private owner of Ukrainian bonds, told Jaresko in March during a meeting with fund manager Michael Heyzenstebom that they were definitely not going to exempt Ukraine from paying its debt. When Jaresko said last year that she may introduce a moratorium on payments effective in August, bond holders agreed to write down 5%. Before that, private creditors had agreed to extend Ukrainian debt out an other 10 years and freeze interest payments until 2019, but Ukraine was asking for a 40% haircut and the two sides are still discussing restructuring.
Russia might get its $3 billion plus fees, but it might get it later…rather than sooner.