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Ukraine has to settle debt to Russia sooner or later - expert

December 20, 2015, 12:55 UTC+3 KIEV
There are several reasons why Kiev will have to pay back the loan, Vladimir Oliinik said
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KIEV, December 20. /TASS/. Though the Ukrainian government has announced a moratorium on payback of $3 billion to Russia, Kiev will have to settle it sooner or later, Ukraine’s political expert Vladimir Oliinik said in an interview with 112 Ukraine television broadcaster on Sunday.

"We shall have to settle this debt sooner or later," he said.

There are several reasons why Kiev will have to pay back the loan, he said.

"IMF has recognised it. Though they have made it possible we receive loans, but we have to observe agreements," the expert said adding "the government also realises it."

Besides, an overdue loan will become an obstacle for new borrowings.

"If we refuse categorically to return the debt, we shall not receive money from other creditors," he said. "In that case our credit reputations will not be good."

However, he said, presently Ukraine "does not have money to pay for the debt." Thus, he called position of the government "a smokescreen."

The problem being, he said, "how the talks will go" and "to have successful participation in the court proceedings."

"Ukraine will have to hire good lawyers and that will cost much money," he said. "That would be only postponing the settlement, and further on, perhaps the payback procedure will be discussed."

On Friday, Ukraine’s Cabinet imposed moratorium on settlement of the debt to Russia.

"Considering that Russia has refused, despite of our efforts, to sign an agreement in the restructuring and to accept our proposals, the cabinet is imposing moratorium on payment of the Russian debt worth $3.075 billion," - Prime Minister Arseniy Yatsenyuk said at a cabinet meeting on Friday.

Yatsenyuk also said that the Ukrainian government has imposed moratorium on the payment of $507 million by two Ukrainian companies to Russian banks.

"The government is imposing a moratorium on the payment of $507 million by two Ukrainian companies - Yuzhnoye and Ukravtodor - to Russian banks. From today, all payments shall be suspended until the adoption of our proposals or a court decision," - he said.

In December 2013, Russian President Vladimir Putin and the then Ukrainian President Viktor Yanukovich reached an agreement that Moscow would extend a 15 billion U.S. dollar loan to Kiev through placing Ukrainian securities. Under the deal, three-billion-U.S. dollar worth of bonds were listed on the Irish Stock Exchange on December 20, 2013 and bought by Russia from its National Welfare Fund.

Later on, Ukraine tried to challenge the loan’s status and reduce it to that of commercial credits subject to restructuring. Russia objected to this approach. However its suggestion that this loan be restructured under reliable Western guarantees was ignored.

In November 2015, Putin said Russia was ready to restructure Ukraine’s debt in case the United States, the European Union or any big international financial institute gave its guarantees to Russia. No guarantees were granted.

On December 17, the IMF board recognized the official status of Russia’s three-billion-U.S. dollar loan to Ukraine.

The deadline for repayment of the Ukrainian debt is December 20. In the event it fails to do that, Russia will go to law ten days after that date.

On Saturday, Russia's Finance Minister Anton Siluanov said commenting on Kiev's announcing of moratorium on settling the outstanding debt to Russia - Russia regrets Ukraine has preferred default to talks.

"Russia acknowledges yesterday's decision of Kiev to announce a moratorium to settle the debt to Russia," he said. "We are sorry Ukraine decided to announce default instead of having talks on the suggestion, the Russian president voiced at the G20 summit in Antalya in November this year."

The finance minister also said Ukraine's announced moratorium does not cancel its obligations to settle the debt.

"The due date for settling $3 billion and the coupon is December 20, Sunday, thus the payment should be made on the following business day - which is Monday, December 21," the minister said. "Ukraine's announced moratorium does not cancel its obligations to settle the debt. The obligations remain in force, and the Russian Federation expects they will be observed fully."

Russia will file a suit if Ukraine fails to settle $3 billion before December 31, the minister said.

"IMF has confirmed the debt is official, but Ukraine has not made any suggestions, which could be based on acknowledging of the debt's official status. If Ukraine does not settle the due sum within the beneficial term to December 31, Russia will file a suit to recover the debt," he said.

Russian Deputy Finance Minister Sergei Storchak said that Ukraine had no chance to win a trial vs. Russia over the 3-billion-dollar credit.

"When the fact of non-payment is easily established by a British court, it will mean a very quick and concrete procedure of making the final decision. In this sense, the Ukrainian colleagues, who are potential litigators, stand no chance to win the trial," Storchak explained.

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