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Will Russia reschedule Ukraine’s debts?

March 17, 2015, 16:08 UTC+3 Alexandrova Lyudmila
© AP Photo/Sergei Chuzavkov

MOSCOW, March 17. /TASS/. The question of rescheduling Ukraine’s debts is a political one first and foremost, polled Russian experts told TASS. So far Russia has refused to do this, and if it does eventually change its mind, it will happen only when the West has changed its attitude and lifted the sanctions, say some. An agreement will have to be forged sooner or later, others argue.

The Ukrainian Finance Ministry has entered into consultations with international lenders on rescheduling its foreign debt. The Ukrainian government last Friday asked the holders of Ukrainian bonds, including Russia, to discuss the possibility of reducing the principal and coupon payments. Kiev asked the bonds’ holders to write off $15 billion and to prolong the period of circulation.

State debt rescheduling is one of the key conditions of the Extended Fund Facility recently approved by the IMF.

The US lenders, who hold $7 billion worth of Ukrainian debts, have united for negotiations with Kiev on writing some debts and rescheduling others. Moscow demands $3 billion in payment of the Eurobonds issued back during the Viktor Yanukovich presidency. At President Vladimir Putin’s decision the bonds were purchased with money taken from the National Welfare Fund.

Russia says it will not reschedule the Ukrainian debt. It continues to insist on paying the $3 billion-dollar-debt, Finance Minister Anton Siluanov said on Monday. The latest tranche is expected in December. At the same time Russia does not demand an early settlement of the debt, although it does have the right to this (Ukraine’s debt has risen to above 60% of the GDP).

If Ukraine succeeds to achieve a write-off of the $15-billion debt, this will become an unprecedented move, says the chief of analysis at QB Finance, Dmitry Kipa, quoted by the daily Nezavisimaya Gazeta. "But to persuade the lenders Ukraine must have some special political influence or special political leverage," Kipa said.

A deputy dean of the world economy and world politics department at the higher school of economics, Andrey Suzdaltsev, has told TASS that "Russia may agree to a debt rescheduling if the Western countries change their approach and if the question of lifting sanctions is settled."

In the current situation, he believes, consent to writing off the debts would be unreasonable. "We cannot afford to make unilateral concessions. We might agree to this only after the sanctions have been lifted, but it remains to be seen." Russia, he said, has already helped the Ukrainian economy a great deal over the years of independence with investment, lending on favorable terms and energy supplies at discount prices tens of millions of dollars worth. Low prices of gas have enabled Ukraine to save more than $80 billion. "In this context the EU and the IMF are no equals."

"If Russia eventually agrees to a rescheduling of Ukraine’s debt, it will do so only on the condition of compliance with the Minsk Accords and Kiev’s support for the economies of the Donetsk and Lugansk regions," the deputy director of the CIS Countries Institute, Vladimir Zharikhin, believes.

Various options are possible, but Russia will most probably decide against debt rescheduling," the leading expert at the Development Centre of the Higher School of Economics, Sergey Pukhov, told TASS. "Reason one is the bad relationship with Ukraine, which has openly labeled Russia as its enemy. Reason two: the western financial sanctions against Russia. Reason three: Russia’s own economic problems."

There are some other opinions as well.

Higher School of Economics lecturer, Ivan Rodionov, has told TASS: "The question of rescheduling is one of the elements of the negotiating process, of political bargaining. Russia will have to continue to dispatch gas to Europe through Ukraine - for the time being there is no other way. But an alternative will have to be looked for in the end."

"We do not see the whole picture, but only individual fragments of it," Rodionov said. "Even despite the crisis economic relations between Ukraine and Russia remain. Coal from Donbass is going to Ukraine and the Ukrainian Energy system keeps transmitting electricity to Crimea, etc."

"I believe we shall come to terms," he concluded. "There is no risk Ukraine may suffer a default. No one, including lenders, is interested in it."

TASS may not share the opinions of its contributors