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Expert: EU, Moscow, Washington should jointly resolve Ukraine’s insolvency problem

May 26, 2015, 18:04 UTC+3 MOSCOW
According to Russian presidential adviser Sergey Glazyev, €300 billion rather than €130 billion is required to switch Ukraine to the regime of at least simple reproduction and financial solvency
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Russian presidential adviser Sergey Glazyev

Russian presidential adviser Sergey Glazyev

© Artyom Korotayev/TASS

MOSCOW, May 26. /TASS/. The problem of Ukraine’s insolvency, including its debt to Russia, should be resolved jointly by Brussels, Moscow and Washington, Russian presidential adviser Sergey Glazyev said on Tuesday.

There is nothing unexpected in Ukraine’s current economic woes "because Russian forecasts made two years ago showed that Ukraine’s default would be inevitable in case of its entry into an association agreement with the EU and the ensuing deterioration of the trade and economic regime with Russia," the expert said.

European colleagues and Ukrainian leaders were warned about this but no discussions on the issue were held, even though former Ukrainian President Viktor Yanukovych decided against entering an association deal with the EU, Glazyev said.

"Nevertheless, the new Ukrainian regime signed the association agreement without thinking twice. As a result, Ukraine’s insolvency is the direct consequence of European choice in its current version," the Russian presidential adviser said.

That is why, Glazyev said, he thinks that responsibility for the current disastrous state of things lies on the EU and the US.

"Today they actually rule the country pursuant to the association agreement. The Ukrainian economy is in actual fact under the EU’s jurisdiction and it has to follow the directives from Brussels while the Ukrainian government has no possibility to influence this process," the adviser to the Russian president said.

Also, "the very legitimacy of the current Ukrainian authorities is secured by the position of the European Union and the United States," the official said, referring to the signing of an association agreement in Brussels.

"If the European Union does not provide Ukraine with the financial assistance it expected - and the Ukrainian government estimated the required financing volumes at €120-150 billion just for assimilating European standards - then Europeans should be responsible for the decisions they imposed on Ukraine," the Russian presidential adviser said.

"If they don’t want to do it, then this makes worthless the legitimacy of the association agreement while its signing with the Ukrainian government, which came to power as a result of a state coup, discredits the foundation of such an economic union," the presidential adviser said.

"If we recognize that this agreement is illegitimate like the Ukrainian leadership, then it is understandable that it would be naive to demand that it should honor international obligations," the expert said.

"As it seems to me, the issue that should be formulated is that there is no legitimate power in Ukraine today, there is no working constitution," the Russian presidential adviser said.

When asked about Russia’s measures to get the $3 billion loan repayment from Ukraine, the expert said "this issue can be resolved only in the context of joint actions by Russia and the European Union."

"Today already €300 billion rather than €130 billion will be required to switch Ukraine to the regime of at least simple reproduction and financial solvency - these are the estimates of our experts for the volume of investment required for the recovery of the Ukrainian economy and its modernization so that it can generate sufficient income for servicing the Ukrainian foreign debt," the expert said.

"An obstacle on this way is the position held by the US, which impedes European countries to formulate a clear-cut answer to numerous proposals by the Russian president on creating a single area of economic development and cooperation from Lisbon to Vladivostok with the establishment of a common regime of trade and cooperation with Ukraine, proceeding from the interests of all its participants," Glazyev said.

‘There is simply no other way today to implement this proposal put forward by Putin," the expert said.

Ukraine’s external debt hit $72.9 billion as of late 2014 while its internal debt stood at $29 billion and its gold and foreign currency reserves were less than $10 billion.

Russia made a decision in late 2013 to invest up to $15 billion in Ukraine’s sovereign Eurobonds. Soon afterwards, Russia bought Ukraine’s first Eurobond tranche worth $3 billion with a two-year maturity and a coupon rate of 5% per annum and coupon payments every six months.

Russia subsequently decided against investing the other $12 billion in Ukraine’s bonds.

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