INTERVIEW-Ukraine open to talks with Russia on $3 bln bond – Yaresko
By Alessandra Prentice and Natalia Zinets
KYIV, Nov 12 (Reuters) – Ukrainian Finance Minister Natalia Yaresko said on Thursday she is open to meeting her Russian counterpart to work out a restructuring of a $3 billion bond, but will not offer terms better than those for other creditors.
The Eurobond held entirely by Russia is among the 14 sovereign and sovereign-guaranteed bonds Kyiv is restructuring to plug a $15 billion funding gap, but the Kremlin has refused to participate in the process, arguing the debt has the status of an official loan as opposed to a commercial one.
The bond is yet another bone of contention between the one-time allies, whose relations are at an all-time low following Russia’s annexation of Ukraine’s Crimea peninsula and a costly pro-Russian separatist conflict.
“At this time there is no specific date (for a meeting) but I am certainly open and willing and will continue in good faith to try and reach some type of agreement,” Yaresko said.
Russian Finance Minister Anton Siluanov has called the terms offered in the debt swap unacceptable, but Yaresko said Kyiv cannot legally offer Russia a better deal.
“It’s not a matter of compromise … The legal structure of the restructuring for all the Eurobonds has a most favoured creditor clause that says that we cannot provide better terms for any holdouts,” Yaresko said. “Therefore that is the structure within which we will have to work.”
The interview coincided with the Finance Ministry’s completion of the debt swap, under whose terms Russia will have 150 days to participate in the process. After that, they lose their right to receive the new securities.
The Russia-held bond matures in December. The International Monetary Fund is considering changing its lending rules so that it can continue supporting Ukraine under a $17.5 billion bailout programme even if Ukraine defaults on the payment to Russia.
“The IMF does plan and has been working for a long time on a change in their overall policy with regard to lending to official arrears. They have a meeting scheduled at the end of November and a board sometime in December and I am confident that the IMF is working hard to do what’s right for the IMF,” Yaresko said.
Russia has expressed concern over the proposed change in IMF policy. Asked if she thought Russia might seek to block the move with the IMF, Yaresko said: “No, not at this time.”
“WE’RE ALL FRUSTRATED”
The Finance Ministry is also dealing with complicated negotiations on the home front that are delaying the disbursement of around $4 billion of international loans for this year.
A third loan tranche from the IMF worth $1.7 billion hinges on Ukraine cutting its budget deficit for 2016. A disagreement between the government and parliament on proposed tax cuts has delayed the submission of a draft budget for next year and raised concerns that Ukraine’s reform efforts could be derailed.
Yaresko said she expected the budget draft would be submitted in early December, allowing the tranche to be disbursed before the end of the year, but conceded Ukraine’s Western backers would be justified in feeling impatient.
“Sure, if someone wasn’t frustrated, they’d have to be sleeping. We’re all frustrated – the government people are frustrated, the parliament people are frustrated and the people of Ukraine are frustrated. We would all like to see it (reform) happen more quickly.”
An IMF mission arrived in Kyiv on Thursday to assess progress made with its programme under which Ukraine has already received almost $6.7 billion this year to shore up its economy crippled by the separatist conflict and years of economic mismanagement and corruption.
A decision by the IMF to disburse the next tranche will also unlock around a further $2.3 billion from other lenders this year. Ukraine will be able to survive financially if the loans are pushed back further, but a delay would damage its image, Yaresko said.
“It’s not just the financial part of this that is important … it’s a matter of reputation, so it’s important,” she said. (Editing by Tom Heneghan)