Russia says Ukraine will not repay debt as a result of “they’re crooks”, vows …
Russia says Ukraine won’t repay debt because “they are crooks”, vows court action
By Lidia Kelly and Natalia Zinets
MOSCOW/KYIV, Dec 9 (Reuters) – Russian officials blasted the International Monetary Fund on Wednesday for changing its long-established lending rules to keep supporting Ukraine and called Kyiv’s authorities “crooks” who are unlikely to repay a $3 billion debt to Moscow.
Finance Minister Anton Siluanov said Ukraine has 10 days after the Moscow-held Eurobond falls due on Dec. 20 to either repay it or accept a restructuring deal proposed by President Vladimir Putin.
The IMF’s change in rules to allow it to keep supporting countries if they fail to repay official creditors embroils the Fund deeper in the nearly two-year conflict between the two neighbours, with the Eurobond becoming its focal point.
The two-year Eurobond was taken out by the government of Moscow-backed ex-president Viktor Yanukovich just two months before he fled to Russia in the face of street protests over his policy swerve away from deeper integration into the European mainstream.
Prime Minister Dmitry Medvedev accused the IMF of meddling and said the Fund’s decision had no legal basis but had been taken for political reasons. He said he doubted Ukraine would redeem the note.
“I have the sense that they won’t pay it back because they are crooks,” Medvedev said in an interview on state television. “And our Western partners not only don’t help but also interfere.”
Ukrainian Finance Minister Natalia Yaresko called the IMF’s decision “historic”.
“It allows us to understand that if we are included in this policy and we unfortunately are not able to restructure the so-called Russian Eurobond, then the doors to IMF loan financing will not be closed to us,” she told journalists.
Kremlin spokesman Dmitry Peskov said the IMF had created a dangerous precedent.
“The precedent for us is absolutely not acceptable, and the main thing is that it is quite dangerous because we have created a dangerous precedent for permitting the non-payment of sovereign debts. The question is: what will happen after that?” Peskov told reporters.
WHAT NEXT?
Siluanov and Medvedev said that if Ukraine failed to redeem the Eurobond or to accept a recent Russian offer of softer repayment terms it would end up in a court.
“We will not put up with this. We will go to court,” Medvedev said. “We will seek a default on the loan. We will fight for a default on all Ukraine loans.”
Moscow initially wanted repayment in full and on time this month. But in an unexpected move Putin last month proposed that Kyiv repay the note in $1 billion instalments, backed by Western guarantees, over the next three years, starting in 2016. Ukraine has not responded to the offer.
Ukraine, which reached an agreement with private creditors to restructure its sovereign and sovereign-guaranteed debt to plug a $15 billion funding gap under an IMF-led $40 billion bailout programme, has insisted the debt owed to Moscow is commercial.
Russia, which the West says continues to support separatist rebels in Ukraine’s east, has said it is country-to-country official debt outside the scope of Kyiv’s deal with private creditors.
Ukraine says it cannot legally offer Russia a better deal than the terms agreed with its other creditors, but it also cannot spare the $3 billion from its budget. Its war-torn economy is expected to shrink 12 percent this year with a budget deficit of 4.1 percent of gross domestic product.
The country’s foreign currency reserves are at $13 billion which is barely enough to cover three months of imports and way below the IMF target for end-2015.
Russia will have to file any claims in a London court as the Eurobond was drafted under British law.
Ukraine’s Prime Minister Arseny Yatseniuk has said previously that Ukraine is prepared to go to court, but Yaresko said last month that she was open to talks with Russia.
Medvedev said that nobody believes in Ukraine’s solvency.
“We appealed to our European partners and the American to help Ukraine but nobody would put their guarantees behind it,” Medvedev said, referring to Putin’s offer “That means that nobody believes in (Ukraine’s) solvency. They washed their hands and said – let it pay on its own.”
Asked to comment on Medvedev’s statements, Yaresko said: “Political statements from another country are not my business.”
(Additional reporting Christian Lowe, Darya Korsunskaya, Ekaterina Golubkova and Anastasia Lyrchikova in Moscow and Alessandra Prentice in Kyiv; Writing by Lidia Kelly; Editing by Richard Balmforth)
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