10:17 09.12.2015

Russia drafting documents for court filing on Ukrainian debt – minister

3 min read
Russia drafting documents for court filing on Ukrainian debt – minister

The International Monetary Fund executive board decision to change the organization's policy regarding countries that have debt to official creditors was made exclusively to the detriment of Russia and forces Russia to prepare documents for a court filing on the Ukrainian debt, Finance Minister Anton Siluanov said.

"The decision to change the rules looks hasty and biased. It is being made exclusively to the detriment of Russia and with the aim of legalizing the possibility for Kyiv to not pay its debts," Siluanov told reporters.

Earlier Bloomberg, citing IMF spokesman Gerry Rice, reported that the decision to change the rules was made at an IMF board meeting on Tuesday.

Siluanov said that Russia had taken a step toward accommodation by offering an option to resolve the debt problem. "We turned to the IMF, since we understood that Kyiv is not resolving its debt problems independently," he said. However, Russia was asked to "hold negotiations along with commercial creditors."

"This is not a constructive dialog, we came full circle. In these conditions, we don't have any other choice than to use all possibilities for protection of our rights as a creditor. We are preparing documents for a court filing," Siluanov said.

"Conditions worked out over years are being destroyed. The rules for financing Fund programs have existed for decades and remained unchanged. The sovereign creditor always had priority over commercial ones. The rules stressed the special role of the official creditor, which was particularly important in crisis periods, when commercial creditors turn away from countries and deprive them of access to resources. You will recall that only Russia provided support to the Ukrainian economy and extended a loan to the country, which did not have access to foreign markets two years ago," Siluanov said.

He said that "against this backdrop, the United States not wanting to resolve the issue of ratifying the agreement to bolster IMF capital, which would come in very useful for resolving Ukraine's debt problems, looks blatant."

"It turns out that it's far simpler to change the basic rules of the IMF's work that were established over years, drag out the decision on changing the Fund's charter and its capitalization, which has been fruitlessly discussed for many years already by the G20, than to substantively resolve the problems of a country in default that is implementing an IMF program," Siluanov said.

The IMF's Lending-into-Arrears Policy excluded the possibility of providing financing to an IMF member country that had debt to an official creditor. Lifting this restriction allows the IMF to continue lending to Ukraine under the current Extended Fund Facility, even if the country defaults on its debt to Russia on the $3 billion in Eurobonds issued in 2014.

Russia's Finance Ministry has already said that it will take Ukraine to court if the borrower does not meet its obligations on the bonds in full on December 20.

Russia offered to restructure the Ukrainian debt by rescheduling it over three years under guarantees from the U.S., the European Union or a top-tier international financial institution. But the U.S. refused to provide such guarantees.

Russian Foreign Minister Sergei Lavrov said that the U.S., by refusing to provide guarantees under the Russian debt restructuring proposal, had essentially acknowledged that there is little chance of restoring Ukraine's solvency.