21 Dec 2019 22:53

Ukraine's $3-bln debt to Russia not included in gas deal, to be resolved in High Court of London - Kozak

MOSCOW. Dec 21 (Interfax) - Ukraine's $3-billion debt to Russia is not included in the gas agreements between the two countries, Russian Deputy Prime Minister Dmitry Kozak said.

"This is a compromise, we decided not to tie these issues in our gas talks, because, if we tried to tie them, we wouldn't have found a solution. We will abide by the law and will fulfill the Stockholm arbitration institute's ruling, and then, if the High Court of London hands down a ruling regarding [Ukraine's] sovereign debt, we hope we will fulfill it the way the court rules. We have nullified the matter so that the gas subject not poison relations between us," Kozak said in an interview with TV host Sergei Brilev on the Rossiya-1 (VGTRK) television channel on Saturday.

Kozak confirmed that the parties agreed to recall all mutual claims, and Gazprom would pay $2.9 billion under a judgement by the Arbitration Institute of the Stockholm Chamber of Commerce. Ukraine's claims could have reached $20 billion, but Gazprom also had claims against Naftogaz of Ukraine, which were to be heard by a Swiss court, he said.

Ukraine defaulted on $3 billion in Eurobonds and $75 million in the final coupon payment in December 2015. Russia had purchased the Eurobonds in December 2013 using money from the National Welfare Fund (NWF).

Kyiv proposed that Moscow accept the same debt restructuring terms reached with Ukraine's major commercial creditors, but Russia rejected the idea, arguing that the bond was sovereign debt.

Ukraine was to clear the debt before January 1, 2016. However, Kyiv imposed a moratorium on servicing this debt in December 2015 and failed to pay a total of $3.075 billion before January 1, 2016 toward servicing and clearing the Eurobonds belonging to Russia.

After that, the Russian Finance Ministry filed a lawsuit in High Court on February 17, 2016, seeking to secure repayment of the debt. The High Court ruled on March 29, 2017 to endorse a quick procedure for hearing the suit, in fact rejecting Ukraine's principal objections and agreeing that it had a debt on Eurobonds. The court recognized that the transaction was a standard one, even though it was concluded in unusual circumstances.

The court so obliged Ukraine to pay Russia the $3 billion in the nominal value of the Eurobonds, $75 million in an unpaid coupon, and $674 in penalty interest per each day of arrears.

In its later decision of May 26, 2017, the court granted Ukraine's motion by suspending the enforcement of the March 29, 2017 ruling before the Court of Appeal completed the hearing of Ukraine's appeal.

The Court of Appeal ruled in September 2018 on an appeal filed by Ukraine regarding the High Court's ruling obliging Ukraine to repay the debt and pay the interest on the Eurobonds bought by Russia using money from the National Welfare Fund. The Court of Appeal upheld the decision not to hear three of the four grounds Ukraine cited in order to avoid fulfilling obligations on these Eurobonds. At the same time, the court found that the fourth argument that the issue of Eurobonds was made under pressure from Russia could not be rejected without comprehensive legal proceedings.