Ukraine's Eurobond obligations to Russia are sovereign debt - Siluanov
MOSCOW. May 21 (Interfax) - Ukraine's obligations to redeem $3 billion in Eurobonds that Russia purchased with National Welfare Fund (NWF) money relate to sovereign, not commercial debt, and failure to honor those obligations could put Ukraine's program with the International Monetary Fund (IMF) in jeopardy, Russian Finance Minister Anon Siluanov said.
"The Russian credit, the National Welfare Fund money invested in the Eurobonds - this investment is sovereign debt, it's a totally different category of debt from commercial debt," he told the Russia 1 TV channel.
He said the IMF's program for Ukraine was based on the fulfillment by the Ukrainian government of all obligations to pay sovereign debts, "that is, obligations to Russia." "If obligations to service the debt are breached, which we can see happening as early as June, or if obligations to repay principal debt are breached, then there can be no program with the Fund, that's the position from the IMF's charter," Siluanov said.
He also recalled that Ukraine was due to pay another $75 million in interest on June 20 and to redeem the $3 billion in bonds December.
"If these payments are not carried out, if the money does not reach Russia, that will be grounds to declare default on your own obligations, on sovereign obligations, and for Russia to go to the courts," he said.
Commenting on the legislation that Ukraine's parliament has passed, entitling the government to impose a moratorium on debt repayments to external foreign creditors in order to safeguard national interests, Siluanov said "essentially a unilateral decision by the Kyiv leadership is in the making, one that says we won't be honoring commitments on those credits that we have received." "Talks are not conducted in such a manner in the civilized world. There should be meetings with investors, terms that are acceptable to both sides should be put before the commercial investors. Such agreements should only be signed on terms that are acceptable to a majority of investors," he said.
The IMF also considers Ukraine's debt to be Russia to be official and not private sector debt. The $3 billion in Eurobonds are owned by the National Welfare Fund, they are official debt, IMF Deputy Spokesman William Murray said at the end of March.
Ukrainian Finance Minister Natalie Jaresko said in April that the restructuring of this issue of Eurobonds falls under the mechanisms of the London Club, a group of commercial creditor banks, in other words private investors. Jaresko said she did not know who the ultimate beneficiary of the Eurobonds purchased by Russia was.
The Russian finance minister said in reply that Russia was the ultimate holder of these bonds.