The board of the International Monetary Fund (IMF) has recognised the official status of Russia's $3bn loan to Ukraine, which will put pressure on Kyiv to start restructuring talks with Moscow.
"In the case of the Eurobond, the Russian authorities have represented that this claim is official," the IMF said in a statement late on December 16. "The information available regarding the history of the claim supports this representation."
However, on December 8, the IMF announced that it will change current policy on non-toleration of arrears to official creditors. This provides an opportunity to continue supporting Ukraine if the country misses the December 20 repayment of the Russian bond, as is widely anticipated.
The $3bn loan was extended to the Ukrainian government in December 2013 under then president Viktor Yanukovych, who was driven from power by protests in February 2014. Ukraine, which is poised to default on the bond due on December 20, has offered Russia the same restructuring terms, including a 20% writedown, that private creditors led by Franklin Templeton accepted in October. However, Russia has insisted on payment in full.
Russia has also consistently rejected Ukrainian attempts to challenge the loan's status and reduce it to that of commercial credits subject to restructuring. Meanwhile, Russia's own suggestion that the repayment schedule of the bond be restructured under reliable Western guarantees has been ignored.
Moscow now warns it will resort to the courts if Kyiv fails to pay up on time, and Finance Minister Anton Siluanov has said his team is already preparing documentation to defend its rights as a lender. In turn, Ukrainian Prime Minister Arseniy Yatsenyuk said on December 9 that his government is "fully armed" for any legal fight with Russia over redemption of the bond
Ukraine's position "remains unchanged" over the debt, he stressed: "We offered restructuring to all international creditors. All responsible international bondholders accepted the proposal of Ukraine. Our suggestion to others who have not accepted our restructuring plan remains on the table."
Meanwhile, Ukrainian Finance Minister Natalie Jaresko told journalists on December 15 that her ministry is in contact with Moscow through "our German partners every day", local media reported.
As Ukraine struggles to rebuild its economy, the bond dispute has overshadowed broader efforts by Kyiv to restructure its debts and meet the terms of a $17.5bn extended funding facility (EFF) agreed with the IMF in March.
The Ukrainian government has now received two tranches totalling $6.77bn of the support package. A further $3bn was received from other international partners, with funds coming from the US, the EU, the World Bank, Canada, Germany, Japan, and Norway.
Jaresko said earlier in December that the government is preparing additional agreements to get "similar support" from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank, and the governments of Poland, Switzerland, and Turkey. "All of them are members of our international financial coalition," Unian news agency quoted the minister as saying.