Finance Minister Anton Siluanov said that if Ukraine refuses to pay its debts on time and in full, Russia will go to court and the IMF. Russia will raise the question of the viability of the Ukrainian IMF program

Russian Finance Minister Anton Siluanov (Photo: TASS)

If the Ukrainian authorities refuse to repay their debt in full and on time, Russia will defend its interests in court, warned Russian Finance Minister Anton Siluanov. In addition, in this situation, the Russian authorities may challenge the validity of the assistance program for Ukraine adopted by the International Monetary Fund (IMF).

“We, as participants in the International Monetary Fund [Russian representatives are members of the board of governors and executive board of the IMF], will raise this issue with the international financial organization - about the consistency of the program that the IMF has today adopted in relation to Ukraine,” Siluanov said (quote via Interfax).

The day before, Ukrainian President Petro Poroshenko held a meeting with IMF head Christine Lagarde, during which he expressed hope that the “active reform efforts” of the Ukrainian authorities will ensure that Ukraine receives the next tranche of a loan from the IMF.

In March 2015, the IMF Board of Governors approved a $17.5 billion loan to Ukraine. The first tranche of $5 billion was transferred to Ukraine in March, the second ($1.7 billion) in August. The decision to provide the third tranche may be made as early as October, after the fund’s mission’s visit to Ukraine. However, according to IMF rules, the fund cannot provide financing to a country that has overdue payments on its official debt.

The question remains open whether Ukraine's debt to Russia is an official or a commercial debt. The Russian authorities insist on the first option, the Ukrainian authorities on the second. The IMF Board of Directors will have to resolve the dispute.

During yesterday's meeting, IMF head Christine Lagarde assured Poroshenko of full support for the reforms being carried out in the country. After the meeting, the Ukrainian president again stated that the debt to Russia will not be repaid on “more privileged” terms compared to other creditors. “Under no circumstances will Russia be placed in more privileged conditions than other creditors of Ukraine. Russia must decide by the end of the year whether it is smart or beautiful,” Poroshenko said.

At the end of August, it became known that the Ukrainian authorities had reached a preliminary agreement with a group of international creditors, to whom the country owes approximately $19 billion, to write off about 20% of the debt. The document on the parameters of the agreement on the restructuring of public debt notes that Ukraine’s debt could be reduced by $3.6 billion, and the repayment dates for the portion of the debt that is not subject to write-off will be postponed from 2015–2023 to 2019–2027.

Commenting on these decisions, Siluanov stated that Russia will not take part in the restructuring of Ukraine's debt.

Later, the head of the Ukrainian government, Arseniy Yatsenyuk, promised that Russia would not receive better conditions, and advised either agreeing or demanding money from “those who took it.” “Those who took the money received political asylum in the Russian Federation. Let them call those bandits whom they sheltered, and let them take the money from them or let them return it to us here, and we will with great pleasure carry out procedural actions for each of them who received funds and plundered the funds of the Ukrainian state,” the prime minister said.

In 2013, Russia bought government bonds issued by Ukraine with a total value of $3 billion. These securities mature at the end of 2015, but a law adopted in the spring of 2015 in Ukraine allows the country's authorities to declare a moratorium on debt repayment.

Russia raised questions about the viability of the IMF assistance program for Ukraine