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Russia to acquire Ukraine's Eurobonds worth USD 2bn already this week.

February 18, 2014

Russian FinMin has promised to acquire Ukraine's Eurobonds worth USD 2bn already by the end of this week, Russia's FinMin Anton Siluanov has announced on Monday.

Previously, Russia said that it would wait with provisioning of a second tranche of USD 15bn bailout deal until Ukraine settles its USD 2.7bn debt for gas with Gazprom. Before that, Russia suggested waiting until Ukraine forms a new government to continue fulfilling Russia's latest financial and energy obligations.

In late 2013, Russia agreed to grant Ukraine USD 15bn by pledging to buy out issues of sovereign Eurobonds, while also lowering the gas exports price to USD 268.5 per 1,000m3. The first issue of USD 3bn worth of bonds (now rated at CCC+/Negative by S&P) were already acquired by tapping into Russia'sNational Welfare Fund.

Russia's bail-out plan reversed the Ukrainian government's intention to sign an Association Agreement with the EU. Since then, three-months long fierce street protests that took the lives of six led to stepping down of PM Mykola Azarov. The protests in Ukraine continue demanding the resignation of pro-Russian president Victor Yanukovych and the return to 2004 version of constitution.   

The disbursement of the funds should help Ukraine's  international reserves, which have declined to USD 17.8bn in January from the already low level of USD 20.4bn at end-2013, reducing the buffer available to the sovereign to service external debt. Political turmoil in the country has also added to a weakening in confidence in the Ukrainian hryvnia and in the exchange rate policy.

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Source: IntelliNews - Weekly Reports

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