Consular assistance in Russia

Russia is currently at war in Ukraine. Are you in Russia and need consular assistance? Find your country’s embassy in Russia on EmbassyPages.

Home News Russia ‘not obliged’ to disburse Ukraine funds: minister

Russia ‘not obliged’ to disburse Ukraine funds: minister

Published on 25/02/2014

Russia has no legal obligation to disburse further tranches of a $15 billion bailout for Ukraine agreed last year with ousted president Viktor Yanukovych, a Russian minister warned on Tuesday.

Russian President Vladimir Putin agreed the bailout to save Ukraine’s ailing economy under a scheme whereby Russia is the sole buyer of eurobonds issued by the Ukrainian state.

Russia extended $3 billion to Ukraine in an initial tranche but froze the next $2 billion amid the turmoil in the country. The fate of the rest of the money remains unclear given the icy relations between the Kremlin and the new pro-EU authorities.

“We have no legal obligations” to disburse the funds, Russian Deputy Finance Minister Sergei Storchak told state Russian news channel Rossiya 24.

“What we are talking about is a new round of negotiations and new agreements. In what form they will take shape — time will tell,” he added.

Storchak said it would only be clear in the middle of this year whether Ukraine has been able to stave off default, when the first payments to Russia are due from the eurobonds it purchased.

“How big the chance is of the money being paid back will be clear relatively fast. The first payment should be made in June,” he said.

He said the readiness of the new Ukrainian authorities to pay off the debt would be a “litmus test” for Kiev’s future relations with creditors.

“We did not give out these three billion dollars as a present,” Storchak said pointedly.

Further complicating the situation, he also reaffirmed Russia’s doubts about the legitimacy of the new Ukrainian authorities.

“It is very important that those people with whom we are going to negotiate in the future are completely legitimate as officials representing the sovereign” issuer.

Interim Ukrainian finance minister Yuriy Kolobov has warned that the “planned volume of macroeconomic assistance for Ukraine may reach around $35 billion (25 billion euros)” by the end of next year.

If Russia fails to help Ukraine at a time of looming financial crisis with the state coffers empty, Kiev will have to turn again to the International Monetary Fund (IMF) as well as the EU.

However they are likely to demand painful economic reform — a demand that prompted Yanukovych to seek the less directly conditional Russian help.