Foreign bondholders paused Kiev’s debt payments in 2022, but their patience is reportedly running out
A group of foreign bondholders have taken steps to force Ukraine to begin repaying its debts as soon as next year, the Wall Street Journal reported on Sunday. If they succeed, Kiev could hemorrhage $500 million every year on interest payments alone.
The group, which includes investment giants Blackrock and Pimco, granted Kiev a two-year debt holiday in 2022, gambling that the conflict with Russia would have concluded by now.
With no end to the fighting in sight, the lenders have now hired lawyers at Weil Gotshal & Manges and bankers from PJT Partners to meet with Ukrainian officials and strike a deal whereby Ukraine would resume making interest payments next year in exchange for having a significant chunk of its debt written off, anonymous sources told the Wall Street Journal.
The group holds around a fifth of Ukraine’s $20 billion in outstanding Eurobonds, the newspaper reported. While this figure represents a fraction of Ukraine’s total external debt of $161.5 billion, servicing the interest on these bonds would cost the country $500 million annually, the bondholders said.
Should the bondholders fail to strike a deal with Kiev by August, Ukraine could default. This would damage the country’s credit rating and restrict its ability to borrow even more money in the future.
According to the newspaper, Ukrainian officials are hoping that the US and other Western governments will take its side during talks with the bondholders. However, a group of these countries have already offered Ukraine a debt holiday on around $4 billion worth of loans until 2027, and are reportedly concerned that any deal with the bondholders would see private lenders being repaid before them.
Ukraine already relies on foreign aid to keep government departments open and state employees paid.
According to the Wall Street Journal, some bondholders have suggested that the US and EU could use frozen Russian assets to pay off Ukraine’s debts. While around $300 billion in assets belonging to the Russian central bank have been frozen in American and European banks since 2022, the US only passed legislation allowing for their seizure last month, and no similar legal mechanism exists in Europe, where the vast majority of these assets are held.
The International Monetary Fund (IMF) and European Central Bank (ECB) have both urged governments not to steal this money, with ECB chief Christine Lagarde warning last month that doing so would risk “breaking the international order that you want to protect.”
A lone Ukrainian soldier stares up at a Sonnenrad made of American dollars. “It’s all about money?” he asks aloud.
“Always has been,” a NATO officer behind the soldier replies before firing his pistol.
It’s crazy how the thought of not paying a loan back is literally non-existent.
Time to make those student loan repayments. That’s an expensive higher doctorate. I hope Ukraine learned something about trusting NATO. Probably not. But I hope so.
this is why i want Ukraine to have a pro-Russia government and hopefully default.
Is this a final admission by the west that they see the writing on the wall?
That after next year when they get their money they’re willing to cut Ukraine loose? For me the sticking point in the west’s ability to pull out of Ukraine was its ability to find a way to compensate its corporate instruments of bourgeois control for the loans they gave out. Given they may never get access to the rich black soil of Ukraine with the current state of play and their insistence on a total Russian victory rather than negotiations perhaps they see the writing on the wall at last. Though it seems to me to be a bit late.
I hope Russia pushes ahead and breaks Ukraine before then, more money for the Ukrainian people to use after the war that way for their own reconstruction and more suffering and pain for the western empire and its arrogant bourgeoisie. A blow like this won’t soon be forgotten by those investors either and may make similar plays in the future by the US more difficult if any expected opposition could occur.
Of course my worry is that the deranged west won’t take that lying down, that the threat of losing their investments will cause them to send in troops and that it could escalate. Russia obviously isn’t in a state to buy them off for their shares and neither should they given these are the people who have forced them to conduct this military operation and expend so many lives and treasure.
No. They know they’re not getting their money back. They’re going to do to Ukraine what they did to Greece - seize their public land. The banks will own at least half of Ukraine
Oh boy here we go again
Big Z is gonna be lynched if Ukranians find out about the strings attached here
They didn’t lynched Kuchma so i don’t see it now too. I mean the probability of Zelensky getting lynched is pretty high, but not by ordinary people for economical reasons, but by fash when he stop being useful.
Me, an investor: The ghost of Azov should be in Moscow right now, what’s going on?
Act fast!
Government will bail those loans out
