REUTERS
Germany is asking Ukraine to propose a new offer to resolve a dispute with Russia over a $3 billion bond default after President Vladimir Putin's government rejected a proposal put forward last month, Bloomberg reported referring to a source close to the negotiations.
The Finance Ministry in Berlin, which is mediating talks between the two states over the debt, is urging Ukraine to compromise, according a person with knowledge of the matter, who asked not to be identified because the details are private.
The latest offer to resolve the dispute was "unacceptable" because it contained terms that were worse than those given to private creditors in a $15 billion restructuring last year, Bloomberg reported referring to Russian Finance Ministry's e-mailed response to questions Tuesday.
The mediation effort is a sign that Ukraine is trying to reach an out-of-court compromise to a dispute that has deepened the rift between the neighbors that began in 2014 when Russia annexed Crimea, according to the report. As is known, the government in Moscow refused to take part in Ukraine's debt operation last year because it wanted to be treated more favorably than private investors. Bondholders accepted a 20% principal write-down as part of that agreement.
"An out-of-court settlement would be definitely preferable, as a court ruling and its subsequent implementation would likely be lengthy, complex and could additionally spoil Russian-Ukrainian relations," Gunter Deuber, an analyst at Raiffeisen Bank International AG in Vienna, said in an e-mailed note, according to Bloomberg.
A spokeswoman for Ukraine's Finance Ministry did not immediately respond to a request for comment on the status of mediation efforts.
As UNIAN reported earlier, on December 18, 2015 Ukraine announced a moratorium on any payments of the Russian debt, including payment of $3 billion borrowed under Viktor Yanukovych's presidency and maturing in December 2015. The moratorium also encompassed Ukraine's sovereign-guaranteed loans for Ukravtodor and Yuzhnoye owed to the Russian banks. The total debt subject to the moratorium exceeds $3.58 billion.
Ukraine is barred from paying Russia back in full under the terms of its restructuring agreement, which was reached to enable the country to qualify for a $17.5 billion International Monetary Fund rescue package to help it avert bankruptcy as separatist unrest hobbled its economy, as noted. The terms of that funding also require Ukraine to negotiate in "good faith" with Russia over the defaulted bond.
[Russian President Vladimir] Putin proposed in November to allow Ukraine to settle the debt in three $1 billion installments from 2016 to 2018, but the plan fell through after the U.S. refused to offer the financial guarantees that Russia requested. Ukrainian Finance Minister Natalie Jaresko made the country's latest offer at the World Economic Forum in Davos last month, according to the person familiar with the negotiations.