Ukraine asks Russia for lower gas prices for winter season

Ukraine said on Thursday (Aug 27) it has reached a crucial debt restructuring deal that will see lenders accept a 20-per cent write-down and keep global markets open to the cash-strapped ex-Soviet state. Ukraine will pay nothing on its bonds if its economy grows less than 3 percent annually.

The new president and parliament elected past year have been denounced by the Kremlin as illegitimate and a threat to the mostly Russian-speaking eastern Ukraine population.

Ukraine’s 2017 issue gained 10 cents to trade at eight-month highs around 66 cents in the dollar, according to Tradeweb data. But it marks a milestone in the government’s efforts to restore its conflict-ravage economy back to health and is a major success for the pro-Western government as it seeks to push through a series of politically tough economic overhauls.

The EU is brokering negotiations between Moscow and Kiev to secure gas supplies for the upcoming winter, but there has been little progress so far. Russian Finance Minister Anton Siluanov, however, has already refused to restructure, showing yet again that for Russia, the matter is political. “Solvency and liquidity have been addressed”.

Yet the five-month negotiations – the equivalent of a hard night out clubbing that ends with a chaste kiss – will do little for Ukraine.

A debt restructuring deal struck late on Thursday between Ukraine and its creditors is key to the country’s economic development as fighting in the country’s east continues to drain resources.

Its Western allies crafted a rescue in February: The worldwide Monetary Fund agreed to lend Ukraine $17.5 billion over four years, while the European Union and United States also pledged substantial financial assistance. Kiev had been pushing for a 40 percent haircut.

U.S. Vice President Joe Biden is criticizing pro-Russian separatists in Ukraine for threatening to take more territory and hold their own elections. At the same time, S&P affirmed its long-term credit rating for Ukraine at “CC”, but also said in its statement Friday about the debt deal that “it would classify any exchange offer or similar restructuring of Ukraine’s foreign currency debt as a default under our criteria”.

The deal will, however, give Ukraine some short-term relief. Bondholders will be rewarded with warrants tied to GDP growth from 2021 to 2040. Jaresko also said that she is seeking additional loan guarantees in 2016, as well as more financing from Europe and the World Bank.