Russia admitted that it cannot prevent the IMF from allowing Ukraine not to pay its debts and receive loans after default

IMF reform, which will allow Ukraine not to pay Russia 3 billion in debt and continue to receive financing from the IMF even after a default on its sovereign debt, will most likely be adopted. Russia's votes are not enough to block such a proposal on the IMF board of directors.

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RIA Novosti reported this Alexey Mozhin, Director of the IMF for Russia, on the sidelines of the Russia Direct conference.

“Here you need a simple majority, Russia has only 2,5%. Therefore, I expect the reform to be accepted. But there is still more than one discussion to be had on this issue,” he said, answering RIA Novosti’s question whether blocking the reform on the IMF board could force Ukraine to answer for its obligations regarding the repayment of Eurobonds purchased by the Russian Federation.

Mozhin noted that Russia does not have a veto right in this case.

Let us remind you that Russia refused to restructure Ukrainian Eurobonds worth three billion dollars, the maturity date of which is the end of December 2015. The Ukrainian government interprets the three billion dollar debt to the Russian Federation as commercial, since it was formed as a result of the redemption of bonds from the Irish Stock Exchange. Ukraine offered the Russian Federation, like other creditors, a return of the amount 20% less and several years after the completion of the IMF financing program.

So, you shouldn’t expect Ukraine to pay its debt to Russia. Just like the Ukrainian default as a result of this, which Russia was counting on, hoping to beat the West in a game by the rules. Moscow was once again shown that it is impossible to win against the West by playing by the rules it has established. Because the one who sets these rules is himself both a player and a judge.

Commercial creditors agreed to a partial write-off of the debt, since taking into account the discount at which the bonds were purchased (reached 40%), they are in the black. Meanwhile, the Russian Federation bought Ukraine's Eurobonds at full price, on a low market, using the reserves of its own National Welfare Fund.

Although the IMF says it has not yet decided on the status of Russian debt, according to the fund's rules, the instrument does not matter. The status is qualified by its acquirer. Thus, the acceleration of the reform, which was announced five years ago, indirectly proves that Ukraine’s debt to the Russian Federation is still sovereign. Wall Street Journal experts previously also agreed that the acceleration of reform at the IMF is connected precisely with the fund’s desire to save Ukraine.

Bloomberg reported on Tuesday, citing a source, that Russia is now looking for options to block the next IMF tranches to Ukraine if it defaults on its debts. However, Russian officials also spoke about this possibility. Thus, the head of the Ministry of Finance Anton Siluanov did not rule out that Russia could exercise its right as a sovereign borrower and demand that the fund recognize the Ukrainian financing program as untenable.

If the reform is approved before December and the directors agree to apply it to previously concluded contracts, Russia will lose this right. Another option for resolving the issue, Russian officials called transferring the case to an international court.

The issue of revising the fund's policy, according to a statement by its representatives, may be considered in the near future at the board of directors in November (usually it takes place in the third decade of the month).