The Ukrainian myth lasted only a few days

While the President of Ukraine talks in New York about a three-fold improvement in the situation with poverty, the problems of the Ukrainian economy are only getting worse, Rossiyskaya Gazeta writes, recalling that on September 23, Kiev was supposed to pay $500 million to creditors with whom it was not possible to conclude a settlement agreement, but pointedly did not do this.

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The publication notes that after the expiration of the period allotted for the payment of the specified amount, in early October, the International Swaps and Derivatives Association (ISDA), headquartered in New York, may record this “credit event” and declare the state of Ukraine insolvent, since the Minister of Finance Ukraine Natalya Yaresko and Prime Minister Arseniy Yatsenyuk, who recently announced a triumphant resolution of the conflict with the creditors’ committee, did not tell Ukrainians the whole truth.

“According to international financial traditions, laws and precedents, the terms of “restructuring” become the rule for all creditors only if the holders of 75 percent of the debt agree to them,” the newspaper writes. – In this case, those who do not agree will be forced to accept the conditions of the majority. However, in practice, this proportion was not observed by Ukraine, and the American funds Aurelius Capital and Elliott Associates, representing the “irreconcilable” holders of more than a quarter of the Ukrainian debt, still demanded payment of 500 million on Eurobonds.”

At the same time, one day before the start date of this payment, on September 22, the Ukrainian government officially put into effect the resolution “On the beginning of the procedure for restructuring state and state-guaranteed debt and its partial write-off,” which declared a moratorium on payments on several issues of its debt securities allegedly in agreement with creditors. Although, as it now turns out, Yaresko and Yatsenyuk did not have the right to do this.

“The problem arose when, on September 23, the named American funds made it clear that the resolution of the Ukrainian Cabinet of Ministers meant nothing to them, and demanded to pay the $500 million owed to them,” RG reports. – It turned out that for ISDA, the main trendsetter in the world of finance, the resolution of the Ukrainian government is also an empty phrase. The Association has already issued a memorandum recognizing the fact of a “potential refusal” in relation to Ukraine. All 15 participants of the meeting dedicated to Ukraine, representatives of the world’s largest financial institutions – Bank of America, Barclays Bank, BNP Paribas, Credit Suisse International, Deutsche Bank and others voted for this decision.”

As a result, Kyiv has virtually no room for maneuver, the publication believes.

“Thus, Kiev has little choice - either by October 3, find and quietly pay the specified amount to the funds, or in its next memorandum, ISDA recognizes Ukraine’s default and its insolvency,” RG considers options. – And this will no longer be a “technical” default (which has actually occurred for Ukraine), but a full-fledged financial collapse. After such a decision by ISDA, all creditors of Ukraine, even those who agreed to “restructuring,” have the right to demand the return of debts immediately and in any form.”

However, the collapse of the national currency and hyperinflation are an inevitable, but not the worst consequence of such a decision by ISDA, the author of the publication believes, adding that Kiev still has time through official Washington to try to solve this problem and persuade Aurelius Capital and Elliott Associates to accept the conditions until the beginning of October restructuring.

“There are still chances for this, according to Ukrainian commentators,” the publication concludes. – It’s another matter that ISDA ruined the image of Yatsenyuk and Yaresko as the saviors of Ukraine from default and brilliant financiers. This myth lived for literally a few days, and it was put an end to... Yulia Tymoshenko. With documents in hand, in front of the whole country, she accused both of them of essentially driving Ukrainians into bondage for decades to come.”