Russian President Vladimir Putin has offered to restructure Ukraine’s $3 billion debt to Moscow.
Speaking on November 16 on the sidelines of a summit of the Group of 20 (G20) major economies in Turkey, Putin proposed lifting a December deadline for the debt repayment.
Putin said that rather than seeking $3 billion in repayment this year, Moscow would be willing to agree to annual payments of $1 billion from 2016 to 2018.
“Not only have we agreed to restructure the Ukrainian debt, but we have proposed even better restructuring conditions than those asked from us by the International Monetary Fund (IMF),” he said.
Russian officials had previously insisted that Ukraine must pay the bond in full on December 20, and threatened legal action if Kyiv missed the deadline.
Putin’s surprise announcement could be a significant step toward defusing tensions with Kyiv and promoting stability in Ukraine, where fighting between government forces and Russian-backed separatists has killed more than 7,900 people.
It may also help warm ties with the West that have plunged to lows unseen since the Cold War over Russia’s annexation of Crimea in March 2014 and the conflict in eastern Ukraine.
Putin said on November 16 that Russia was asking for guarantees for the repayment from the United States, the European Union, or global financial organizations.
"Since our [western] partners are so confident that the credit status of Ukraine will only grow and that there is no reason to even doubt that we shall be paid $3 billion next year, then our partners should not have any problem with issuing guarantees for [our] loan,” the Russian president said.
“We agreed with our partners that we’ll discuss details of our proposals comprehensively in the nearest future,” he added.
Russian Deputy Finance Minister Sergei Storchak said the IMF has until December 8 to respond to the proposal.
He also said that if the Russian proposal is accepted, Russia still expects Ukraine to make a coupon payment for the bond in December.
According to an IMF spokesperson, the details of the Russian proposal now need to be discussed between Russia and Ukraine.
Meanwhile, the Ukrainian Finance Ministry said it “hasn’t received any direct information and has no comment at this time."
Ukraine needs to restructure its debt in order to qualify for a $17.5 billion IMF loan granted to help lift the economy out of a recession.
In August, a creditor group reached a $15 billion restructuring agreement with Kyiv that included a 20 percent principal writedown and a four-year maturity extension.
But Moscow refused to participate in the deal, saying Ukraine’s $3 billion debt to Russia -- issued under Russian-backed President Viktor Yanukovych before he was ousted in February 2014 -- was sovereign and should be treated differently to the private creditors.