Archives for December 2015

“There’s no doubt that Kiev won’t pay,” Medvedev said on Monday at the meeting of Cabinet ministers. He added that Russia should recover Ukraine’s debt along with penalties.

He said the repayment deadline expired on December 20, signifying Ukraine is in default.

Kiev still has a 10-day grace period during which it could pay the debt without penalty, said Medvedev.

“But due to the statements from Ukrainian officials, they are not planning to do that. Accordingly, a de facto default will happen in 10 days,” added the Prime Minister.

He also said he had signed a decree to introduce economic measures (starting from January 1) as the economic part of Ukraine’s Association Agreement with the EU kicks in. “We need to protect the Russian market, our producers and prevent the import of goods [from sanctioned EU countries – Ed.] marked as Ukrainian products,” Medvedev said.

On Friday, Kiev imposed a moratorium on Russian debt repayment, saying it was halted until the Ukrainian government “makes restructuring proposals or a relevant court decision comes out.” The announcement came ahead of the December 20 deadline.

Earlier this month, Russian President Vladimir Putin ordered the Finance Ministry to file a lawsuit against Ukraine if Kiev failed to pay.

In November Putin proposed restructuring Ukraine’s debt. The offer would have delayed Kiev’s default and allow it to repay $1 billion per year for three years, from 2016 to 2018. Moscow demanded guarantees from the US, EU, and international financial organizations on future payments of the Ukrainian sovereign debt. None were given.

Ukraine’s sovereign debt to Russia dates back to a deal between President Putin and former Ukrainian President Viktor Yanukovich struck in 2013 which envisaged Moscow buying $15 billion worth of Ukrainian bonds. In December 2013 Russia bought $3 billion worth of Ukrainian bonds.

Article source: https://www.rt.com/business/326647-medvedev-ukraine-debt-court/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Worst of crisis over for Russia, but country needs to adjust to life with cheap crude – Putin

As of 3:00 p.m. GMT Monday, Brent blend was trading at $36.04 a barrel, while US benchmark West Texas Intermediate was at $34.00.

On Thursday, the Energy Information Administration (EIA) said that the current US oil inventories stand at 490.7 million barrels, while refineries operated at 92 percent of their capacity in the week ending December 11.

Oil was dealt a double blow Friday, when US President Barack Obama signed a bill to lift the US export ban. The ban was established during the US oil shortages in the 1970s, as part of a bigger deal that included tax breaks for renewable-energy companies and refiners.

“I don’t doubt you’ll see some exports next year. We’re pretty excited about it, but we’ve also got to get the infrastructure in place,” ConocoPhillips CEO Ryan Lance told Bloomberg.

American oil exports are “not going to happen Monday, but within a week or two, you’re going to see contracts be developed and a system come into place,” Representative Joe Barton, a Texas Republican and the House’s chief advocate for ending the export ban, told Bloomberg.

Russia continues record oil production – energy ministry

Iraqi Oil Minister Adel Abdul Mahdi said that oil prices could rebound in 2016 on improved global economic growth, in an interview with Assabah newspaper published Monday.

“There is big hope that, in the first half or by the end of next year, oil prices would return to what they were,” he told the Iraqi daily, not specifying a price level.

Oil prices have been under pressure over concerns of global oversupply. OPEC’s output was the highest in over three years at 31.7 million barrels per day in November. Russia’s oil output has continued hovering at post-Soviet record levels in November at 10.779 million barrels per day.

Many oil exporting countries will now have to amend their 2016 budgets. In its federal budget adopted for 2016, Russia was relying on $50 per barrel and 63.3 rubles per dollar. Russian President Vladimir Putin said the budget needs to be adjusted.

Article source: https://www.rt.com/business/326619-oil-prices-brent-us-export/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“Considering that Russia has refused, despite our efforts, to sign an agreement on restructuring and to accept our proposals, the cabinet is imposing a moratorium on payment of the Russian debt worth $3 billion,” said Yatsenyuk.

The payment is halted “until we make restructuring proposals or a relevant court decision is made,” added the Prime Minister.

Kiev’s moratorium on debt repayment to Russia constitutes default, according to the chairman of the Federation Council International Affairs Committee Konstantin Kosachev.

“According to IMF rules, a moratorium by the Ukrainian government on the $3 billion debt repayment to Russia is in fact a declaration of Ukraine’s default,” said Kosachev.

Уряд запроваджує мораторій на виплату $3 млрд 75 млн російських бондів.

— Arseniy Yatsenyuk (@Yatsenyuk_AP) December 18, 2015

On Wednesday, The International Monetary Fund (IMF) recognized Ukraine’s debt to Russia as official and sovereign. The sovereign status of the debt means Ukraine would have to declare default if unable to pay.

However, on Tuesday the IMF changed its strict policy prohibiting the fund from lending “to countries that are not making a good-faith effort to eliminate their arrears with creditors.”

The decision was criticized by Moscow, as it will apparently allow the IMF to continue doing business as usual with Kiev even if it fails to pay its sovereign debt to Russia.

READ MORE: IMF recognizes Ukraine’s contested $3bn debt to Russia as sovereign

According to Yatsenyuk, Ukraine has also halted debt repayments by state-owned companies to Russian banks.

“The government is imposing a moratorium on the $507 million debt payment to Russian banks of two Ukrainian companies Yuzhnoe and Ukravtodor. From today all payments are suspended till our [government – Ed.] or a court makes a decision,” Yatsenyuk said.

Late on Thursday, Ukraine’s Ministry of Finance said Kiev couldn’t pay off Russia’s $3 billion Eurobond loan without breaking a debt restructuring deal reached with other international creditors.

The country “remains committed to negotiating in good faith” with Moscow over debt restructuring, said the ministry in a statement.

In August, Ukraine agreed a restructuring deal with a creditor committee led by Franklin Templeton (which owns about $7 billion of Ukrainian bonds) providing a 20 percent write-down on about $18 billion worth of Eurobonds.

Russia refused to participate in the debt restructuring, claiming its bond purchase was a state loan not a commercial one.

In November, Russian President Vladimir Putin offered a three-year restructuring plan for Kiev’s debt, provided loan guarantees were in place from the US, the EU and the International Monetary Fund. Under the offer, Russia would forgo payment this year and Kiev would pay $1 billion a year for the next three years.

The deal fell through after Ukraine’s Western backers were unwilling to provide such guarantees.

Last week, President Putin ordered the Finance Ministry to file a lawsuit against Ukraine if Kiev fails to repay Russia’s $3 billion Eurobond loan within a 10-day grace period after the December 20 deadline.

Ukraine’s sovereign debt to Russia dates back to a deal between President Putin and former Ukrainian President Viktor Yanukovich struck in 2013 which envisaged Moscow buying $15 billion worth of Ukrainian bonds. Russia bought $3 billion worth in December 20, 2013, and the debt was supposed to be redeemed on December 20, 2015.

Article source: https://www.rt.com/business/326409-ukraine-defaults-russian-debt/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Sarkozy placed under formal investigation for corruption

Lagarde has been accused of “negligence by a person in a position of public authority.”

Bernard Tapie, a former owner of Marseilles football club was awarded €400 million compensation in a lawsuit against the French bank Credit Lyonnais, which he accused of undervaluing his stake in sportswear multinational Adidas. Lagarde, who was President Sarkozy’s finance minister at the time, sent the case to arbitration and ratified the payout.

“Ms. Lagarde would like to reaffirm that she acted in the best interest of the French state and in full compliance with the law,” said a statement from the IMF.

French investigators have been looking into whether Tapie was offered a deal in return for supporting Sarkozy in the 2007 presidential election and whether Lagarde was acting on his orders.

“A decision like this is incomprehensible. I sent her a text, she was really surprised and very disappointed,” her lawyer Yves Repiquet told Reuters.

The French businessman and politician Bernard Tapie was a key shareholder in Adidas. When he needed cash in 1993, he began to look for buyers of his stake, Spiegel reported. Tapie sold his share to Credit Lyonnais for two billion francs. A few months later, the bank, which then belonged to the state, resold the assets to businessman Robert Louis-Dreyfus for twice the price. Tapie accused Credit Lyonnais of fraud and demanded compensation for lost profits, which was eventually paid out in 2007.

In 2007, Finance Minister Christine Lagarde intervened in the process and appointed a special committee to resolve the issue. The committee eventually ruled in favor of Tapie and decided to pay him about €400 million.

At the end of June 2013, Credit Lyonnais filed a complaint against the arbitration decision. A court then ordered Tapie to return the €400 million, this went to appeal and in December 2015 this was rejected.

Article source: https://www.rt.com/business/326399-lagarde-tapie-france-trial/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

“We are aware of the high dependence of our economy on the price of our traditional export products – oil, gas and their derivatives. We proceeded from the fact that the average price for Brent will be $100 per barrel,” said Putin during his annual televised press conference on Thursday.

READ MORE: Crude falls below $35 a barrel for first time since 2009

“When the price dropped from $100 to $50 per barrel we planned the budget considering these figures. Now the price is $38. We are forced to revise again,” Putin said.

Global oil glut to persist in 2016 – IEA

Putin said low oil prices have dragged down the Russian economy, but it’s slowly recovering and the worst of the crisis is behind.

“It is a 3.7 percent GDP contraction, 12.3 percent inflation. The real income of the population has fallen, the investment in fixed assets decreased by 5.7 percent. However, statistics show that the crisis in the Russian economy as a whole has passed its peak. From the second quarter, there are signs of stabilization in business activity. In September and October, GDP grew by 0.1-0.3 percent compared to the previous month,” he said.

The President also addressed concerns over using the country’s reserves to fill the hole in the budget left by falling crude prices. In October, Russian Finance Minister Anton Siluanov said the nation’s Reserve Fund could be depleted in 2016, forcing the government to dip into its last remaining reserve, the National Welfare Fund.

“Our foreign reserves stand at $364.4 billion. They’ve depleted a bit, but it’s still a very solid figure,” said Putin.

READ MORE: Moody’s changes outlook on Russian bond rating to stable

Later on Thursday, the Central Bank of Russia reported that the country’s international reserves had grown almost $7 billion in the second week of December to $371.2 billion.