Crisis in Ukraine: Daily Briefing – 27 August 2015, 7 PM Kyiv time

Crisis in Ukraine: Daily Briefing

27 August 2015, 7 PM Kyiv time

  1. Russian Invasion of Ukraine

The National Security and Defense Council of Ukraine (RNBO) reported at 12:30 PM Kyiv time that fighting in eastern Ukraine intensified in the last 24 hours – seven Ukrainian soldiers were killed and thirteen were wounded. Towards Luhansk, Russian-terrorist forces shelled Stanytsia Luhanska with mortars and grenade launchers. Russian-terrorist forces shelled Ukrainian positions at Shchastya. At Troitske, Russian-terrorist forces shelled Ukrainian positions with mortars and tanks. Towards Donetsk, Russian-terrorist forces shelled Ukrainian positions near Luhanske village with artillery and mortars. Clashes with Russian-terrorist forces took place north of occupied Horlivka, where Russian-terrorist forces shelled Ukrainian positions at Zaytseve, Mayorsk and Kirove with mortars and artillery. Near the Donetsk airport, Russian-terrorist forces shelled Ukrainian positions with artillery and tanks. Towards Mariupol, Russian-terrorist forces shelled Ukrainian positions at Starohnativka with mortars and artillery, and Lebedynske with artillery.

  1. Ukraine, international creditors reach debt deal

Ukraine and the ad hoc committee of international creditors reached a deal on “Indicative Heads of Terms (IHT) for the restructuring of 14 sovereign and sovereign-guaranteed Eurobonds for an outstanding principal of c. US$ 18 billion,” the Ministry of Finance of Ukraine reported. The terms of the deal include “a 20% nominal haircut, yielding up to US$3.6 billion of debt relief for Ukraine on bonds within the perimeter of the IHT. […] Eurobonds within the IHT perimeter to be rolled into nine new bonds, with principal payments rescheduled to fall outside of the EFF [IMF’s Extended Fund Facility] program period (2015-2018). Principal is instead repaid thereafter in nine equal amounts from 2019 to 2027;  A coupon of 7.75% on all nine series, representing an increase of c.50 basis points (0.50%) compared to the blended average under current contractual agreements;  A value recovery instrument in the form of a real GDP growth warrant, providing potential upside to holders from 2021 to 2040 under the following terms (exact definitions and formulas can be found in the IHT):  No payments if real GDP growth is below 3%;   15% of the value of the GDP growth between 3-4%;  40% of the value of the GDP growth above 4%;  payments for years 2021 – 2025 capped at 1% of GDP for each year, and  no payments unless nominal GDP is higher than US$125.4 billion,” a joint statement from the Ministry of Finance and the creditors’ committee stated.

  1. Ukraine PM: The default our enemies expected is not going to happen

Following the announcement of the debt restructuring deal, Ukrainian PM A. Yatsenyuk stated,”The default so much expected by our enemies is not going to happen. Ukraine has reached a deal with the creditors’ committee on restructuring and partial debt remission […] The Russian Federation didn’t join the creditors’ committee. And therefore, the Government of Ukraine officially declares that Russia, under no circumstances, will get better terms than other lenders. It’s their decision. Either you accept our terms, or you will never get better terms.” Anders Aslund, Senior Fellow at the Atlantic Council stated, “Absurdly, Ukraine is supposed to repay Russia a $3 billion Eurobond in December that Russia issued in December 2013 to save former President Viktor Yanukovych. Why should Ukraine pay anything to its aggressor? Ukraine has already raised a number of international law cases against Russia for its illegal annexation of Crimea and its confiscation of state and private property there. The United States and the European Union need to reinforce their manifold sanctions against Russia by providing full legal and political support to Ukraine and insist that the country should not pay Russia. An aggressor should pay war reparations, as Iraq was forced to do after it attempted to annex Kuwait in 1990. Ukraine has come a long way. The United States and European Union need to tip the balance to its success.”

  1. IMF welcomes Ukraine deal with international creditors

IMF Managing Director C. Lagarde stated, “We welcome today’s agreement on the terms of the debt exchange offer between the Ukrainian government and the ad hoc Creditors’ Committee of holders of Ukraine’s sovereign and sovereign guaranteed debt. The announced parameters of the agreement will help restore debt sustainability and – together with the authorities’ policy reform efforts – will substantively meet the objectives set under the IMF-supported program. […] I am very pleased with today’s announcement and appreciate the positive attitude of both the ad hoc Creditor Committee and the Ukrainian government. Let me highlight in particular the hard work by the Finance Minister and her team that made this agreement possible.”

  1. European Council President: As long as Sentsov and others stay in prison, all honest and decent people will not remain indifferent to their fate

Following a meeting with Ukrainian President P. Poroshenko, European Council President D. Tusk stated, “Two days ago Oleg Sentsov was sentenced to twenty years in a labour camp in Russia. Sentsov protested against the annexation of Crimea, where he lived with his two children. Sentsov, Kolchenko, Savchenko and all other Ukrainians held illegally in Russia as well as EU citizens such as Eston Kohver are blatant acts of injustice. They are also symbolic of the cynicism that dominates Russian politics. As long as Oleg Sentsov and others stay in prison, all honest and decent people will not remain indifferent to their fate.”

  1. Ukrainian and European Commission Presidents: Russia not fulfilling Minsk agreements

Following his meeting with European Commission President J.C. Junker, Ukrainian President P. Poroshenko stated, “Russia is not fulfilling the Minsk agreements. […] There will be no Minsk 3. […] The Minsk agreements are comprehensive. The only thing that must happen for peace in Ukraine – [the Minsk agreements] must be implemented. European Commission President J.C. Junker stated, “I wish to reiterate my wish to see the two parties implement the entirety of the Minsk agreements. I am speaking especially to Russia because the Russian side does not seem to fulfill the duties that should be theirs.”

  1. European Commission President: EC intends to propose Ukraine visa liberalization to member states at end of year

Following a meeting with Ukrainian President P. Poroshenko European Commission President J.C. Junker welcomed the “enormous progress” made by Ukraine to “meet certain criteria for visa liberalisation and stressed that the Commission intends to propose visa liberalisation to Member States by the end of the year. At the same time he underlined that further progress is needed notably in the fight against corruption.”

  1. US President notes Ukraine’s progress in implementing Minsk; Russia must do the same

US President B. Obama spoke with German Chancellor A. Merkel on 26 August “to discuss the recent upsurge in violence in eastern Ukraine resulting from increased attacks by combined Russian-separatist forces across the Line of Contact.  President Obama noted Ukraine’s progress in implementing its obligations under the Minsk agreements, and reiterated that Russia must do the same,” the White House said in a statement.

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