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Eastern Europe
November 24, 2017 www.intellinews.com I Page 19
and gearboxes made by the Borisov-based engine factory Geely, with Belarusian and Russian accu- mulators, and tyres made by Belshina – all Bela- rusian companies. The Belarusian components will then include the front axle and the back axle, wheel disks, ABS and ESP systems, and seats, Semashko said.
The project is also an import-substitution drive and Lukashenko says he has “forbidden the entire power vertical to buy import cars. We've already bought dozens of [Geely] cars. We will
gradually replace the rest now, starting with the central government and ending with municipal government agencies. We are already doing it.”
In other incentives, Lukashenko called for five- year warranties and high quality after-sales servicing, which should have special appeal to domestic buyers: in Soviet times a second-hand Lada was worth more than a new one as it was assumed the first owner had fixed all the prob- lems the car had after leaving the factor as the quality of production was so low.
Russia says it is willing to sell its disputed $3bn Ukrainian bond bne IntelliNews
Russia is willing to sell its defaulted-on Ukrainian $3bn bonds and end its row with Kyiv, the Russian Finance Ministry has said.
In a what could be seen as a peace offering, Russia’s Deputy Finance Minister Sergey Storchak said Russia was ready for an out-of-court settlement with Ukraine over a $3bn Eurobond issue it bought in the twilight of the rule of ousted president Viktor Yanukovych, and could sell the bonds to a third country if a buyer could be found.
Ukraine sold a $3bn 5.0% two-year Eurobond to Russia as part of a larger $15bn bail out package in December 2013. The new administration of Presi- dent Petro Poroshenko has refused to honour the debt, which has since become a political football. Ukraine has technically defaulted on the bond.
“Ukraine’s new government restructured $15bn of outstanding sovereign Eurobonds in Novem- ber 2015 (and added some quasi-sovereign debt later), agreeing a four-year maturity extension along with a 20% nominal haircut in exchange for GDP warrants. Russia did not participate in the debt exchange, leading to Ukraine defaulting on the $3bn bond in December 2015,” Dragon Capital said in a note.
Russia has sued Ukraine in a UK court in what has turned into a messy legal battle. Ukraine is due to appeal sometime in early 2018 against the initial court ruling that found it should honour the bond.
Analysts worry that Ukraine will lose and be told to pay. However, with few assets outside Ukraine it is hard to see how Kyiv can be forced to pay.
But a negative ruling may complicate its relations with the International Monetary Fund (IMF) and its $17bn stand-by agreement. The IMF has already changed its rules to allow itself to lend to a sovereign that has defaulted on a sovereign bond, something that its own charter previous forbade, because of the situation in Ukraine.
Storchak said Russia was ready to “accept cash or debt of a third country” for the bond. Germany has been suggested as one possible buyer.
“The third party consenting to buy the bond would likely need to restructure it on the terms Ukraine agreed with its Eurobond holders in 2015. This would lead to a marginal drop in Ukraine’s debt- to-GDP ratio (-0.6pp) as a result of the nominal haircut but slightly higher interest payments,” Dragon said.