Russian finance official says Ukraine may default on Eurobond tranche

MOSCOW Tue Feb 25, 2014 2:27pm EST

Russia's Deputy Finance Minister Sergei Storchak arrives at the G20 meeting during the spring International Monetary Fund (IMF)-World Bank meetings in Washington April 20, 2012. REUTERS/Yuri Gripas

Russia's Deputy Finance Minister Sergei Storchak arrives at the G20 meeting during the spring International Monetary Fund (IMF)-World Bank meetings in Washington April 20, 2012.

Credit: Reuters/Yuri Gripas

MOSCOW (Reuters) - There is a small risk that Ukraine may default on $3 billion in Eurobonds that Russia recently acquired, Russia's Deputy Finance Minister Sergei Storchak said on Tuesday.

"We probably have risks, but not so big ones," he said. "It's possible to begin with the fact that the debtor has a difficult financial situation, that it can't return the money to us in two years."

Storchak added that while the possibility existed of substituting one instrument for another, he was opposed to including Ukraine's debt to Russia in a general restructuring.

"This wouldn't be right. I think that our bond demands won't be part of the package. If we will decide, then it will be on a bilateral basis," he said.

The comments come as Western governments and the IMF are trying to put together an international bailout for Ukraine after pro-Russian president Viktor Yanukovich was forced out after months of street protests, and are seeking to involve Russia in the process.

Storchak said Russia was under no legal obligation to go on with its $15 billion package of lending to Ukraine - agreed after Yanukovich walked away from a free trade deal with Europe - but did not rule out Russia's providing more credit.

Russia already purchased $3 billion worth of Eurobonds in December.

Further purchases would depend on the legitimacy of the Ukrainian negotiators, he said.

Finance Minister Anton Siluanov however said there was no reason to comment on the possibility of a default.

"I'm not inclined to talk about the risks of a default," Itar Tass reported Siluanov as saying.

"The money must be returned at the end of 2015. Until that moment, I do not doubt that an economic course of the new leadership of Ukraine will be worked out and that resources will be designated for the financing of the budget."

Siluanov and Economy Minister Alexei Ulyukayev have said that Russia may continue with the program, but only after the formation of a new Ukrainian government and details about its program.

(Reporting by Darya Korsunskaya; Writing by Jason Bush; Editing by Alison Williams)

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