October 8, 2015 / 4:42 PM / 4 years ago

UPDATE 2-Ukraine to open debt talks with Russia -U.S. official

(Adds Nuland comments on Russian sanctions, Ukraine ceasefire)

By Lesley Wroughton

WASHINGTON, Oct 8 (Reuters) - Ukrainian finance officials will open talks with Russian counterparts on a maturing $3 billion Eurobond that Russia holds on the sidelines of IMF-World Bank meetings in Peru, a senior U.S. official said on Thursday.

U.S. Assistant Secretary of State, Victoria Nuland, told a congressional hearing there had been no formal discussions with Russia on the issue because Kiev just completed a debt restructuring deal with private creditors on $18 billion of its debt. The Russia bond matures in December.

“My understanding is that the Ukrainian government is now approaching the Russian government and that conversation may begin in coming days at the Lima ... meeting,” Nuland told the Senate Foreign Relations Committee. She said Ukraine would offer Russia the same terms agreed with private creditors.

“Russia has said it wants to help Ukraine with its recovery and this would be one way it could do so,” Nuland said. “If it doesn’t accept those terms then we’ll have to work with Ukraine on other options.”

Russia already has said it will not accept any write-down on the debt because the bond is a bilateral ‘official sector’ loan and should be exempt. Ukraine’s Finance Minister Natalie Jareski said on Monday she would not negotiate a deal in Lima.

Nuland said the United States and EU were in agreement that sanctions on Russia would remain until the Minsk ceasefire accord signed in February between Ukraine and pro-Russian separatists was fully implemented. Sanctions were likely to be rolled over next year, she added.

“The EU continues to join us in saying there will not be sanctions relief until Minsk is fully implemented, that means until Ukraine has sovereignty again over its eastern border,” Nuland said.

“Given the shifting timelines of Minsk that is likely to take more time than we originally anticipated, so that is probably going to mean we’ll have to have some roll over next year,” she added.

EU foreign ministers approved the extension of sanctions on Russia until the end of January 2016. The measures affect Russia’s energy, financial, and military sectors, and includes an investment ban on Crimea.

The sanctions were imposed for one year in July 2014 in response to Russia’s annexation of Ukraine’s Crimean Peninsula in March and its support for pro-Russian separatists in Ukraine.

Nuland said the United States would increase sanctions if there was an increase in violence, a further land grab or “fake elections.” (Reporting by Lesley Wroughton; Editing by Bill Trott and Chizu Nomiyama)

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