## STATUS OF UKRAINE’S EUROBOND HELD BY THE RUSSIAN FEDERATION

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### Introduction
- On December 24, 2013, a US$3 billion Eurobond due December 20, 2015 issued by Ukraine was placed with Russia’s National Wealth Fund (“NWF”).
- At the request of the Executive Director for the Russian Federation, IMF staff assessed whether the Eurobond constitutes an official claim for the purposes of the Fund’s policy on arrears to official bilateral creditors.
- A proposed decision and staff assessment were prepared by European, Legal, and Strategy, Policy, and Review Departments (Prepared December 11, 2015; Approved by Poul Thomsen, Sean Hagan, and Hugh Bredenkamp).

### Applicable rules
- The Fund has relied on Paris Club practices for the purposes of the policy on arrears to official bilateral creditors.
- Paris Club practice: restructured claims generally include credits provided by either a creditor government or an agency of the government acting on behalf of the government, and credits guaranteed by the government or an agency acting on behalf of the government once the guarantee is called.
- The Fund’s approach for classifying a claim as official focuses on whether the claim:
  - is held by the government, or an agency acting on behalf of the government; and
  - originates from an underlying transaction where the creditor government, or an agency acting on behalf of the government, provided or guaranteed financing to the borrowing country.
- The Fund has not relied on differences in the form in which the debt was issued to make the official/private distinction.

### Staff assessment
- Russian authorities represented that the Eurobond claim is official; the available history supports that representation.
- Key factual points supporting official status:
  - The bond was acquired by Russia’s NWF pursuant to a decision by the Russian Government to provide assistance to Ukraine.
  - Russia’s Finance Minister, Mr. Siluanov, stated assistance was provided via the NWF because the funds had not been appropriated in the federal budget, which ruled out a direct intergovernmental credit.
  - The NWF’s investment guidelines did not permit investment in Ukrainian bonds due to credit rating requirements; a specific government decision was needed to amend them.
  - The Russian Government amended NWF’s investment regulations on December 19, 2013 to allow investment in debt of foreign states upon individual Government decisions (Russian Federation Government Resolution No. 1194 of 12/19/2013).
  - Subsequently the Russian authorities confirmed to Euroclear, at the request of the Ukrainian authorities, that the Eurobond has at all times been 100 percent owned by the Russian Government.
- Staff conclusion:
  - The Eurobond is an official claim for the purposes of the Fund’s policy on arrears to official bilateral creditors because:
    - (i) it is held by the NWF, an agency acting on behalf of the Russian Government; and
    - (ii) it originates from a transaction where the NWF acted on behalf of the Russian Government to provide financing to Ukraine.

### Executive Board decision and assessment
- Press Release No. 15/570, December 16, 2015: The IMF Executive Board decided that the claim arising from the US$3 billion Eurobond issued by Ukraine on December 24, 2013 and held by Russia’s NWF is an official claim for the purposes of the Fund’s policy on arrears to official bilateral creditors.
- The Board considered the staff paper and endorsed the staff assessment without a meeting (Executive Board lapse-of-time procedure).
- Ukraine is not currently in arrears to its official creditors.
- The Executive Board Assessment reiterated the factual points and staff view that the Eurobond is an official claim because it was acquired by the NWF pursuant to a Russian Government decision to provide assistance, required an amendment to NWF investment guidelines on December 19, 2013, and has been 100 percent owned by the Russian Government.

*Source: IMF staff paper and Press Release No. 15/570 (December 16, 2015).*

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