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A group of foreign bondholders have taken steps to force Ukraine to begin repaying its debts as soon as next year, the Wall Street Journal reported on Sunday.

If they succeed, Kiev could haemorrhage $500 million every year on interest payments alone.

The group, which includes investment giants BlackRock and Pimco, granted Kiev a two-year debt holiday in 2022, gambling that the conflict with Russia would have concluded by now.

With no end to the fighting in sight, the lenders have now hired lawyers at Weil Gotshal & Manges and bankers from PJT Partners to meet with Ukrainian officials and strike a deal whereby Ukraine would resume making interest payments next year in exchange for having a significant chunk of its debt written off, anonymous sources told the Wall Street Journal.

Read more: World Bank issues Ukraine bankruptcy warning

The group holds around a fifth of Ukraine’s $20 billion in outstanding Eurobonds, the newspaper reported. While this figure represents a fraction of Ukraine’s total external debt of $161.5 billion, servicing the interest on these bonds would cost the country $500 million annually, the bondholders said.

Should the bondholders fail to strike a deal with Kiev by August, Ukraine could default. This would damage the country’s credit rating and restrict its ability to borrow even more money in the future.

According to the newspaper, Ukrainian officials are hoping that the US and other Western governments will take its side during talks with the bondholders. However, a group of these countries have already offered Ukraine a debt holiday on around $4 billion worth of loans until 2027, and are reportedly concerned that any deal with the bondholders would see private lenders being repaid before them.

Ukraine already relies on foreign aid to keep government departments open and state employees paid. The country’s military is almost entirely dependent on foreign funding; officials in Kiev and the West were predicting imminent defeat until the US Congress approved a foreign aid bill last month which included $61 billion for Ukraine and US government agencies involved in the conflict.

The bill provides almost $14 billion to Ukraine for the purchase of weapons, and includes $9 billion in new “forgivable loans.” 

According to the Wall Street Journal, some bondholders have suggested that the US and EU could use frozen Russian assets to pay off Ukraine’s debts. While around $300 billion in assets belonging to the Russian central bank have been frozen in American and European banks since 2022, the US only passed legislation allowing for their seizure last month, and no similar legal mechanism exists in Europe, where the vast majority of these assets are held.

The International Monetary Fund (“IMF”) and European Central Bank (“ECB”) have both urged governments not to steal this money, with ECB chief Christine Lagarde warning last month that doing so would risk “breaking the international order that you want to protect.”

The above is republished from RT.  The Wall Street Journal article referenced to can be read HERE.

There are two major groups of creditors: nation states and private lenders.

In March, Reuters reported that a group of 8 to 12 large asset managers holding a significant portion of Ukraine’s outstanding Eurobonds was expected to form a creditors committee.  The names of the “large asset managers” were not provided.

Ukraine’s creditors committee has now been formed and, as RT noted above, has hired lawyers and bankers to negotiate “a deal whereby Ukraine would resume making interest payments next year in exchange for having a significant chunk of its debt written off.”

Do you believe investors would agree to a significant chunk of Ukraine’s debt being “written off”?  No. It won’t be written off; the repayment will merely change form and be repaid in kind.

To get an indication of what form the repayment in kind could take, we use the example of the debt Ukraine has incurred with the European Union (“EU”) under the guise of “aid.”

In May 2023, Belgium historian, political scientist and spokesperson for the Committee for the Abolishment of Illegitimate Debt (“CADTM”) Éric Toussaint said:

… a large part of the financial aid granted by Ukraine’s allies consists of loans, which means new debts. This is quite clear and outrageous, in the context of so-called aid from the EU and EU members. For instance, the support package of up to €18 billion for Ukraine announced by the EU in November 2022 will be transferred only gradually, and as loans to be paid back in full and with interest.

Altogether, the EU and its 27 member states have up to now pledged to lend Ukraine some €55 bn over the coming years.

EU aid is conditioned by an agreement between Ukraine and the IMF.  In reciprocation, Ukraine’s agreement with the IMF stipulates that the Ukrainian government implement structural (counter) reforms required of Ukraine to meet the conditions for joining the European Union … This means, in particular, increasing privatisations and enabling even more foreign investment in the sectors that whet the appetites of Western capitalists.

Among the goods that they covet are the enormous stretches of arable land. Let us recall that Ukraine is a breadbasket for Europe and the world. The plan is to develop the opportunity for foreign agri-business investors to acquire huge amounts of very fertile cultivated land.

Creditors are well aware that full debt repayment according to the set timetable will be impossible. Not only are they aware of this; they make sure it will be the case so as to use it as leverage.

Negotiations for the restructuring of Ukrainian debt will provide an opportunity for creditors to get as much as they can, to the detriment of the Ukrainian people and of Ukraine’s natural resources.

Ukraine: Resisting creditors, CADTM, 23 May 2023

It’s not only agricultural resources that are coveted by Ukraine’s war investors.  Its natural resources are needed for obedience to the “climate crisis” agenda.

At the end of last year, during an interview with German television news programme Tagesschau, German Bundestag member Roderich Kiesewetter said that important economic interests play a role in the Ukraine war and highlighted the huge lithium reserves in the Donbas. These are by far the largest lithium deposits in Europe. Lithium is used to make batteries for electric cars. The European Union wants all member states to ban the sale of new hydrocarbon-fuelled vehicles and switch to electric cars by 2035.

At the beginning of 2023, the then European Commissioner for Climate Change, Frans Timmermans, had already claimed that Ukraine had what it takes to become “a leader in modern green energy.” According to Timmermans, Ukraine has a “huge potential for solar, wind, hydro and biomethane.”