The facts on yesterday's deal:
Existing Debt
Ukraine will pay $2 billion straight away on the existing debt it owes Russia. It will then pay a further $1.1 billion in instalments before the end of year. This is lower than Russia's earlier demands that Ukraine pay $5 billion off in debt, it is unclear how Russia has positioned itself regard this $1.9 billion.
Natural Gas Supplies
Russia has agreed to sell Ukraine gas at a price of 385 dollars per 1000cm once the initial 2 billion debt tranche is paid off. The price is considered to be a 100 dollar discount to the actual price which will restart again after 6 months. Meaning, 485 dollars per 1000cm of gas from March 2015.
Government approval
Both parties must now have the deal approved by their respective governments.
Analysis:
Paying back the debt will put significant strain on the currency as the dollars will have to be bought from the market. It is most likely that the dollars will come from the IMF loan. But given that most of the loan will now be used simply to pay for the gas, the loan size is hugely inadequate. If the IMF are serious about supporting Ukraine they will have to significantly increase the loan size as has already been reported.
Complete story at - Yesterday's Gas Deal: Another Nail in Ukraine's Coffin - Russia Insider
Existing Debt
Ukraine will pay $2 billion straight away on the existing debt it owes Russia. It will then pay a further $1.1 billion in instalments before the end of year. This is lower than Russia's earlier demands that Ukraine pay $5 billion off in debt, it is unclear how Russia has positioned itself regard this $1.9 billion.
Natural Gas Supplies
Russia has agreed to sell Ukraine gas at a price of 385 dollars per 1000cm once the initial 2 billion debt tranche is paid off. The price is considered to be a 100 dollar discount to the actual price which will restart again after 6 months. Meaning, 485 dollars per 1000cm of gas from March 2015.
Government approval
Both parties must now have the deal approved by their respective governments.
Analysis:
Paying back the debt will put significant strain on the currency as the dollars will have to be bought from the market. It is most likely that the dollars will come from the IMF loan. But given that most of the loan will now be used simply to pay for the gas, the loan size is hugely inadequate. If the IMF are serious about supporting Ukraine they will have to significantly increase the loan size as has already been reported.
Complete story at - Yesterday's Gas Deal: Another Nail in Ukraine's Coffin - Russia Insider
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