• German-mediated talks continue over defaulted $3 billion debt
  • Meeting between finance ministry officials possible soon

Ukraine may still reach an agreement with Russia on $3 billion of debt it defaulted on last month as talks mediated by Germany continue, Finance Minister Natalie Jaresko said.

Officials from the two sides’ finance ministries may meet “in the near future” after their lawyers negotiated last month, Jaresko said Saturday in an interview in Davos. The next round may be among lower-level representatives if scheduling conflicts prevent the ministers from attending, she said.

Natalie Jaresko
Natalie Jaresko
Photographer: Guillermo Gutierrez/Bloomberg

“I think it’s still very possible to reach a consensual agreement out of court with Russia,” Jaresko said. “We have dialog, the dialog exists on different levels.” She urged Russian to “join the group of international creditors and come through with restructuring.”

The $3 billion bond -- which Russia bought in 2013 as part of an abortive bail-out for Ukraine’s former leader just months before he was toppled -- has become a thorny issue in the two former Soviet neighbors’ frayed relationship. The Kremlin held the debt out of an $18 billion restructuring deal Jaresko negotiated with creditors last year, setting the sides on course for a court a battle.

Russia’s Finance Ministry on Jan. 1 said it had taken measures to start legal proceedings. The government in Kiev has said that Russia won’t get better terms than other creditors who participated in the restructuring deal, and pledged to defend itself against any lawsuit over the debt.

The restructuring agreement was needed to unlock a $17.5 billion IMF bailout for Ukraine as it recovers from an 18-month recession and the conflict with pro-Russian separatists that ravaged its industrial heartland.

With the fighting having subsided, the government is trying to access the next $1.7 billion payment after political squabbling delayed the passage of a 2016 budget that met the Washington-based lender’s requirements. Other pending cash from international partners may push that amount to $4 billion, Jaresko said.