As Ukraine faces an imminent bankruptcy deadline, its acting president Volodymy Zelenskyy has been aggressively pushing to the front the new business model. According to the Kyiv Independent, Zelenskyy said on July 24 that he is actively working with Western partners to secure $65 billion—an annual contract for military production inside Ukraine ($25 billion) to fight Russia. Another $40 billion is said to be to cover Kyiv’s deficit due to increased military spending. Zelenskyy has been telling the U.K., France and Germany that it is not sufficient to fund weaponry, while refusing to pay the salaries of military personnel. He argues it “turns out our soldiers themselves can be the weapon that protects everyone” and that Europe needs to pay, as Zelenskyy wrote to the G7 countries, for the service to strengthen continental security.
Ukraine faces an August 1 deadline on payments on $23 billion owed to private bondholders. Over two years ago, creditors agreed to suspend Ukraine’s payments. On June 17, Ukraine’s Finance Ministry published a “Cleansing Announcement” on the London Stock Exchange that they had held an unsuccessful extended round of negotiations, from June 3-14, with an “Ad Hoc Creditor Committee” (comprised of “a number of major institutional asset managers and other long-term investors ... as well as with certain other holders of Eurobonds"). Kyiv had called for a 60% haircut from their creditors with a longer repayment schedule, while they moved their 20% offer to 22.5% with a shorter schedule. “Both sides expressed a strong desire to reach a deal, but based on the public information they disclosed, the gap between their initial positions was quite large,” said Olena Bilan, chief economist at Kyiv-based investment bank Dragon Capital. Then, and again in July, the Finance Ministry expressed “confidence” that an agreement would be reached.
Ukraine’s amount of government-backed debt went past $150 billion over a year ago. The G7 and Paris Club governments have postponed payments until 2027, but not the private bondholders. They include France’s Amundi SA, U.K.-based Amia Capital LLP, and U.S. firms BlackRock Inc. and Pimco.
