ALFA BANK CONFIRMS NAFTOHAZ SYNDICATED LOAN TALKS

C O N F I D E N T I A L KYIV 002168

SENSITIVE
SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA

E.O. 12958: DECL: 12/17/2019
TAGS: EFIN EREL ETRD PGOV PINR UP XH
SUBJECT: ALFA BANK CONFIRMS NAFTOHAZ SYNDICATED LOAN TALKS

REF: A. KYIV 2147

B. KYIV 2140

C. KYIV 1981

Classified By: Economic Counselor Edward Kaska for Reasons 1.4 (b) and
(d)


1. (C) Kyiv-based Alfa Bank executive Ivan Yurik confirmed
to Econoff on December 18 that Russian banks were in
final-stage negotiations over a syndicated loan to Ukrainian
state energy company Naftohaz. The loan would likely cover
Ukraine's January 7 and February 7 payments to Gazprom, Yurik
believed. The Russian banks were waiting for results of this
week's discussions over Ukraine's IMF program before making a
determination over the size and scope of the loan.


2. (C) Yurik acknowledged that Alfa's Moscow parent bank had
been approached by Russian state-owned Sberbank and
Vnesheconombank (VEB) to participate as a minority creditor
in the syndicated instrument. The loan would be made with
Russian capital, as Ukrainian subsidiaries did "not have the
resources to plug Naftohaz's gap," Yurik said.


3. (C) Ukrainian Deputy Prime Minister Nemyria had told the
Ambassador on December 15 that Russia was weighing in heavily
with the IMF on disbursing a fourth loan tranche (ref B).
Yurik agreed that it was in Russia's strategic and commercial
interest to prevent a gas crisis. Russian Prime Minister
Putin had initiated talks over a loan arrangement with the
heads of Sberbank, VEB, and Alfa before his Yalta meetings
with Tymoshenko, claimed Yurik. Naftohaz spokesman Valentyn
Zemlyansky told us in November that Naftohaz was pursuing
talks with Russian banks, though he did not reveal any terms
of a potential agreement (ref C).


4. (C) Yurik told us Alfa Bank/Ukraine Vice Chairman and
former Ukrainian Minister of Economy Roman Shpek had said
that Nemyria's bargaining position with the IMF in Washington
this week was to focus on Ukraine's need for $2 billion to
pay Gazprom. Claiming that the lack of an IMF tranche would
lead to a failed January or February payment and trigger a
gas crisis was the GOU's best means of getting the IMF to
pony up, Yurik believed.


5. (C) The reality was that gas issues are a "distant" two
weeks away for the Prime Minister, said Yurik. The real
crisis for Tymoshenko was in December 2009, particularly the
nearly empty state treasury and the political ramifications
of missed wage and pension payments (ref A). Tymoshenko
would use IMF monies, procured under the guise of gas payment
needs, for social spending purposes over the next two weeks.
Yurik believed that Tymoshenko would in any case still go
forward with the Russian syndicated loan to free up funds for
January and February budget allocations.

COMMENT
--------------


6. (C) Since Yurik is also an advisor to former Minister of
Finance Pynzenyk, now a vocal critic of Tymoshenko, we
received his message with due caution. However, the general
nature of Tymoshenko's plan rings true, especially since it
has been known for weeks that Naftohaz was working with
Gazprom on a financing deal. It is highly likely that
President Yushchenko is also aware of the loan talks, as well
as Tymoshenko's general scheme to get through the
pre-election fiscal crisis. If Yurik's statement is to be
believed, we suspect Yushchenko will remain adamant in his
opposition to central bank monetization of GOU debt.

TEFFT