The Export-Import Bank of China is threatening to force the default of a US$1.5 billion loan to the State Food and Grain Corporation of Ukraine (SFGCU) just days after the Russian and Ukrainian governments agreed to reopen grain and food shipments to Africa, according to a banker close to the situation.
“China Exim Bank is playing hardball and threatening to send a default note on the loan,” the banker said.
The banker said the Ukrainian government is seeking a two-year freeze on some $19.5 billion in debt payment with the world’s largest private investors along with $5 billion held by the Paris Club and Group of Seven nations headed by US Treasury Secretary Janet Yellen.
The alleged threat by China’s Exim Bank to derail the debt rescheduling comes after Ukraine’s Naftogaz, the national energy company, was forced into default on Tuesday after creditors refused to a two-year freeze on debt payments.
China Exim Bank was not immediately available for comment.
Myron Wasylyk, the American adviser to Naftogaz chief executive officer Yuri Vitrenko, said the company went into default after the government did not give its consent for Naftogaz to pay off the most recent bond coupon.
“We wanted to pay the coupon. The government wanted us to delay payment and bondholders didn’t approve the delay,” Wasylyk said.
If China scuttles a debt postponement – on a loan originating under the government of Russian-backed Ukrainian president Viktor Yanukovych in 2012 – it will undoubtedly further complicate the food-shipment deal between Ukraine and Russia initiated by Italian Prime Minister Mario Draghi and overseen by Turkish President Recep Tayyip Erdogan.
Just hours after Ukraine and Russia signed agreement with Turkey and the United Nations to restart grain shipment to Africa, the Russian military launched missile attacks on Ukraine’s main agriculture transshipment port, Odessa.
The Russian attack on Odessa also raised questions whether the Kremlin’s most hawkish advocates of the war are purposely undermining President Vladimir Putin, especially as the grain-for-Africa deal has been the only sign of détente between Ukraine and Russia since the start of hostilities.
The missile attack on Odessa seriously risked expanding the current conflict by inflicting damage on an important US-owned asset, the Neptune deep-water grain port operated by America’s largest food conglomerate, the Minneapolis, Minnesota-based Cargill Corporation.
In July 2021, Cargill took over a 51% stake in Neptune at Pivdennyi Port on the northern outskirts of Odessa.
The port, which transported up to 10% of Ukraine’s total grain exports, was part of total investment of about $150 million backed by the World Bank’s International Finance Corporation and the European Bank for Reconstruction and Development (EBRD).
Peter K Semler is the chief executive editor and founder of Capitol Intelligence. Previously, he was the Washington, DC, bureau chief for Mergermarket (Dealreporter/Debtwire) of the Financial Times and headed political and economic coverage of the US House of Representatives and Senate.