Inglorious Eurobonds: The Sequel

A consortium of Russian investors has formally issued a default notice to the Belarusian Ministry of Finance. In the event that Belarus fails to meet its financial obligations, the litigants are prepared to commence legal proceedings in the London arbitration court. Notwithstanding the evident absence of a coherent contingency plan for an impending investment crisis, Minsk appears to be relying upon a strategy of minor concessions and compromises.

The investment scandal, which precipitated in the autumn of 2023, has endured. A group comprising five companies and eight individuals, all proprietors of Belarusian Eurobonds, has dispatched a formal notice of default to Belarusian Finance Minister Yury Seliverstau, citing five bond issues: Belarus 2023, Belarus 2026, Belarus 2027, Belarus 2030, and Belarus 2031. The communication delineates the default as an outcome of the failure of the Council of Ministers and the National Bank of Belarus to discharge obligations pertaining to the repayment of Eurobonds and/or the remittance of interest coupons.

The investors implore Minsk to honor its commitments to state bondholders in full, underscoring that such compliance “will serve to uphold interest and confidence in the country’s external public borrowings.” Concurrently, these investors are contemplating initiating legal action in the London Court of International Arbitration (LCIA) to seek restitution from Belarus.

The initiative group currently holds securities from these issues valued at USD 178 million, constituting a collective worth of USD 3.25 billion—nearly twice the magnitude of the Russian import substitution loan.

Direct payments to Russian investors in relation to these bonds have been suspended since 2022. The Ministry of Finance has proposed various repayment modalities, including settlements in Belarusian rubles and utilizing the Belarusian financial infrastructure, albeit the latter is deemed unsatisfactory by the bondholders. Commencing at the conclusion of 2023, payments have been reinstated, albeit exclusively for the Belarus 2023 issue and restricted to holders who acquired the securities prior to September 6, 2022.

On January 23, it came to light that the Ministry of Finance of Belarus is amenable to adjusting the previously established framework and envisages broadening the scope of investors eligible to receive payments on Eurobonds.

The preliminary draft of the National Strategy for Sustainable Development 2040 identifies the dearth of investment as the most formidable threat to goal attainment, alongside personnel shortages and Western sanctions. As of now, the government has not provided effective solutions to address these problems, and they have not started the necessary political changes needed before implementing such solutions.

Even though the regime is trying to improve the investment environment, things are not very active, and the returns on fixed investments are not great. A crucial requirement for a country to fully participate in the securities market is getting a credit rating. It’s worth mentioning that last year, after the major international rating agencies—S&P, Fitch, and Moody’s—paused Belarus’s sovereign ratings, the Russian Analytical Credit Rating Agency did the same.