Venezuela & Russia Agree to Debt Restructure

Russia’s finance minister said Moscow had agreed to postpone Venezuela’s debt repayment.

Russian Finance Minister Anton Siluanov
Russian Finance Minister Anton Siluanov

Bogota, November 1, 2017 ( – Russian Finance Minister Anton Siluanov told press Friday that his government had agreed to restructure Venezuela’s debt repayments to Moscow.

Though Siluanov did not give details, he indicated that the new terms would include the postponement of Venezuela’s USD$3 billion debt repayment. 

“We are ready to make a two-stage postponement. The first part includes pretty favourable terms with a small sum due for repayment so that it’s manageable for our Venezuelan colleagues,” he said.

“The bigger part of the debt is put off until the second stage of repayment,” the minister added. 

According to Siluanov, the deal will most likely be finalized between November 23 and 24 during bilateral talks between the two governments in Sochi.

Meanwhile, Venezuelan state oil company PDVSA defied international expectations Friday by making a USD$841.88 million amortization payment on its 2020 bonds to shareholders. 

In an official statement, the state company said that it has made the payments in spite of the “illegal sanctions” and “economic blockade” imposed on Venezuela by the United States. It also highlighted the Venezuelan government’s commitment to servicing its foreign debt repayments.

The payment comes on the back of delays to the servicing of sovereign, PDVSA and Electricidad de Caracas (ELECAR) bonds, and amid silence from the company over a $143 million coupon payment also due Friday. 

Venezuela was plunged into an economic crisis in 2014 due to an abrupt drop in global oil prices, casting doubt amongst investors regarding the government’s ability to pay its external debt. In August, the US Donald Trump administration also approved economic sanctions against Caracas, prohibiting US financial institutions from lending new money to the cash-strapped Maduro government. 

Several intellectuals, such as former Minister for Basic Industries and Mining Victor Alvarez, have urged the government to default on its debt in favor of investing in national production.

This position found an unexpected advocate last week when opposition head of the National Assembly and First Justice leader Julio Borges also called on the government to default and restructure its debt repayments. 

Throughout 2017, Borges wrote at least a dozen letters to major international banks including Goldman Sachs urging them to financially boycott the Venezuelan government. He told lenders that any future opposition government would refuse to honor any financial deals reached with the current government – potentially leading to huge losses for would-be investors. 

Reuters reported that the Venezuelan government made the decision to pay the debt Friday following a last minute meeting with financial advisors to discuss the potential impact of a default.

PDVSA was scheduled to pay USD$1.634 million on its debt in October and will have to pay a further USD$1.890 in November.