In the midst of Russia’s war of aggression, Ukraine faces the risk of having to pay out billions to holders of pre-war private claims. The claims relate to bonds whose payout is linked to the growth of Ukraine’s economic output (GDP warrants). After the sharp decline of the Ukrainian economy at the start of the war, it is now growing again – much to the delight of the bondholders, who now hope to rake in billions in profits. In a joint statement, erlassjahr.de, together with its Ukrainian partner organization Sotsialniy Rukh and other European civil society partners, is therefore demanding that aid funds that are actually intended for reconstruction and defence do not flow into the accounts of hedge funds. Western supporters of Ukraine must ensure that bondholders cannot collect these claims, but that they are comprehensively restructured.
Instruments “for a different world”
The GDP warrants originate from a debt restructuring in 2015. To make the restructuring attractive to investors at the time, Ukraine offered bondholders an instrument that would pay out if the Ukrainian economy reached certain growth levels. However, it is one-sided: investors do not have to accept any losses if growth slows down again. Some of these investors are vulture funds, such as Aurelius Capital. In the past, this fund has acquired government bonds that were at risk of default, only to then sue for repayment in US and British courts to obtain outsized high profits.
Following the Russian invasion in 2022, Ukraine’s GDP fell by almost 30 percent. Due to international aid and increased military production for Ukraine’s defense, GDP rose again in 2023 after this crash. Even though the GDP growth is not a sign of increasing prosperity in which investors could participate, but rather reflects a recovery from a destructive war of aggression, media reports suggest that Ukraine might face payments of up to $6.6 billion to the warrant holders. This would be in addition to the $2.6 billion in original claims – 2.5 times the original value of the bonds.
However, Artem Tidva of the Ukrainian movement Sotsialniy Rukh makes clear: “These instruments were created for a world that no longer exists. Today, Ukraine is facing an exceptional situation.” Together with erlassjahr.de, Debt Justice UK, the European Network on Debt and Development, CCFD-Terre Solidaire, and the Plateforme française dette & développement, he is therefore calling for the bonds to be deeplyrestructured. Bondholders should not be allowed to make profits at the expense of the Ukrainian people.
Western allies must support Ukraine legally and financially
At the end of April 2025, debt restructuring negotiations between Ukraine and the bondholders failed; the creditors refused to accept a debt restructuring proposed by the Ukrainian government. Since the bonds are governed by English law, it is now up to international partners, and the UK in particular, to ensure that hedge funds do not take their claims successfully to court. The organizations are therefore calling on the UK government to pass legislation that protects Ukraine from being sued while restructuring negotiations are ongoing.
Germany, as a member of the G7 and the Paris Club, has a key role to play in helping Ukraine find a sustainable solution. In addition to the legal blockade of lawsuits before European courts, financial support for Ukraine must also continue. Therefore, the IMF must also continue its support for Ukraine – even if Ukraine is no longer able to service its bonds.
First billion-dollar claim looms – Ukraine needs backing
The first payment on the instrument, amounting to over half a billion US dollars, would be due at the beginning of June. However, the Ukrainian head of debt management recently announced that Ukraine would not be in a rush to reach a restructuring agreement before the upcoming deadline. Ukraine must now stand firm on this position to achieve a sustainable solution – and to do so, it needs reliable European partners who support it.
Statements and reactions from our partners:
Press Release by Debt Justice UK (English)
Statement by Debt Justice UK (English)
Statement by Sotsialniy Rukh (Ukrainian)
Statement by the Plateforme francaise dette & developpment (French)