Kiev has billed this week as the deadline for an agreement.
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US Secretary of State John Kerry called his Russian counterpart Sergei Lavrov on Thursday to express “grave concern” about increased separatist attacks in Ukraine, a senior State Department official said. They have not reached an agreement, said a source close to the talks, but will resume negotiations later on Thursday.
The worldwide Monetary Fund (IMF) has made debt restructuring a condition for Ukraine to receive all the tranches of the $17.5 billion bailout that the organization is providing.
Crucial debt payment deadlines looming for Ukraine are a $60 million coupon on August 23 and a $500-million bond maturing on September 23.
A monitoring group who observe the ceasefire received reports from the Ukrainian government saying they have been forced to respond to “Russian aggression”.
Others, including Vadim Khramov, an economist at Bank of America Merrill Lynch, were optimistic, particularly since the two sides released a joint statement, indicating they may be on the same page.
Another potential risk is that of “holdout” creditors who refuse the restructuring deal to chase a bigger payout.
Yerlan Syzdykov, head of emerging markets bond and high-yield at Pioneer Investments, said creditors’ willingness in a late July proposal to accept a nominal haircut had been an important step. It also reported that an Austrian economic institute has projected losses as high as $114 billion for the Western bloc’s economies if the sanctions stay in place through January 2016 as enacted.
“What we need now is more than just a low price, but also guarantees that the price will not change throughout the entire heating season, because otherwise we could find ourselves without a contract halfway through the winter season, which would be a real problem for us”, Demchyshyn said.
While time is running out for cash-strapped Kiev, investors say the process is well within usual time frames for such a negotiation.
Moscow blames the Ukrainian authorities for the recent escalation in violence.
Two people were killed in another round of intense shelling between Western-backed Ukrainian government forces and pro-Russian fighters in the separatist east, officials from both sides said on Friday.
The 16-month war has now claimed the lives of more than 6,800 people and thrown Ukraine’s already-stagnant economy into paralysis.
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The hryvnia, which gained 12 percent against the dollar in the second quarter, remains 28 percent weaker this year, the second-worst performance globally after Belarus’s ruble, data compiled by Bloomberg show.
