Ukraine debt and European Union sanctions anger Russian Federation
By Daren Flores on Dec 25, 2015 with Comments 0
KYIV, Ukraine-Ukraine said Friday that it would suspend repayment of a $3 billion bond to Russia, a move that the Russian government earlier said would provoke legal action against Kyiv.
The moratorium would be in place “until the acceptance of our restructuring proposals or the adoption of the relevant court decision …”
The moratorium also applies to about $507 million owed to Russian banks by two state-run companies, according to Yatsenyuk.
Moscow and Kyiv have been locked in a bitter showdown over a Russian $3 billion loan granted to the pro-Moscow regime of ex-president Viktor Yanukovych in December 2013, not long before he was ousted and fled to Russia.
Ukraine’s moratorium on the Russian bond is unlikely to derail a bailout from the IMF, which recently adjusted its lending policy to allow participating countries to continue receiving funds even if they are behind on repaying sovereign loans.
In August, the Ukrainian cabinet and a group of its other worldwide creditors have reached an agreement, which envisages a 20-percent write-off of 15 billion US dollars of Kyiv’s foreign debts and a 4-year extension of the loan repayment period. But Russia argued the debt was sovereign, despite its unusual Eurobond form, and proposed its own repayment terms.
Ukraine’s parliament, which has descended into fistfighting during several heated debates this year, has repeatedly called on Moscow to relinquish Crimea, which voted to join the Russian federation in an election Kyiv says was rigged.
The default “is just confirmation of the unimproved relations between the countries”, said Simon Quijano-Evans, the London-based chief emerging-market strategist at Commerzbank.
Kyiv claims Moscow has refused to discuss restructuring proposals.
“The December 2015 Eurobonds constitute debt obligations which Ukraine can not pay in accordance with their initial terms”, the ministry said in a statement.
The fund meanwhile expressed concerns Friday over parliament’s rejection this week of a draft budget for next year and a new tax code, saying that a balanced budget is a “key condition” for funding and deviating from it would “inevitably disrupt the associated worldwide financing”.
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