Ukraine’s prime minister says the country will not pay back its Dollars three-billion debt to Russian Federation despite Moscow’s warning that it would take legal action against Kiev if it misses looming deadline for the debt redemption.
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“Russia has refused, despite our repeated attempts to sign the agreement for restructuring, to accept our proposals”, Yatsenyuk explained.
Ukraine’s economy has struggled over the past few years and the country has negotiated repayment terms with creditors, but not with Russian Federation.
“The Ukranian government is imposing a moratorium on repaying the so-called Russian debt”, Prime Minister Arseniy Yatsenyuk told a government meeting. “This reaction and this decree show Russia’s true intentions and show that this process has nothing in common with looking for answers”, she said.
Mr. Yatsenyuk added that the restoration of electricity to Crimea is a separate issue that could be decided only by Ukraine’s Security and Defense Council. Payments are frozen “until our proposals on restructuring are accepted or until a relevant court decision is made”, he said.
The Kremlin today slammed North Atlantic Treaty Organisation and Ukraine for misinterpreting a remark by President Vladimir Putin as a virtual admission of Russian troops in eastern Ukraine.
Cash-strapped Kiev is in dire need of further global funding and was required by the IMF to restructure a total of $15.3bn of debt to unlock the next instalment of the $17.5bn aid package.
It followed the overthrow of a Moscow-allied president in Kiev and Russia’s annexation of the Crimean peninsula from Ukraine in what grew to be the biggest spat between Moscow and the West since the Cold War.
It is unclear at this point how Ukraine’s imminent default will affect the four-year IMF bailout as the Fund recently said it can continue to lend to countries behind with debt payments as long as the country is trying “in good faith” to reach a deal.
William Jackson, an emerging markets analyst at Capital Economics, said the implications of the moratorium were unclear.
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Ukraine is demanding repayment terms similar to those Russian Federation has offered other worldwide creditors. “But it’s not hard to envisage any debt talks breaking down”, he said.
