Ukrainian Prime Minister Arseny Yatseniuk said on Friday Ukraine had imposed a moratorium on the payment of a $3 billion Eurobond held entirely by Russia that matures on December 20 and on $507 million of Ukrainian commercial debt held by Russian banks.
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“Starting from today, payments of these debts which amount to $3,582bn to Russian Federation is suspended until either the acceptance of our restructuring proposals or the adoption of the relevant court decision”.
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Ukraine’s Finance Minister Natalie Jaresko said the country was “committed to working in good faith to finding a resolution”, and that talks with the Russian side were continuing. “And in this case problems will emerge for many creditors who gave money to Ukraine and continue to do it”. But Russia argued the debt was sovereign, despite its unusual Eurobond form, and proposed its own repayment terms. Moscow said it would file a lawsuit against Kiev to the global court if the payments were not met.
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More than 9,000 people were killed in fighting between Russia-backed separatist rebels and Kiev troops in east Ukraine since April 2014, and the European Union blames Moscow for driving the revolt. “Under the terms of the new Ukrainian bonds issued on Nov.12, in the debt exchange, Ukraine is prohibited from paying holdout creditors in accordance with the original contractual terms”, the statement added.
However, Ukraine’s decision may become problematic to the International Monetary Fund, a major lender to the country, which is technically not allowed to lend to countries in default to other nations.
William Jackson, an emerging markets analyst at Capital Economics, said the implications of the moratorium were unclear.
President Petro Poroshenko described the Russian bond as a “bribe” earlier this year, rejecting Putin’s demands for repayment.
“I stress, once again, that we are ready for a legal process with the Russian side”, Yatsenyuk said.
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