Ukraine won’t repay $3 billion Russian debt due this weekend

Ukrainian prime minister Arseniy Yatsenyuk has said his country will not repay a £2 billion debt owed to Russian Federation by this weekend.

German firms expect trade with Russia to decline further next year as sanctions imposed over the Ukraine conflict are prolonged and the economic crisis in Russia worsens, the head of the German-Russian Foreign Trade Chamber said on Friday.

Russian Federation has stepped up the economic pressure in recent weeks, moving to impose trade restrictions on a wide range of Ukrainian products from the first of the year, when a trade deal between Ukraine and the European Union is slated to take effect.

“I remind you that Ukraine has agreed to restructure its debt obligations with responsible creditors, who accepted the terms of the Ukrainian side”. That move could jeopardize crucial loans that Ukraine has been receiving from a $17.5 billion bailout deal with the International Monetary Fund.

Ukraine has been at loggerheads with Vladimir Putin for nearly two years over accusations he is financing rebel soldiers in the east of the country.

Ukraine’s messy politics and the threat of a court battle with Russian Federation are prompting many fund managers to sell out of Ukraine’s bond market.

The deadline for repayment of the Ukrainian debt is December 20. But Russia has refused to accept the terms it has offered, arguing that the bond was an official bilateral loan.

The government in Kyiv has also sought to give a political dimension to the debt, hinting that Russian Federation bought Ukrainian bonds in December 2013 in a clandestine bribe of then-President Viktor Yanukovych, who was facing massive anti-government protests at the time.

Storchak said Ukraine had no chance of winning in court.

The Finance Ministry sounded a more conciliatory note, saying in a statement: “Ukraine remains committed…to negotiating in good faith a consensual restructuring of the December 2015 Eurobonds”.