Ukraine not to repay $3-billion debt to Russian Federation

Addressing a cabinet meeting on Friday, Arseniy Yatsenyuk said Kiev had made a decision to impose a “moratorium” on the Russian bond, meaning the Ukrainian government would officially default on the bond due on December 20.

A moratorium on repayments would be in place “until the acceptance of our restructuring proposals or the adoption of the relevant court decision…”

“I remind you that Ukraine has agreed to restructure its debt obligations with responsible creditors, who accepted the terms of the Ukrainian side”.

The Kremlin has said it will suspend a trade pact with Kyiv which will exclude Ukraine from from the free market that includes former Soviet states in the new year.

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.

“We have expected these actions – looking at the line of conduct that the Ukrainian authorities have exercised in the last six months”, Storchak told journalists.

The announcement essentially confirmed that Kiev will default on the bond come Sunday and unleash a protracted legal battle, though the immediate implications for its much-needed bailout package from the International Monetary Fund were unclear.

“Ultimately, the problem of any lender is that he is interested in the economic growth of its borrower”, he said.

Ukraine’s finance ministry sounded a more conciliatory note than Yatseniuk, saying in a statement: “Ukraine remains committed…to negotiating in good faith a consensual restructuring of the December 2015 Eurobonds”.

That effectively means that Ukraine is defaulting on the debt.

The IMF this week agreed with Moscow that the bond consists of an official loan. “We are ready for court proceedings with Russian Federation”.