Ukraine Says Won’t Repay Russian Debt

In November 2015, Putin said Russian Federation was ready to restructure Ukraine’s debt in case the United States, the European Union or any big global financial institute gave its guarantees to Russian Federation.

Prime Minister Arseny Yatseniuk said on Friday that Ukraine would not repay the Eurobond when it matures and that Kiev was geared to fight the issue in court.

The Ukrainian finance ministry said in a statement Thursday that it has “negotiated in good faith” with Russian Federation but it can not pay the bond debt without violating its deal with other worldwide creditors.

Ukrainian Finance Minister Nataliya Yaresko said late Friday she hoped the dispute could still be resolved but Kremlin spokesman Dmitry Peskov discounted that possibility, saying “there is only the court prospect”. Ukrainian government also imposed moratorium on the payment of $507 mln by 2 Ukrainian companies to Russian banks.

After he fled, Russian Federation annexed Ukraine’s Crimea in March 2014 and threw its backing behind a rebellion by separatists in eastern Ukraine.

“It is with concern that we have observed the discussions yesterday in Parliament that effectively rejected the government’s proposals for a new tax code and the government budget for 2016”, David Lipton, the first deputy managing director of the International Monetary Fund, said, in a statement.

But Russia, whose political relations with Ukraine are at rock bottom, has refused to accept these terms, insisting the bond is an official country-to-country loan, not commercial debt. That deal involves a 20 percent write-down of bond holdings, which cut Ukraine’s sovereign debt from $19 billion to $15.5 billion.

“Yatsenyuk has clearly run the idea of the moratorium by the main creditors and received their guarantees”, Karasyov told The Associated Press.