Russia says Ukraine defaulted on $3 billion Eurobond

In December 2015 the European Commission said that Ukraine, along with Georgia, had carried out the reforms it promised to enact to win Brussels’ backing and the EC planned to make the formal legal recommendation for a visa-free regime between the EU and the countries in question in early 2016.

Russia’s finance ministry confirmed in a statement on its website that it had “initiated the procedures necessary for a prompt commencement of court hearings with Ukraine” and that it would file a lawsuit in the English courts.

Russia loaned Ukraine $3 billion in 2013, under former pro-Russia President Viktor Yanukovych.

Brovko added that the arrival of European products on Ukraine’s would not necessarily dampen demand for Ukrainian goods.

Ukrainian authorities say it is not a sovereign loan by one state to another but rather a transaction made via the financial markets that is subject to terms agreed with other creditors.

In August past year Kiev negotiated a 20 per cent debt write-down deal on £12bn worth of bonds with foreign commercial creditors.

Kiev’s pro-Western government rejected the offer.

Currently, Russia and Ukraine are trading in accordance with the free trade agreement between CIS countries.

The dispute has been hampering the International Monetary Fund’s $17.5-billion rescue plan for Ukraine, which restricts Kiev’s ability to restructure billions of dollars in debt.

Ukrainian Prime Minister Arseniy Yatsenyuk has put the cost of Moscow’s measures to his country at some $600 million.

“Russian Federation intends to carefully examine any significant offer from Ukraine, but also believes that the court proceedings do not preclude a constructive dialogue in order to reach an acceptable settlement of the debt”, Siluanov reportedly said, in the statement.

Ukraine’s free-trade agreement with the European Union came into force on January 1, coinciding with the start of Moscow’s food embargo against Kyiv.

“It is fairly certain that the president will decide not to sign the contract on those conditions”, Dmitry Peskov, Mr Putin’s press secretary, said after the results of the poll were announced on Friday.

However, sporadic outbreaks of violence continue and a Ukrainian soldier and two civilians were killed in fighting on December 27 despite the truce.