Kyiv halts payment on $3 billion debt to Russian Federation

The comment came less than one day after President Putin told a major press conference in Moscow that it was wrong to say that there were regular Russian troops in Ukraine, but added, “We have never said that there are no people there engaged in solving certain questions, including ones in the military sphere”.

Russian Deputy Finance Minister Sergei Storchak said on Friday that Ukraine’s decision to impose a moratorium on the payment of a US$3 billion Eurobond held by Russia was not a surprise and that Moscow would win any future legal case on the matter.

Russian Federation has suspended coal exports to Ukraine in retaliation.

The suspension would stay in place “until the acceptance of our restructuring proposals or the adoption of the relevant court decision”, Yatsenyuk said.

“Russia has refused, despite our repeated attempts to sign the agreement for restructuring, to accept our proposals”, Yatsenyuk explained.

Ukraine’s restructured dollar-denominated bonds stayed lower, with the yield on the debt due 2025 rising two basis points to 9.65pc by 12:05pm in Kiev.

The IMF has taken Russia’s side and recognized Ukraine’s debt as sovereign, meaning Kiev would have to declare default if unable to pay. Ukraine has insisted that the loan should be considered private and should, therefore, be exempt from the International Monetary Fund’s rules that require Kiev to make good on its sovereign debt as part of its IMF bailout package, which the country desperately needs to overhaul its struggling economy.

He said foreign investors in Ukraine are not likely to be affected “because you can count them on one hand as it is”.

Moscow approved the loan to Ukraine in late 2013, shortly before the country’s pro-Russian president Viktor Yanukovych was ousted, and before the annexation of Crimea and the armed conflict in the east. But the Fund has also changed its policy to allow it to keep lending to countries in arrears on repayments of such debt, effectively throwing Ukraine a borrowing lifeline.