Russian Federation sorry Ukraine prefers default to talks

The Kyiv government will not make a payment due this weekend on its debt of $3 billion (2.77 billion euro), Prime Minister Yatsenyuk announced on Friday.

Moscow and Kiev have been locked in a bitter showdown over a Russian $3 billion loan granted to the pro-Moscow regime of ex-president Viktor Yanukovych in December 2013, not long before he was ousted and fled to Russia.

“I stress, once again, that we are ready for a legal process with the Russian side”, he said.

In August, the Ukrainian cabinet and a group of its other worldwide creditors have reached an agreement, which envisages a 20-percent write-off of 15 billion US dollars of Kiev’s foreign debts and a 4-year extension of the loan repayment period.

The suspension would stay in place “until the acceptance of our restructuring proposals or the adoption of the relevant court decision”, Yatsenyuk said. Ukraine is still required to negotiate in good faith on a restructuring, according to International Monetary Fund rules. Moscow had previously said it would take Ukraine to court if it did not pay on time.

European Union envoys agreed on Friday a six-month rollover of the bloc’s economic sanctions on Russian Federation, diplomats said, extending the measures on energy, banking and defence sectors until the end of July 2016.

It followed the overthrow of a Moscow-allied president in Kiev and Russia’s annexation of the Crimean peninsula from Ukraine in what grew to be the biggest spat between Moscow and the West since the Cold War.

William Jackson, an emerging markets analyst at Capital Economics, said the implications of the moratorium were unclear. “But it’s not hard to envisage any debt talks breaking down”, he said.

He said the IMF’s recent concerns about the Ukrainian parliament’s decision to reject a proposed budget for the next year and a new tax code could indicate a “growing risk that the country’s bailout could be put on hold”.