Ukraine defaults on $3 billion Eurobond to Russian Federation

The Ukrainian Finance Ministry said on Friday it was still committed to negotiating a good faith restructuring agreement with Russian Federation on a $3 billion Eurobond, as the government imposed a moratorium on its repayment next week.

The two sides have been engaged in a dispute over the United States dollars three-billion loan given by Moscow the government of former Ukrainian president Viktor Yanukovych shortly before his ouster in 2013.

“People went there to fight, they shot and took part in fighting – that is what the “military sphere” is”, he said.

RIA Novosti recalled that on 1 December Russia, the European Commission and Ukraine failed to reach an agreement on the EU-Ukraine free trade deal.

Many – including the president of Ukraine and the head of North Atlantic Treaty Organisation – interpreted Putin’s words as effectively an acknowledgement that Russia did send regular troops across the border to buttress Russian-speaking rebels in eastern Ukraine, a claim the Kremlin has always denied.

That deal has seen countries accept a 20 per cent write-down of their Ukrainian bond holdings, a move that has cut Ukraine’s sovereign debt from $19 billion to $15.5 billion.

The two nations are also at loggerheads over Russia’s invasion of Crimea, to the east of Ukraine.

The development is unlikely to threaten a $17 billion bailout from the International Monetary Fund, which adjusted policies regarding countries in arrears just last week.

“From today we are halting payments on this debt”, he said, essentially confirming that Kiev will default on the bond when the Sunday payment deadline arrives.

At the time, Yatseniuk said Ukraine was “ready for legal proceedings on this issue”. But, separately, the Washington-based lender criticized Ukraine’s parliament Friday, accusing it of all but scuttling a tax-overhaul plan needed to unlock much-needed IMF funds.

William Jackson, an emerging markets analyst at Capital Economics, said the implications of the moratorium were unclear.

“It’s not hard to envisage any debt talks breaking down”, added Jackson.