Ukraine Imposes Moratorium on Repaying $3 bln Russian Bond

“The government of Ukraine is imposing a moratorium on payment of the so-called Russian bond”, Ukrainian prime minister Arseniy Yatsenyuk said on Friday.

On Twitter, he added: “From now on payments of debts for the Russian Federation [will] stop, [until] the adoption of our proposals on restructuring, or [a] judicial decision”. “We are sorry Ukraine made a decision to announce default instead of having talks on the suggestion, the Russian president voiced at the G20 summit in Antalya in November this year.”.

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.

That effectively means that Ukraine is defaulting on the disputed United States dollars 3 billion bond, which Russian President Vladimir Putin bought from former Ukrainian counterpart Viktor Yanukovych two years ago, just months before he was ousted.

“The Ukrainian Government has indeed negotiated in good faith all along and in line with the IMF-supported Program’s debt operation targets, without prejudice to its position on the underlying debt obligations themselves”, the Ukrainian ministry of finance said, in a statement released Thursday.

The dispute over the budget and tax code has already delayed the disbursal of the latest loan tranche of about $2 billion, as Ukraine battles recession amid the conflict against Russia-backed separatists in the east.

The payment is part of a $15 billion loan arranged in 2013, prior to Russia’s 2014 annexation of Crimea and Ukraine’s interest in joining a European Union free trade zone.

On Aug. 27, a group of the country’s largest creditors, including investment firm Franklin Templeton, which owns around half of the country’s outstanding debt, accepted a 20 percent write-off on $18 billion in outstanding bonds.

Ukraine’s struggling economy relies on International Monetary Fund aid.

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

Ukrainian leaders have accused Moscow of sending troops and weapons to the east, a claim the Kremlin has denied.