Ukraine still committed to good faith debt talks with Russia: Finance Ministry

Ukraine is also set to cancel payments on $507 million of Ukrainian commercial debt held by Russian banks, according to the prime minister.

“The default may not affect the IMF bailout as the IMF already relaxed rules and the Fund will not stop its program despite Ukraine failure to repay its debt to Russian Federation”.

Ukraine’s announced moratorium does not cancel its obligations to settle the debt, Siluanov said. However Moscow is in a less beneficiant mood lately, as the Russian economy sags under the weight of depressed global oil costs & worldwide sanctions over Russian actions in Ukraine, together with the forced annexation of Crimea & asserted support for armed separatists. That deal involves a 20 percent write-down of bond holdings, which cut Ukraine’s sovereign debt from $19 billion to $15.5 billion. “But we are ready to pay this price for our freedom and our European choice”, Poroshenko said in Brussels.

Moscow turned the taps back on in October under a deal that saw Kiev switch to a pre-payment system, meaning that cash-strapped Ukraine must stump up money in advance to cover Russian gas deliveries.

The government in Kyiv has also sought to give a political dimension to the debt, hinting that Russian Federation bought Ukrainian bonds in December 2013 in a clandestine bribe of then-President Viktor Yanukovych, who was facing massive anti-government protests at the time.

The default “is just confirmation of the unimproved relations between the countries”, said Simon Quijano-Evans, the London-based chief emerging-market strategist at Commerzbank.

The country “remains committed to negotiating in good faith” with Moscow over debt restructuring, said the ministry in a statement. On Friday the International Monetary Fund warned that the programme was under threat from apparent rejection by parliament of critical tax amendments and the draft 2016 budget.

The decision to halt the payment is “effectively, a declaration of Ukraine’s default” the chairman of Foreign Policy committee in the Russian Federation Council, Konstatin Kosachev, said.