Ukraine won’t repay $3bn payment due to Russian Federation this weekend

The “moratorium” on outstanding debt repayments to Russian Federation announced by Ukrainian Prime Minister Arseniy Yatsenyuk effectively means that Ukraine is defaulting on the debt due Sunday. “The obligation remain in force, and the Russian Federation expects its complete fulfillment”, Siluanov told journalists.

In November, Russian President Vladimir Putin offered a three-year restructuring plan for Kiev’s debt, provided loan guarantees were in place from the U.S., the European Union and the International Monetary Fund. Under the offer, Russia would forgo payment this year and Kiev would pay $1 billion a year for the next three years. He stressed that visa-free travel would only be possible for those who live in Ukraine-controlled territory, indicating that it would not be applicable for people in Russia-controlled territories like Crimea.

German firms expect trade with Russia to decline further next year as sanctions imposed over the Ukraine conflict are prolonged and the economic crisis in Russia worsens, the head of the German-Russian Foreign Trade Chamber said on Friday. He confirmed that the payment of more than 3.5 billion dollars “has been suspended” until Ukraine “makes restructuring proposals or a relevant court decision is made”.

Officials in Kiev argue that the loan is not a sovereign one granted by a state to another and is subject to terms agreed of an agreement with its other creditors, but Moscow says it can not be considered private debt and has refused such conditions.

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.

Obviously Russia will go to court to defend its interests. The Kremlin has also threatened to take Ukraine to court if it fails to pay. That offer fell through earlier in December, and Russian finance minister Anton Siluanov said on December an out-of-court settlement may be “impossible”.