Yatsenyuk announces moratorium on repayment to Russian Federation

Moscow has vowed to take Kiev to court over the disputed bond, which comes due just as Russian Federation gets ready to scrap its free-trade zone with Ukraine in response to the planned January 1st launch of a landmark EU-Ukraine trade pact.

“Since Russia has refused, despite our repeated efforts to sign a restructuring agreement…, to accept our proposals, the cabinet is imposing a moratorium on repayment of the so-called Russian bond”, Yatsenyuk said in a government meeting.

The Kremlin on Friday slammed North Atlantic Treaty Organisation and Ukraine for misinterpreting a remark by President Vladimir Putin as a virtual admission of Russian troops in eastern Ukraine. “Effectively, there are only legal prospects now”.

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.

Ukrainian Prime Minister Arseniy Yatsenyuk says Kyiv will suspend trade with Russian-occupied Crimea in one month.

“We have expected these actions – looking at the line of conduct that the Ukrainian authorities have exercised in the last six months”, Storchak told journalists.

Storchak said Ukraine had no chance of winning in court.

“Ultimately, the problem of any lender is that he is interested in the economic growth of its borrower”, he said.

In November Putin proposed restructuring Ukraine’s debt. “An out-of-court restructuring is possible, but the only way to negotiate is to negotiate directly”.

The development isn’t likely to threaten a bailout from the International Monetary Fund, which recently adjusted its lending policy to allow participating countries to continue receiving funds even if they are behind on repayments to sovereign lenders.

The fund meanwhile expressed concerns Friday over parliament’s rejection this week of a draft budget for next year and a new tax code, saying that a balanced budget is a “key condition” for funding and deviating from it would “inevitably disrupt the associated worldwide financing”.

While there are signs the two sides are willing to reach an out-of-court settlement, a legal battle in the United Kingdom – either through the court system or arbitration – is a real possibility.