Ukraine set to default on $3bn Russian bond debt as tensions escalate

Ukraine PM Arseniy YatsenyukRussian bond debt: Ukraine has said that it does not intend to repay the $3 billion in bonds it owes Russia and which come due tomorrow, bringing the two countries a step closer to a court battle amid a new wave of economic tension between Kiev and Moscow. The Ukrainian Prime Minister Arseniy Yatsenyuk said that his government was going to impose a moratorium on the note which Russian President Vladimir Putin bought two years ago as part of an abortive bail-out for Ukraine’s former leader Viktor Yanukovych a matter of months before he was toppled.
Yesterday, Russia said that it would wait until a 10-day grace period on the bond expires on Dec. 30 before starting legal action.
Reeling from a two-year-old conflict with Russian-backed separatists in the east of the country, Ukraine has for months been pushing Russia to join a $18bn restructuring arrangement that it hammered out with commercial creditors earlier in the year. For its part, Russia has been arguing that the debt was sovereign.
Russia has also been stepping up the economic pressure in recent weeks, moving to impose trade restrictions on a wide range of Ukrainian products from the beginning of next year, when an FTA between Ukraine and the European Union is scheduled to take effect. Russia has opposed Ukraine’s efforts to build ties with the EU, a key policy goal for the current government in Kiev. The EU, meanwhile, is expected this week to extend sanctions imposed on Russia over the Ukraine crisis for another six months.

Source: Bloomberg