Ukraine suspends 3.5 billion dollar debt payment to Russia

(Vatican Radio) Ukraine says it will not repay some $3 billion in loans that were due to Russia this weekend, despite threats of a court case and possible tensions with the International Monetary Fund. Friday's move came amid an ongoing conflict between Ukrainian government forces and Russian-backed separatists.

Listen to Stefan Bos' report: 

Speaking at a televised government session, Ukrainian Prime Minister Arseniy Yatsenyuk made clear that Russia would not receive repayment for the multi-billion dollar debt Eurobond as planned because Moscow refused to agree to terms already accepted by other international creditors. "After Russia refused to accept our offer despite our attempts to reach a restructuring deal, the government is now imposing a moratorium on the repayment of the $3 billion debt to Russia," he added.

Prime Minister Yatsenyuk said the Ukrainian government also imposes "a moratorium on the payment of $507 million" that two Ukrainian companies Pivdennyi Bank and Ukravtodor have to pay to Russian banks. 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". And he warned: "We are ready for court proceedings with Russia."

Russian President Vladimir Putin has already made clear that Russia will launch a court case against Ukraine after he was informed about the situation by his Finance minister.  "The deadline for the payment of the 3 billion [Dollar] loan is due soon. We know about everything related to it," Putin said. "Why can’t these risks be shared to four years? I can’t understand that. Well, alright then sue them," he told Finance Minister Anton Siluanov.

IMF WARNING

Analysts say Ukraine's move could jeopardize crucial loans that Ukraine has been receiving from a $17.5 billion bailout deal with the International Monetary Fund. The IMF recently said it can continue to lend to countries behind debt payments only as long as the country is trying "in good faith" to reach a deal.    

Relations between Ukraine and Russia soured after Moscow annexed the Crimean peninsula in March 2014 and threw its backing behind separatist rebels in eastern Ukraine. Ukrainian leaders have also accused Moscow of sending troops and weapons to the east, a claim the Kremlin has denied.