Вкотре підкреслюю, що ми готові до судової процедури з російською стороною.
— Arseniy Yatsenyuk (@Yatsenyuk_AP) December 18, 2015
Уряд запроваджує мораторій на виплату $3 млрд 75 млн російських бондів. — Arseniy Yatsenyuk (@Yatsenyuk_AP) December 18, 2015
Earlier this week, the IMF ruled that the debt to Russia was intergovernmental (as opposed to private). “In the case of the Eurobond, the Russian authorities have represented that this claim is official. The information available regarding the history of the claim supports this representation,” the Fund said, in a statement.
“The decision means that under new IMF rules Ukraine will now have to demonstrate ‘good faith’ in at least attempting to negotiate a restructuring of its debt with Russia if it wants to secure the next instalment of a $17bn IMF-led rescue programme,” FT noted at the time. “But the ‘good faith’ bar is one that senior IMF officials do not believe Ukraine has yet met.”
That ruling effectively set the stage for Ukraine to declare a default and that’s precisely what happened just moments ago.
As Bloomberg reports, “Prime Minister Arseniy Yatsenyuk said Kiev is imposing a moratorium on the note due Dec. 20. Yatsenyuk announced the payment freeze at a government meeting in Kiev on Friday.”The finance ministry warned Russia on Thursday evening that it could not make the payment (due by Sunday).
“Considering that Russia has refused, despite our efforts, to sign an agreement on restructuring and to accept our proposals, the cabinet is imposing a moratorium on payment of the Russian debt worth $3 billion,” Yatsenyuk said, adding that Kiev “is also imposing a moratorium on the $507 million debt payment to Russian banks of two Ukrainian companies Yuzhnoe and Ukravtodor. From today all payments are suspended till our government or a court makes a decision.”
And it looks like a court will have to make “a decision” because Putin is probably going to sue.“Russia said as recently as last week it would take Ukraine to court if the payment was missed,” Bloomberg notes.
Earlier this month, Putin ordered Finance Minister Anton Siluanov to file a lawsuit against Ukraine in the event Kiev defaults. “It is strange. If they are so confident in the country’s solvency for the next year, then they could somehow participate during the last four years to share the risks,” Putin said, referencing Washington’s unwillingness to back Ukraine’s guarantees. “Fine. File the lawsuit,” he concluded.
So, the stage is now set for what will surely be an amusing court battle between Russia and Ukraine which, you’re reminded, are still essentially at war. In a preview of the kind of chuckle-inducing soundbites you’re likely to hear in the months ahead, we close with the following quote from PM Dmitry Medvedev:
“I have a feeling that they will not pay us back because they are crooks.”