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27 Jul, 2016 09:38

Kiev refuses to pay Russian debt because it was 'forced to take the money'

Kiev refuses to pay Russian debt because it was 'forced to take the money'

Ukraine’s Finance Minister Aleksandr Danilyuk says he sees no reason why the country should repay the $3 billion debt to Russia.

“It was a political credit which we were forced to take... Our position is that we shouldn’t return the money,” he told Ukrainian channel Espreso.TV

The minister confirmed the hearings at the High Court in London over the lawsuit brought by Russia concerning Kiev’s unpaid debt could take up to two years.

Ukrainian President Petro Poroshenko in May approved a bill extending the moratorium on paying off the country’s external debt, including the $3 billion Eurobond owed to Russia. The law allows Kiev more time to legally find ways to restructure its external debt.

Kiev’s debt to Moscow is the result of a deal sealed in 2013 between President Vladimir Putin and former Ukrainian President Viktor Yanukovich. Moscow agreed to give Kiev a $15 billion loan through the purchase of Ukrainian Eurobonds. The first tranche of $3 billion was purchased by Russia and was to be repaid by December 20, 2015.

READ MORE: Russia demands $683,333 daily interest on Ukraine’s $3bn overdue debt

After Ukraine failed to repay the debt on schedule Moscow filed a lawsuit demanding the repayment.

Moscow had already suggested a debt-relief plan under which Ukraine could repay its arrears in three installments of $1 billion over the next three years. Russia wanted guarantees from the US, the EU or the International Monetary Fund on future payments of the Ukrainian sovereign debt. The deal, however, fell through, as Ukraine’s Western backers were unwilling to provide the guarantees.

Moscow says its bond purchase was a state loan, not a commercial one but Kiev argues that it was part of external commercial debt and could be restructured.

The International Monetary Fund recognizes Kiev’s debt to Russia as official and sovereign, with Ukraine, as the borrower state, responsible for the loan repayment.