The pro-Western government’s dispute with its commercial creditors appeared to be resolved when the sides struck what Kiev called a “win-win” agreement last month.

But nothing in the war-torn former Soviet nation comes easy. The August deal is on the verge of being shredded by a small group of private lenders who came out on its losing end.

And Russia is still awaiting the December repayment of a $3.0 billion (2.7 billion euro) loan it provided president Viktor Yanukovych just months before his February 2014 ouster by pro-Western protesters.

Kiev views the money as little more than a bribe paid for Yanukovych’s shock 2013 decision to reject a landmark EU association agreement — a pact approved by both Kiev in Brussels shortly after the Moscow-backed leader’s fall.

What happened in August?

Ukraine’s US-born Finance Minister Natalie Jaresko crowned more than five months of excruciating discussions with Franklin Templeton and three other financial titans by signing a restructuring agreement that cuts Kiev’s debt by a fifth.

The terms went a long way toward meeting the $15.3 billion cost-cutting target that the International Monetary Fund had set in return for a $40 billion global rescue package to be meted out under strict conditions over the coming four years.

But those negotiations left out a smaller group of investors that included Aurelius Capital Management — the same US hedge fund now battling the cash-strapped government of Argentina.

Aurelius is particularly unhappy because it holds debts that come due in the coming months. It would therefore have to wait much longer for a return on its investment than Templeton and other creditors holding Eurobonds maturing at later dates.

Is Ukraine in default?

Not quite.

Kiev missed its first bond repayment on Wednesday citing rules of the August deal — a decision that some analysts call a “technical” default that does not affect Ukraine’s standing in the eyes of most investors.

Standard and Poor’s on Friday lowered Ukraine’s foreign currency sovereign credit rating to “selective default”.

The problem for Kiev is that the August deal will not go into actual effect until it is approved by 75 percent of bondholders within the coming month.

Such backing would allow Kiev to roll over its 11 sovereign and three state-backed Eurobonds into nine new securities that pay slightly higher returns but — unless Ukraine’s economy improves significantly — will only be paid out between 2019 and 2027.

Aurelius says it holds 25 percent of the missed September 23 repayment and has enough votes at a meeting tentatively set for October 14 in London to sink the entire deal.

“This is a worrying signal,” UniCredit Bank Ukraine analyst Yegor Perelygin told Kiev’s liga.net news site.

London’s International Swaps and Derivatives Association will then have the right to declare Ukraine in official default.

Will Russia Cooperate?

The short answer is ‘no’.

Moscow views the Eurobonds as a government-to-government loan that must be repaid under international law.

Russian Finance Minister Anton Siluanov said he would not be attending the London meeting and instead “waiting for the debt’s repayment”.

Kiev argues that the Russian-purchased Eurobond is a commercial paper that falls under the same restructuring rules as agreed with the other private creditors.

“Russia will never be offered better terms that those offered to the other bondholders,” Ukrainian President Petro Poroshenko said earlier this month.

An IMF board meeting is expected to decide which side is right by the time the bond matures on December 20.

Can the economy bounce back?

Ukraine’s nearly three-year-long economic contraction has seen output shrink to levels even lower than those seen in the dying years of the Soviet Union.

The cost of Ukraine’s 17-month war against pro-Russian eastern insurgents and the loss of huge steel mills and coal mines to the rebels has seen the central bank lower its 2015 outlook to a gross domestic product loss of 11.5 percent.

But not all the statistics make such grim reading.

The once-spiralling pace of inflation has stabilised enough to allow the central bank to lower borrowing costs to 22 from 30 percent in the past two months.

The central bank expects consumer prices to rise by just 12 percent next year — a sliver of the 61-percent rate at which inflation was soaring in April.

“Monthly production data continues to show that the Ukrainian economy bottomed out in the second quarter of 2015,” the SigmaBlazer private equity firm said in a research note.

“In fact, industrial production in July increased by 3.4 percent in relation to June this year.

But not all analysts are as optimistic.

“The completed (debt) deal will have no immediate effect,” UniCredit’s Perelygin said.

“The economy will take 12 to 18 months to stabilise.”

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