Ukraine threatens 'legal war' with Russia over debt

15th October 2015, Comments 0 comments

Ukraine threatened Thursday to launch a "legal war" with Russia after Moscow held out on a vital debt restructuring agreement to stop the crisis-torn nation from hurtling into default.

The Ukrainian government gave Moscow a strict October 29 deadline to either accept the same terms as its other debt holders or face it in the international courts.

"All of Ukraine's creditors by their majority -- which stands at more than 75 percent of the creditors' committee votes -- agreed to write off Ukraine's debt," Ukrainian Prime Minister Arseniy Yatsenyuk told a televised government meeting.

The Western-backed leader said the deal at talks on Wednesday in London would provide his cash-strapped country with an immediate write-down of $3 billion (2.6 billion euros) and restructure future debt worth $8.5 billion.

Ukraine appeared to step back from the brink of default when it reached a 20-percent write-down agreement in August with four Western investments titans that own about half of Ukraine's $18 billion in maturing commercial debt.

But that deal had to also be backed by other bondholders who demanded better terms. These funds owned debt with short-term maturities and would have had to wait much longer to see a return on investments made over the past 10 years.

Bloomberg reported that the holdouts had agreed to join the other creditors after several rounds of negotiations last week.

The final vote itself took place behind closed doors in the London office of one of Ukrainian government's financial advisers.

The main sticking point remains Russia, Ukraine's eastern neighbour that bought a $3.0 billion Eurobond from Viktor Yanukovych just months before his ouster by pro-EU demonstrators in February 2014.

Russia denies playing any part in the pro-Kremlin insurgency that swept eastern Ukraine in the wake of his fall and views the bond as a sovereign loan that is not subject to the commercial deal agreed with the Western funds.

- Moscow demands payment -

Moscow wants the money paid back in full by the December 20 deadline.

It has otherwise threatened to file a lawsuit against Kiev in a tribunal that may declare Ukraine in official default -- a decision that would complicate the release of further assistance to Kiev from the International Monetary Fund.

"Russia has one more deadline -- October 29 is it," Yatsenyuk told his government.

"Please, get in line with the normal countries, which accepted the conditions of the Ukrainian parliament on either writing down or restructuring these debts."

Yatsenyuk did not explain why he set that specific date.

But Russian President Vladimir Putin's official spokesman immediately rejected Yatsenyuk's appeal.

"There are no changes in Russia's position concerning the debt," Interfax quoted Putin spokesman Dmitry Peskov as saying.

"As both Russian Finance Minister Anton Siluanov and President Vladimir Putin had said -- this is a government-to-government debt."

The IMF is expected to rule on whether Kiev or Moscow is right about the commercial or sovereign status of the disputed $3.0 loan within the coming months.

© 2015 AFP

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