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Moscow vows tough action if Kiev halts debt repayments

A file photo of Russian Prime Minister Dmitry Medvedev speaking in the lower house of Russia’s parliament (©AFP)

Russian Prime Minister Dmitry Medvedev has warned that his country will adopt a tough stance should Ukraine fail to repay its debts to Moscow after Kiev’s parliament authorized the government to suspend foreign debt payments.

On Friday, Medvedev slammed the Ukrainian parliament’s decision as “highly contradictory,” saying, “We will take the toughest position in this case and will defend our national interests,” Russia’s TASS news agency reported.

Earlier this week, Ukraine’s legislature passed a bill granting the government the right to suspend foreign debt payments, including the $3-billion-dollar loan it received from Moscow back in 2013 months before the ouster of former president, Viktor Yanukovych.

“They appear speaking about private loans but at the same time hinting they do not intend to repay debts of Yanukovych’s government,” said the Russian premier, adding, “It looks like the refusal of the Bolsheviks to repay debts of the tsarist government. If this is indeed formalized in such a way, it will definitely mean Ukraine’s default and will influence their agreements with the IMF.”

According to the report, Ukraine’s Prime Minister Arseniy Yatsenyuk (pictured below) announced on Friday that Kiev had to repay $30 billion in foreign debt and an additional $17 billion in domestic liabilities within four years.


The Ukrainian premier, however, added that the moratorium on debt payments passed by the parliament only concerns those received from private creditors. He urged Kiev’s Western sponsors to grant it “real financial assistance,” said the report.

Kiev considers its $3 billion Eurobonds held by Moscow as a private loan and thus subject to the moratorium, while Russia insists the loan cannot be regarded as private and should be promptly repaid as due by December 2015.

Ties between Moscow and Kiev deteriorated in February 2014, when Yanukovych was ousted after large protests and fierce clashes with security forces in Kiev.

The Eastern European’s economy shrank by 7.5 percent last year as inflation soared, making it the worst economic year for Ukraine in over seven decades. Ukraine’s central bank has forecast that the country’s economy will continue to contract by up to five additional percentage points this year, and the inflation is predicted to stand at 18 percent.

The nosedive in the country’s economy comes as the Kiev government has sharply increased its military spending in a bid to reinforce its army, which is engaged in fierce clashes in the country’s east.


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