It’s an all out economic war between Russia and Ukraine after Kiev failed to repay a bond worth $3 billion (£2.1 billion).
And the battleground will be London, where Russia’s Finance Ministry officially filed a lawsuit over the case.
But Ukraine is not going down without a fight — its foreign Pavlo Klimkin told the state news agency Ukrinform that Kiev is going to argue that the bond was a geopolitical “bribe.”
Klimkin said: “Of course, we will work in order to prove that it was a bribe in form and content. The fact, that the London court will consider this dispute gives us more opportunities. We are getting ready for it, and all the appropriate messages will be made soon.”
Basically Ukraine is going use this claim as the centrepiece of its defence for not paying the $3 billion. In other words, it’s going to say that Russia was unduly punishing the country because it didn’t pay this bond, which is dubbing it as a “bribe”.
Russia first announced that it was suing Ukraine in January, just after Ukraine installed a moratorium on servicing its debt as it struck a restructuring agreement with all of its creditors apart from Russia. In other words, it stopped paying back Russia but carried on paying back everyone else.
This led to Russia and Ukraine fighting publicly about the state of affairs and various economic and financial disputes between the two countries have intensified.
For example, a few days before Russia announced its intentions to sue Ukraine, Ukraine cut the power supplies to Crimea, which Russia annexed in March 2014. The following day Russia cancelled a free-trade agreement and imposed new trade restrictions against Ukraine.
Here’s the full statement from the Russian government, released on Wednesday (emphasis ours):
The Ministry of Finance of the Russian Federation today filed a lawsuit in the English High Court against Ukraine to recover all amounts owed under Ukraine’s US$3 billion Eurobond held by the Russian Federation, as well as all costs incurred by the Russian Federation in bringing this legal action.
In its lawsuit the Russian Federation demands that Ukraine pay the principal of the Eurobond in the amount of US$3 billion, the unpaid December 2015 coupon in the amount of US$75 million, and the interest beginning from December 20, 2015, in addition to the Russian Federation’s costs in bringing the enforcement action.
This lawsuit was filed after numerous futile attempts to encourage Ukraine to enter into good faith negotiations to restructure the debt, and to acknowledge that the Eurobond held by the Russian Federation is an official credit and must be afforded treatment better than that previously provided to Ukraine’s private creditors.
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