[LINK] "Ukraine Defaults on $3 Billion Bond to Russia"

[rfmcdonald]

Bloomberg notes the continuing collapse of Russia-Ukraine relations.

Ukraine said it won’t repay $3 billion in bonds due to Russia, moving a step closer to a court battle amid a new wave of economic tension between the two ex-Soviet neighbors.

Prime Minister Arseniy Yatsenyuk said Kiev is imposing a moratorium on the note due Dec. 20, which Russian President Vladimir Putin bought two years ago as part of an abortive bail-out for Ukraine’s former leader just months before he was toppled. Russia said on Friday it will wait until a 10-day grace period on the bond expires on Dec. 30 before starting legal action.

Ukraine, its finances reeling from a two-year-old conflict with Russian-backed separatists in the east of the country, had pushed Russia to join a $18 billion restructuring with commercial creditors this year. But Russia argued the debt was sovereign, despite its unusual Eurobond form, and proposed its own repayment terms.

The default “is just confirmation of the unimproved relations between the countries," said Simon Quijano-Evans, the London-based chief emerging-market strategist at Commerzbank AG. “The hope is that backstage negotiations will succeed in finding a solution. Otherwise, a legal case would probably ensue, unnecessarily complicating the ongoing political discussions surrounding eastern Ukraine and the sanctions."