The Ukrainian government is "fully armed" for any legal fight with Russia over a $3bn Eurobond Moscow is demanding to be redeemed in full, Prime Minister Arseny Yatsenyuk said as the sides step up the rhetoric before the December 20 deadline for payment.
"Russia can't and won't be offered other conditions to the restructuring than other creditors. Therefore, if Russia is ready to accept the terms of the restructuring, be our guest. If it files a lawsuit against Ukraine, we're ready for legal proceedings, we are fully armed," Yatsenyuk's media office quoted him as saying on December 9.
Ukraine's position "remains unchanged" over the debt, he stressed. "We offered rstructuring to all international creditors. All responsible international bond-holders accepted the proposal of Ukraine. Our suggestion to others who have not accepted our restructuring plan remains on the table."
As Russia prepares to sue over the bond, Ukraine may also try to stonewall the case by arguing that Moscow's annexation of Crimea in March 2015 cost it far more. Yatsenyuk also referred to compensation claims already underway in the European Court of Human Rights for "trillion losses entailed by illegal annexation" of Crimea, seized 20 months ago by Russian troops.
On December 8, the International Monetary Fund (IMF) announced that it will change current policy on non-toleration of arrears to official creditors. This provides an opportunity to continue supporting Ukraine if the country misses the December 20 repayment of the Russian bond, as is widely anticipated.
With Russia adamant that bond is official and not private debt, Finance Minister Anton Siluanov said on the same day that his ministry is already preparing documentation to defend its rights as a lender in court.
"We made a conciliatory gesture - suggested an option of settling the Ukraine's debt problem and approached the IMF because we understood Kyiv does not solve its debt problems on its own. However, we received the proposal to hold talks along with commercial lenders," Siluanov said. "This is not a meaningful dialogue. We have no option in such conditions other than using all possibilities to defend our rights as a creditor."
Meanwhile, Russian Prime Minister Dmitry Medvedev took a blunter tone in the matter, saying that, "I have a feeling they won't pay us back because they're crooks." He also attacked the IMF for a decision he said was politically motivated.
"For the first time in its history, [the IMF] has gone and made a decision aimed at supporting the economy of a debtor nation, disregarding the circumstances of the case and existing legal agreements, exclusively for political reasons," Medvedev said in an interview with Russian TV.
The Ukrainian government has now received two tranches of an IMF support package agreed in March worth $6.77bn of the $17.5bn facility. A further $3bn was received from other international partners, with funds coming from the US, the EU, the World Bank, Canada, Germany, Japan, and Norway.
Ukrainian Finance Minister Natalie Jaresko said on December 9 that the government is preparing additional agreements to get "similar support" from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank, and the governments of Poland, Switzerland, and Turkey. "All of them are members of our international financial coalition," Unian news agency quoted Jaresko as saying.
Meanwhile, Yatsenyuk underlined that if Russia still refuses to restructure the $3bn debt on the same terms as other creditors accepted, the IMF can continue its cooperation programme with Ukraine unobstructed.
In mid-October, private creditors voted in favour of Ukraine's $18bn debt restructuring, while Russia refused to take part in the vote. The result ended a seven-month marathon to secure a debt restructuring deal with a group of investors represented by US investment firm Franklin Templeton.
With a major court battle now seemingly inevitable, Yatsenyuk claimed Russia had "decided to refuse to abide" by any rulings made by the European Court of Human Rights in the matter.
"The Russian Federation is well aware they will lose this action. However, that won't prevent us from fulfilling the ruling of the European Court of Human Rights and we will institute legal proceedings in other courts and in other countries," Yatsenyuk added.