UPDATE2: Kiev sets moratorium on $3 bln debt to Moscow, ready for trial

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MOSCOW, Dec 18 (PRIME) -- The Ukrainian government has introduced a moratorium on U.S. $3 billion Eurobond debt repayment to Russia and is ready for court litigations, Prime Minister Arseny Yatsenyuk said at a government meeting Friday.

“The Ukrainian government introduces a moratorium on repayment of the so-called Russian debt today…We are introducing a moratorium on payment of $3.075 billion Russian bonds,” Yatsenyuk said.

Kiev also sets a moratorium on repayment of a $507 million debt of satellite and rocket designer Yuzhnoye Design Office and state automobile road agency Ukravtodor to Russian banks, the prime minister said.

“Starting from today, the repayment of debts totaling $3.582 billion in favor of the Russian side is suspended until either acceptance of our restructuring proposals or a corresponding court decision. I emphasize once again that we are ready for court proceedings with the Russian side,” Yatsenyuk said.

The International Monetary Fund (IMF) recognized this debt as sovereign on Wednesday. Russian Finance Minister Anton Siluanov said that after the IMF ruling Moscow expects new restructuring proposals from Ukraine as opposed to older ones focused on commercial creditors.

Russia bought the 2-year Eurobonds in December 2013 and rejected restructuring conditions proposed by Ukraine to its commercial creditors. Kiev insisted that the terms of debt repayment to Russia will be the same as for private creditors.

RUSSIAN OFFICIALS: URAINE EXPECTEDLY DEFAULTS

Dmitry Peskov, a spokesman of President Vladimir Putin, said that Kiev has actually defaulted by introducing the moratorium.

“Actually, default, one can say, was officially acknowledged by the Ukrainian side when they announced a moratorium on repayment of a sovereign debt… It is the recognition of a situation of default,” he said.

Russian Deputy Finance Minister Sergei Storchak said in an interview with Rossiya 24 TV channel, “The first thing which I would like to say – this is no surprise for us, we’d expected such actions because of the policy which was pursued by the Ukrainian authorities in the last six months.”

Russia plans to initiate legal proceedings over the moratorium in 10 days after the maturity of the debt, or in 10 days after December 20, Storchak said, adding that Kiev has no chance to win by court action.

Ukraine is very unlikely to refinance the debt after legal proceedings started and Russia may have to choose some assets as compensation if it wins the claim, Storchak said.

The IMF, the EBRD and the IFC, which are the major and only lenders to Ukraine, will hardly provide financing to the country above the set limits that are expected to be disbursed in 2016 already, he said, adding that Kiev will likely face a deficit of money to finance structural reforms, such as restructuring of Naftogaz and the national gas transporting network.

Russian authorities have not decided yet whether to ask the IMF to block a program of aid to Ukraine and need preliminary consultations in order to make such a decision, he said.

“Sovereign lenders are not used to choosing a route which will not bring a positive result. If there is no result, I believe it is pointless to insist on blocking the fund’s program,” the deputy minister said.

“The problem of each lender is that he is interested in economic growth of his borrower.”

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