Ukraine Says Russian Aggression Means It Can’t Repay Bonds

  • Ukraine files defense in London in Russia’s lawsuit over bonds
  • Says Russia’s actions means it couldn’t benefit from money

Ukraine said that a Russian campaign of aggression and economic sanctions, including the occupation of the Crimean peninsula, made it impossible to repay a $3 billion bond at the center of a London lawsuit.

Ukraine was under “massive, unlawful and illegitimate economic and political pressure” to take financial support from Russia instead of signing a 2013 agreement with the European Union, Ukraine said in the London court filing Friday. The London court should dismiss the case, or delay it until Russia “complies with its obligations under public international law,” Ukraine said.

The conflict with Russia-backed rebels in the east has pushed Ukraine to the brink of bankruptcy, forcing it to seek an international bailout. Russia filed the London lawsuit to force Ukraine to repay the defaulted $3 billion bond, plus nearly $700,000 in interest for every additional day of default.

Russian president Vladimir Putin bought the debt in December 2013 to bail out his ally, Ukrainian leader Viktor Yanukovych, who was ousted months later. Russia annexed Crimea in 2014 and has faced international criticism for supporting rebels in two eastern regions of Ukraine. The stand-off shows little sign of abating amid continued violence and failed peace talks.

Dmitry Medvedev, the Russian Prime Minister, has said the country expects full repayment and that Ukraine is in violation of its international obligations. A Kremlin spokesman didn’t immediately respond to a message seeking comment.

In its court papers, Ukraine said Russia’s actions had caused a severe recession and affected its ability to pay. Russia has banned Ukrainian imports of milk, beer and cheese and ended discounted pricing for natural gas, according to the documents.

The case is: The Law Debenture Trust Corporation Plc v. Ukraine, High Court of Justice, Queen’s Bench Division, Commercial Court: FL-2016-000002

Before it's here, it's on the Bloomberg Terminal. LEARN MORE