Ukraine cannot pay $3 billion Russian debt

ANKARA

Ukraine cannot pay a $3 billion debt due to Russia on Sunday, the Ukrainian Finance Ministry said Friday.

"The December 2015 Eurobonds constitute debt obligations which Ukraine cannot pay in accordance with their initial terms," the ministry said in a statement.

According to the ministry, payment would violate the terms of the country's agreement with the International Monetary Fund (IMF). In March, the fund approved a $17.5 billion loan package to Ukraine that called for debt restructuring and economic reform.

The ministry said the holders of the December 2015 Eurobonds decided not to participate in the debt exchange. “Under the terms of the new Ukrainian bonds issued on Nov.12, in the debt exchange, Ukraine is prohibited from paying holdout creditors in accordance with the original contractual terms,” the statement added.

On Aug. 27, a group of the country’s largest creditors, including investment firm Franklin Templeton, which owns around half of the country’s outstanding debt, accepted a 20 percent write-off on $18 billion in outstanding bonds.

“Ukraine remains committed to negotiating in good faith a consensual restructuring of the December 2015 Eurobonds,” the statement said.

Last month, Russian President Vladimir Putin offered to restructure repayment of the Ukrainian debt over three years. However, the offer was contingent on the provision of guarantees by the U.S., the EU and other parties.

When the guarantees were not provided the offer fell through.

Russia has threatened to take the case to international courts if Ukraine does not make the payment on time.