Ukraine Blackmails Creditors With Debt Payment Freeze

Ukraine’s parliament approved a law granting the government the right to impose a moratorium on foreign debt payments on Tuesday. The document presented by Prime Minister Arseniy Yatseniuk, was upheld by 256 MPs.

"If we have no money to pay salaries and pensions, people will kick us all out of parliament… If, because of a default, the dollar rate goes through the roof, they will do the same, that’s why we can’t afford any further bickering”, the Kiev-based Vesti newspaper quoted an unnamed member of Petro Poroshenko’s faction in the Verkhovna Rada as saying.

Prime Minister Arseniy Yatsenyuk said Ukraine was to pay $30 bln of the country’s foreign debt and $17 bln of the country’s domestic debt within four years.

He added that the moratorium concerns only private creditors, holding the debt of Ukraine.

Russia expects Ukraine to pay back its debt of $3 bln in euro-bonds in December 2015. Kiev regards the $3 bln in euro bonds held by Russia as a private loan and, therefore, subject to the moratorium.

The document, to be effective until July 1, 2016, also contains a provision whereby creditors will not be able to claim state property as compensation in the event the moratorium goes into effect.

Its approval is sending a very bad signal to investors and creditors as it allows the government to declare a technical default.

Earlier Russia's Deputy Finance Minister Sergey Storchak said Russia would not take part in restructuring Ukraine's debt and was expecting the next debt payment in June.