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No Easing Up
Russia Prepares to Sue Ukraine

Russia says it is preparing to take Ukraine to court over an outstanding $3 billion loan Moscow issued to the government of former President Viktor Yanukovich in the weeks leading up to his abdication in the face of tenacious street protests in early 2014. Reuters:

Russia has offered to restructure the debt in equal installments over the next three years if the West provides guarantees. But Ukraine has included it among the sovereign and sovereign-guaranteed bonds to be restructured in a deal with a group of its largest creditors.

“This week we received an official refusal from the U.S. government to provide guarantees on Ukraine’s liabilities. In this regard, there is nothing left but for us to file a legal case against Ukraine if the debtor does not fulfill its liabilities fully on Dec. 20,” RIA news agency cited the Finance Ministry as saying in a statement.

The ministry added that Russia had offered Ukraine better terms than those the International Monetary Fund had asked for.

Russia’s ostensibly generous restructuring of Ukraine’s outstanding obligations was, in reality, anything but. As we wrote at the time, it was actually a shrewd strategic move whereby Russia’s downsides would be minimized and pressure would be ratcheted up on Kyiv. Putin’s lawsuit is likely to cause cash-strapped Ukraine real headaches at best and lots of money at worst. As this Bloomberg article explains, the loan was structured with some rather unusual and tough provisions.

Some Western leaders would like the Ukraine problem to go away so they can focus on collaborating with Moscow in the Middle East. Indeed, many have speculated that Putin himself preferred to keep things quiet in order to build support for Russia’s exploits in Syria and hopefully persuade the EU to lift sanctions. Yet between Putin’s continued provocations and reports that the sanctions regime will remain for at least another six months, it looks likely that tensions will continue to rise.

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