London will decide on Ukraine-Russia loan dispute
Russia has formally initiated legal proceedings against Ukraine in London for refusing to repay a USD 3bn debt. Ukraine's Prime Minister Arseniy Yatsenyuk said Ukraine had prepared itself for court action after the country officially defaulted on the debt on 20 December.
Despite deafulting the International Monetary Fund (IMF) changed its rules so that failure to repay the Russian debt did not disqualify Ukraine from receiving a IMF USD 17.5 billion dollar rescue package agreed with the pro-EU post- revolution government.
The cash was lent by Moscow to the administration of former president Viktor Yanukovych. In a statement on Friday the Russian finance ministry said it had "initiated the procedures necessary for a prompt commencement of court hearings with Ukraine" and would file a lawsuit in the English courts.
The 3 USD billion loan was the first installment of a USD15 billion package agreed with Yanukovych after he pulled out of the Ukraine–European Union Association Agreement. Yanukovych's decision to shelve EU integration sparked the EuroMaidan revolution.
On Saturday Ukraine introduced trade tariffs on Russian produce after Moscow cancelled its liberal trade regime with Ukraine on Friday. Moscow promised to introduce the tariffs if Ukraine if it went ahead with the EU trade pact which came into force on January 1.
Ukrainian President Petro Poroshenko said Friday that Russia had resorted to "economic warfare" against Ukraine after its military campaign in eastern Ukraine proved unsuccesful.
Porosshenko said the Russian embargo would be painful for the economy but the deal with the world's largest trading bloc is expected to to far outweigh the loss of Russian business. The European Commission said in a statement of December 31 that "the agreement will contribute to the modernization and diversification of the Ukrainian economy and will create additional incentives for reform."