Russia Says Ukraine Violated Terms Of $3B Loan, May Demand Early Repayment

It is “likely” that Russia will demand an early repayment of a $3 billion loan it gave to Ukraine as the latter violated “a number of parameters” that were preconditions for the loan, a government official, speaking on condition of anonymity, told state-owned news agency Sputnik. The report comes even as Russian Finance Minister Anton Siluanov said that his country has legitimate grounds to demand immediate repayment of the debt.

“Ukraine has actually breached the conditions of the loan, which requires that the Ukraine’s state debt should not be more than 60 percent of the GDP,” Siluanov reportedly said on Saturday. However, he added, the decision over when Moscow would demand the repayment of the loan has “not yet been made.”

Demands for repayment of loan by Russia would further worsen the situation in Ukraine, which is already reeling under high inflation and declining industrial production.

Russia had reportedly lent money to Ukraine by buying Eurobonds in December 2013, two months before the ouster of Ukraine's pro-Moscow President Viktor Yanukovich. Since then, however, following Russian invasion of the Black Sea island of Crimea -- a territory internationally recognized as part of Ukraine -- the relations between the two nations have continued to deteriorate.

Ukraine has consistently accused Russia of fomenting trouble in the country’s eastern territories by backing pro-Moscow rebels in the region and sending troops to support the separatists. Russia, on the other hand, has repeatedly denied involvement in the conflict that began in April last year. Nearly 5,000 people are believed to have been killed in the conflict in eastern Ukraine till now.

However, the latest comment by Russian officials contradict remarks by President Vladimir Putin in November last year, when he reportedly said that Russia will not demand early repayment of Ukraine's debt as it would cause a financial collapse.

In May last year, the International Monetary Fund had reportedly approved $17 billion in emergency funds for Ukraine amid warnings that conflict with Russia could significantly damage the country’s economy.

In December, rating agency Moody's had estimated that Ukraine's debt amounted to 72 percent of GDP in 2014 and it was expected to rise further to 83 percent in 2015, according to a Reuters report.