Ukraine defaults on $3bn bond to Russia

Vladimir Putin bought the bond two years ago to bail out the former Ukraine president

Arseniy Yatsenyuk, prime miniter of Ukraine (Getty Images)

Ukraine has defaulted on a $3 billion bond payment to Russia in one of the biggest sovereign defaults in history, according to reports.

Arseniy Yatsenyuk, prime miniter of Ukraine, said at a meeting in Kiev on Friday that there was a payment freeze on the bond, which was due on December 20, Bloomberg reported.

Vladimir Putin, the Russian president, bought the bond two years ago to bail out the former Ukraine president Viktor Yanukovych before he was toppled.

Russia said last week that it would take Ukraine to court if the payment did not come through.

Ukraine has repeatedly said that it could not make the debt repayment on December 20 without violating other deals.

Germany had been helping to mediate talks with Russia and Ukraine. It had organised a meeting with the two sides at an IMF meeting in October, giving some analysts hope that a deal would be reached.

The IMF has also tried to encourage a resolution. Ukraine was bailed out by the IMF to the tune of $17.5 billion this year after prolonged conflicted plunged the economy into recession. In December, the IMF said that it would only continue to pay the billion-dollar loan if Ukraine negotiates with Russia on its sovereign debt.

Fitch, the ratings agency, downgraded Ukraine debt to D in November, signalling imminent default.