Spotlight: Russia vows restrictive measures over Ukraine's possible debt default, free trade deal with EU

Russian President Vladimir Putin on Wednesday vowed to take restrictive measures on Ukraine if it fails to repay its debt of 3 billion U.S. dollars in December.

Putin also pledged to protect his country's economic interests if the Ukraine-EU free trade regime would be implemented in January.

On the debt repayment, Putin ordered to "take them (Ukrainians) to court then," according to an online Kremlin transcript of the president's meeting with government officials.

Ukraine got a 3-billion-dollar loan in the form of Eurobonds from Russia in December 2013 to shore up its economy amid financial crisis. The loan matures on Dec. 20.

Putin proposed in mid-November to reschedule the debt payment so that Kiev could pay 1 billion U.S. dollars each year from 2016 to 2018.

Russia had also requested the United States, the European Union or one of the international financial bodies to share the risks and provide Moscow with debt repayment guarantees.

Russian Financial Minister Anton Siluanov told Putin during Wednesday's meeting that last week a letter was sent by the U.S. Department of the Treasury refusing to provide such guarantees, while EU's unofficial refusals were also received by them.

Earlier in the day, Prime Minister Dmitry Medvedev also admitted the possibility of taking Ukraine to court over the potential default.

In response to Russia's statements, Ukrainian Prime Minister Arseniy Yatsenyuk said Kiev is "ready to pursue in court fully armed," reiterating that no other terms would be provided to Moscow than the agreement reached in August between Ukraine and its other international creditors.

The agreement envisages a 20-percent write-off of Kiev's outstanding foreign debts and a four-year extension of the loan repayment period, which was rejected by Russia that insists a full payback.

As the deadline is approaching, the International Monetary Fund (IMF) decided Wednesday to change its lending regulations for countries that are in arrears to official creditors.

The decision would allow the IMF's bailout package for Ukraine to move forward despite its missed payment with Russia. The move triggered strong criticism in Russia, as Prime Minister Medvedev warned the international confidence in IMF would be seriously undermined.

"For the first time ever in its history the IMF has made a decision entirely for political reasons, choosing to support a borrower country in defiance of the real state of affairs and the existing legal agreements," Medvedev said.

Moreover, Kremlin spokesman Dmitry Peskov expressed worries that IMF's decision would create a very dangerous precedent for allowing the possibility of sovereign debt non-payment.

During Wednesday's meeting, Putin also asked Economic Development Minister Alexei Ulyukayev to continue trilateral consultations with Ukraine and the EU on Kiev's free trade regime with the EU.

"I ask you, in spite of all the difficulties, to continue this discussion in the hope that we will still be able to reach some kind of agreement before Jan. 1, 2016 (the date when the Ukraine-EU agreement begins effective)," Putin said.

Russia fears the Ukraine-EU free trade deal can result in a massive re-export of European goods, which would undermine Russia's current sanctions on goods from EU.

According to Russian Prime Minister Medvedev, the three sides are negotiating the rules for parallel enforcement of Ukraine's free trade with the Commonwealth of Independent States as well as with the EU.

"There are almost no chances that we will agree," said Medvedev. "If it does not happen, then we will introduce a new trade regime with Ukraine, including specific sanctions against Ukrainian foodstuffs."

He warned that Russia's privileged trade regime with Ukraine will end, in particular with tariffs to be raised for different categories of goods from 3 to 9 percent, or 6 percent on average. Endit