Ukraine will not pay Russia a $3 billion debt - officially

Ukrainian Prime Minister Arseniy Yatsenyuk stated that Ukraine does not intend to pay off the $3 billion debt to Russia this weekend after Moscow refused to accept the repayment conditions approved by other international creditors.

Rather, a 'moratorium' on the repayment of the debt to Russia effectively means that Ukraine may jeopardize important loans, including those from the International Monetary Fund.

This is the latest dispute between the two neighbors after arguments over gas supplies, the annexation of the Crimean Peninsula to Russia, and the conflict in eastern Ukraine.

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'After the Russian Federation refused to accept our proposal, despite attempts to reach an agreement on restructuring, the government is imposing a moratorium on the repayment of obligations of $3 billion, - said Yatsenyuk. - We are prepared for litigation with Russia.

He did not specify when Ukraine would be ready to repay the debt. Earlier, Moscow stated that it would sue Ukraine if the state did not pay its debts on time.

Russian officials have not yet responded to Yatsenyuk's statement.

It is unclear at this stage how Ukraine's impending default will affect the four-year financial assistance from the IMF.

The Ukrainian economy has been struggling over the past few years, and the country is negotiating debt repayment terms with creditors, but not with Russia.

In November, Russian President Vladimir Putin proposed debt restructuring, stating that Moscow would be willing to agree to a payment of $1 billion per year from 2016 to 2018.

Ukraine rejected the proposal, stating that it cannot legally offer Russia any alternative that is different from other creditors.

This deal involves a 20 percent write-off of Ukrainian bond assets, which will reduce Ukraine's sovereign debt from $19 billion to $15.5 billion.

Relations between the two neighbors have deteriorated since Russia annexed the Crimean Peninsula in March 2014 and began providing support to militants in eastern Ukraine. Ukrainian leaders have accused Moscow of sending troops and weapons east, which the Kremlin categorically denies.