Ukraine and Russia at loggerheads over debt owed

Arguably one of the world's most influential leaders, Russian President Vladimir Putin has not alway won over the hearts of all who cross paths with him. He is probably the biggest critics of the US without leading the conversation into radicalism, shooting straight from the hip, the actions by which has landed his country in economic trouble by defying both the US and European leaders orders to undo his annexation of Crimea.

Putin's aspiration in former Soviet states is to prevent further economic and political power finding it's way into the world's largest trading bloc, the EU. Russia hasn't always be on good terms with their western neighbours with leaders of the now defunct communist state claiming its stake by building the infamous Berlin Wall, so there is still a level of animosity between the nations even after the fall of communism.

The trouble began brewing when then Ukraine President Viktor Yanukovych who happened to be an ally of Putin, was swayed away from joining forces with the European Union and subsequently rewarded with a bond of $3 billion to seal the ill-fated friendship. This lead to the fall of Yanukovych after the people of Ukraine objected to the move that would bring them closer to their former master.

In the end Putin sent his troops to Crimea to send a militant message to his detractors that he would not simply roll over and allow such revolution to destroy his plans. The people of Crimea voted in a referendum that saw them casting their ballots favourably in separation from Ukraine with Putin ready on hand to sign a treaty declaring them a part of Russia.

Putin tests English debt law as Ukraine feud heads to London, by @natashadoff https://t.co/FjCRWmrmk3 #Russia pic.twitter.com/C4kjGw6VT3

— Emerging Markets (@BloombergEM) October 29, 2015

However Ukraine, who was already facing fiscal pressure at the time of the revolution, has entered into an agreement with creditors to restructure its debt as it is unable to service it due to the war that has ravaged its economy and halted the normal course of business.

Of the debt that comes up the largest, Russia's monetary exchange it gave former leader Yanukovych in exchange for his political backing, is the largest but Ukrainian leaders dispute that this money requires repayment as it alleges that this was merely a bribe by Russia.

But Russia says that the loan was official and denies that it was made with the intention of winning support from Ukraine. The matter is now at loggerheads with both parties looking set to approach the courts to resolve the matter, something scholars and governments around the world say could be a landmark case that paves the way to future disputes.

Putin is an astute politician and I don't think he'd have openly given a bribe, however I do think he provided financial assistance to a country facing a crisis in return for support. Whether Ukraine has a good argument to present to the court reasons why they shouldn't be liable for this money will ultimately decide this case.

In the meanwhile court delays stifone existing debt payments that need to be settled because Russia needs to ascertain  whether this money is owed to them or not effectively halting the entire restructuring process and leaving investors frustrated at the extended periods to receive their due payments, something that doesn't build confidence especially for a nation that is in desperate need of capital to rebuild it's broken country.