This statement by Bloomberg, indicating that Ukraine is in line after Greece, heading towards a default, resonated considerably around Ukraine and beyond.

Analysts say that talk of a possible default of Ukraine has existed throughout the 20 years of its independence, and yet such a collapse never took place. As noted by the president of the non-governmental Centre for Economic Development, Alexander Paskhaver, in the midst of the economic crisis in 2008 the risks of default by Ukraine were several times higher than now and today there are no objective parameters which indicate that Ukraine will not be able to pay off its debt in 2012. Paskhaver finds the talk of an illegal default to be illegitimate in itself, given that Bloomberg indicates only of an increasing difficult situation, not of default itself:

“This is nothing more than a signal that the situation is not easy,” says Paskhaver.

On the topic of the possibility of a default caused by Bloomberg’s report, there was an immediate response by officials in Ukraine. On February 23rd Prime Minister Mykola Azarov publicly assured the world that the Government and the National Bank of Ukraine are in full control of the financial and economic situation in the country, and urged the media not to scare people by discussing such strong words as ‘default’:

“There will not be any kind of default in Ukraine!” he said firmly.

Newly appointed vice premier of Ukraine, Valery Khoroshkovsky, a super-efficient manager and a rising star of Ukrainian politics, said that Ukraine performs all of its debt obligations with no problems. "I want to formally refute such insinuations, because in fact we now do not see problems with the repayment of external debt, even if we have not resumed our cooperation with the IMF,” he said.

He explained that the largest number of debt repayments was made in February, and Ukraine produced these payments without any problems. He noted that further payments would be required in March, and then the financial burden will be the beginning of summer, June 4, and then by October 2012. "We see all these aspects, we have enough financial resources to pay all these debts", assured Khoroshkovsky.

So where did Bloomberg get the impression that Ukraine was ready to go the way of the Greeks?

Get up close to that issue, and you can strongly pick out the smell of gas.

Before it is willing to grant another loan to Ukraine, the IMF insisted that the domestic price of gas for Ukraine’s population should be increased to market levels, and linked the solution of the problem with the provision of credit. But the acting government of Ukraine simply cannot take such a step, for in October Ukraine will hold parliamentary elections. The ruling party’s ratings, and those of President Viktor Yanukovych, have fallen to critically low levels. An increase in the price of gas for ordinary retail customers could lead to the regime simply being swept away by angry voters. For this reason, and some others, a key issue for Ukraine is the price of Russian gas.

Due to the contract signed in 2009, Russia imposed unprecedented high gas prices for neighboring Ukraine. This price is much higher than that charged to all other European countries. It is because of the signing of this contract that the former Prime Minister Yulia Tymoshenko in October last year was sentenced to seven years in prison and is now serving her sentence.

When he came to power in 2010, “pro-Russian” Yanukovych dripped assurances about the “friendship and Slavic brotherhood,” and in Ukraine great expectations arose that Russia would reduce gas prices in return for numerous political concessions. These expectations soon turned into bitter disappointment, and the new economic confrontation which not only continues but has intensified. "Economic war" broke out, in forms such as the blocking of supplies of Ukrainian cheese to the Russian market. This conflict is exacerbated by the fact that Ukraine was defiant enough to implement a Western-oriented economic development plan, and achieved by that route a considerable success: full preparation to sign an agreement to create a large-scale free trade zone with the EU. This step of the political elite of Ukraine puts an end to Russia’s plans to return the country to its sphere of economic dominance.

So, perhaps not coincidentally, the principal distributors of Bloomberg’s message about the risk of default of Ukraine, and the comparison of Ukraine with Greece, were Russian media.

Zoya Burbeza is a solicitor at Zaiwalla & Co. Solicitors, a niche London firm specializing in international commercial arbitration and litigation.