Axel Kicillof, Argentina's economy minister, has announced that Argentina is now suing Citibank for striking a deal with a group of U.S. creditors in order to fight the government over unpaid debt.

Citibank Argentina, a subsidiary of Citigroup, found itself embroiled in a drawn out court battle after the left-leaning government demanded that the bank process interest payments on exchanged debt, which was in defiance of U.S. court orders.

Last month, the bank agreed with the litigating investors not to appeal the court's injunction which blocked Argentina's payments if it was then allowed to process two one-off transfers in March and June.

The transfers were meant to help Citibank Argentina put an end to its local bond custody business.

As quoted in the Telegraph, Kicillof has claimed that the agreement "violated and interfered with regulations governing our public debt."

In the past two weeks relations between the Latin American country and Citibank Argentina have seriously deteriorated.

Argentina's securities regulator suspended the bank from capital market operations on March 27, and then declared that a local financial house would take over its previously held role as a custodian of certain bonds.

Four days after this occurred, the central bank of Argentina stripped Citibank Argentina's chief executive of his authority, and then proceeded to deploy regulators into the bank's headquarters in an effort to to monitor its operations.

Argentina has gone so far as to disparage the hedge funds that rejected the bond swaps after the country's record default on $100 billion in 2002, calling them "vultures" bent on crippling an economy in a greedy pursuit of outlandish profits.

Kicillof has criticized Citibank Argentina for signing what he called a "a deal with the devil" and said that the government had asked the Argentine courts to have the pact nullified.

Citigroup has declined to comment.