Kremlin to resume hardball approach to Ukraine

Макроэкономика 03.10.2014 In his keynote speech at the annual investment forum held by state-owned investment firm VTB Capital yesterday, Russian President Putin referred to Ukraine, using such words as fraternity as he habitually does, which is more appropriate in reference to national sports in Russia. He stated, "It is in Russia's interest to have a reliable, predictable partner and neighbor" and referred to "a bond between Russia and Ukraine of an ethnic, religious and historical nature." We believe the Kremlin will continue playing geopolitical hardball to destabilize Ukraine politically and economically to ultimately re-install its own proxy government in Kiev. Such a government will play according to the Kremlin's objective of averting both EU and NATO memberships. The Kremlin will continue to disrupt any progressive economic policymaking and vital reforms to destabilize Ukraine's current government. Ultimately, this will prohibit the recovery of Ukraine's sovereign credit rating to the pre-2008 crisis level of B1 by Moody's from its current Caa3 rating. Also notable was Putin's reference to the Western sanctions which he characterized as "helping strengthen Russia". In other words, Russia's geopolitical behavior, exemplified by the annexation of Crimea, as well as the state of its economy and governance over the first six months of this year, have invited sanctions that have really been quite harmless.