Author: Kim Iskyan



By Kim Iskyan



Friendly neighbor: Russia’s influence in Ukraine will grow after Viktor Yanukovych won the recent presidential election

Russia's finance ministry hired a team of investment banks to help it prepare for the country's first eurobond sale since 1998. A first tranche out of a total issuance of up to $18 billion will probably go to market in the second quarter of the year. Although Russia's budget deficit for 2010 is projected at nearly 7%, the country's $400 billion in foreign currency reserves should help bring down yields and help entice investors.

A number of statements by senior banking and government officials suggested that the privatization of some of Russia's state banks was being considered. Although the country's two largest state banks, Sberbank and VTB, are already partially privatized, the government still holds well over a controlling stake in both. But while small stakes may be sold to help raise revenue for government coffers, a full privatization is highly unlikely anytime soon.

In a rare public demonstration of some of the underlying tensions in Russia, Russia's political opposition engineered in Kaliningrad—an exclave of Russia located between Lithuania and Poland—the largest anti-government protest in more than a decade, numbering some 10,000 people. The demonstration—which was in part a protest against regional authorities but also targeted prime minister Vladimir Putin—reflected continued frustration with poor governance in the context of difficult economic conditions, as the economic recovery trickles down only very slowly, leaving some regions still waiting for a return to growth. While some additional protests are likely in the coming months, with the pretext of local elections in certain regions, the Kremlin has sufficient financial, political and media resources at its disposal to head off any genuine threat of social instability.

Russia's leadership was no doubt pleased with the result of neighboring Ukraine's runoff presidential election. The pro-Russia opposition candidate Viktor Yanukovych narrowly won the election, defeating the country's prime minister, the pro-Western Yulia Tymoshenko. The victory eradicated the final vestiges of the Orange Revolution in 2004, which brought Victor Yuschenko to power.