Given that Russian bonds have been strong performers since the start of 2015, Fitch looks to have made a savvy call by maintaining an investment grade rating, although lowered to BBB-, on the Russian sovereign when its peers cut their ratings to sub-investment grade in a wave of pessimism earlier in 2015. Both Standard and Poor’s and Moody’s slashed their ratings to ‘junk’ following the imposition of sanctions by Europe and the US on the back of the Crimean annexation and the Ukrainian impasse. Thus, it was interesting to see Standard and Poor’s finally upgrade the outlook on Russia to stable on 16 September, although retaining the BB+ long-term foreign currency rating.
A further round of the Normandy Four talks took place on Monday night between Vladimir Putin, Angela Merkel, Francois Hollande and Petro Poroshenko in another attempt to try and get the Minsk II agreement implemented and to move closer to some sort of resolution of the Ukrainian issue. But if anything, the talks seem to have hit a stalemate of late. Vladimir Putin emphasised “a direct dialogue between Kiev and Donetsk and Lugansk should be a key element in the conflict resolution to achieve a full and comprehensive implementation of the Minsk agreements of February 12, 2015.” The Russian minutes also note that the Normandy Four had received a package of proposals for local elections, special status, amnesty and decentralisation that had been agreed with the DNR and LNR. But the issue remains that elections have not been held yet, the Ukrainian parliament has not devolved power to the separatist regions and Russia sees these as a required steps before it will withdraw its troops and return the border to Ukrainian control.
The latest round of the “Normandy Four” talks took place in Paris between the Foreign Ministers of the Ukraine, Russia, Germany and France on March 4. Jean-Marc Ayrault, the French Minister of French Foreign Affairs, made a statement at the end of the meeting noting that the Minsk agreements are a “roadmap…to achieve an effective result”, and the key areas discussed at the meeting were the ceasefire, the practicalities of holding elections and making them safe. The statement read, “We emphasized the importance of the Ukrainian Parliament and government drawing up and adopting an electoral law, to enable local elections to be held, and we expressed the wish for those local elections to be held before the end of the first half of 2016, according to the sequence adopted by the heads of state and government in Paris on 2 October“.
In February this year the Minsk II ceasefire agreement was signed to try and resolve the Ukrainian conflict. The agreement incorporates a 13 point plan to remove heavy weaponry, create a buffer zone and devolve powers to the separatists. After a series of four way conference calls between Petro Poroshenko, Vladimir Putin, Angela Merkel and Francois Hollande this year on its implementation the four leaders attended a summit in Paris on October 2 to resolve some outstanding issues. One key focus of the talks was the local elections in the separatist areas. This had become a contentious subject as the rebels had threatened to hold their own elections on October 18 and 1 November in Donetsk and Luhansk which would not have complied with the terms of the Minsk II agreement; these were already being dismissed by the Ukrainian government as “fake elections”.