My immediate thinking post-Donald J. Trump’s victory was that Vladimir Putin would be very nice/cooperative for a period, awaiting a return on his investment in the U.S. electoral process via concessions on sanctions, Ukraine, and some kind of great power summit, a Yalta II to re-affirm Russia’s return on to the Great Power Stage again. But Putin would basically bide his time for a period – but still with an eye on his own re-election campaign in March 2018.

Against the consensus I thought that could play well for Ukraine in the short term, as it would give the country time to further push on with reform/recovery – rebuilding its defences both metaphorically and actually.

By contrast, I thought a Hillary Clinton victory, in the short term, would have been bad for Ukraine, as Putin would have gone straight back to the battlefield option, which would have seen another speedy unwind of the still fragile macro.

But ultimately even with a Trump victory I thought that Putin would be disappointed in the U.S., as Russia hawkishness ran so deep in D.C. and Congress that I assumed that Trump could never deliver on Putin’s expectations.

I was wrong in the sense that the Trump-Russia gig blew up far sooner than I had assumed, and this makes a speedy re-approachment with Russia less likely. Clearly now there is little chance of Russia sanctions being withdrawn quickly and there is even a chance now that there is an even worse scenario that Congress codifies these into a law, making them structural and very difficult to remove.

I guess the question now is how Putin plays all this. Is he still prepared to wait it all out, sit on the side-lines, and hope that Trump and the remaining Russophiles in his administration quickly re-assert themselves?

One senses in Moscow the initial euphoria with the Trump victory is evaporating fast – as the realisation dawns that their alleged meddling in the U.S. election looks like backfiring and badly. They had taken a risk in backing Trump, assuming he would lose, but in pushing Trump, they assumed the whole political process in the US would be discredited, Clinton damaged in the process, turning this into a win-win for Moscow. They never imagined, until very late, really that Trump could win. But they thought that even if he did they would have a nice inside line to the White House. However, with Flynn gone, and the prospect of Russia hawks back in the White House, and Russian meddling now laid bare, they are in a worse position than before – why would Trump now want a photo op appearing with Putin, the man who helped put him in power, and especially with his many foes in Congress baying for blood. And the D.C. military, security and diplomatic establishment is now just incensed by how all this has panned out – and even more hawkish on Russia than before.

I guess from one perspective, the Kremlin will hope to just keep quiet, try and do nothing to rock the boat, and hope that some kind of normality returns to the White House and D.C. Any bad boy behavior now would surely just be the final nail in the coffin of any re-approachment with the U.S. administration.

Perhaps, but already this week we have seen Moscow up the ante with reports about new missile deployments, breaking existing disarmament treaties with the U.S .– and all timed to coincide with Defense Secretary James Mattis’ and U.S. Secretary of State Rex Tillerson’s visits to Europe.

That seemed pretty provocative – and actually played into the hands of those calling for an arms build-up by NATO. Moscow might opt to use undoubted US weakness to take strategic advantage again while it can in Ukraine – shades of the recent upsurge of violence in Donbas. Perhaps, but I think Moscow is still trying to get a handle on DC developments – like us all.

In the interim though I think what we are likely to see is lots of Russian, non-sanctioned issuers come to market while they can, filling their boots with dollars. I know Russian entities are flush with dollar liquidity, but you can never have enough dollars if you assume difficult geopolitical setting still looms, plus you want to bank roll Putin’s re-election next year. Logically there is a window at present, when pricing is attractive, and the UST is in such a state of flux that they are likely to be in no state to respond by re-tightening the sanctions regime to close this particular gap. And logically, I guess, if you think sanctions will be eased this year – re-pricing the Russian credit curve, you would wait for that. But if Russian entities come –which I think they will, this just sends a signal that they don’t expect early sanctions removal.

And whether Putin will then go back to conflict situations in Ukraine et al, I guess that depends on how he reads developments in D.C., the performance of the Russian economy in the interim, and also his own poll ratings. Conflict brings risks – body bags in Russia’s case, to which the Russian electorate are very sensitive.

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