By Vladimir Osakovsky, Head of Strategy and Research for UniCredit Securities
Yesterday former prime minister Viktor Yanukovich and Prime Minister Yulia Timoshenko dominated the first round of Ukraine’s presidential election, bringing them toward a run-off vote and ousting incumbent Viktor Yushchenko.
National exit polls gave Yanukovich 31.3% of the votes and Timoshenko 27.1%, with former Central Bank Governor Sergey Tigipko surprising in third place with 13.2%, RBC reported.
The Central Election Commission expects the final results to be ready later today, with the second round of voting planned for 7 February 2010. Under the election rules, if no candidate receives more than 50% of the vote, the leading two candidates go forward to the second round.
We believe that either candidate could win the election, with everything depending on the alliances formed after the first round. Yanukovich is considered to be pro-Russian, mostly due to his affiliation with the largely Russian-speaking eastern regions of Ukraine. He advocates for Russian as a second official language and opposes Ukraine joining NATO.
Russia openly supported him during the 2004 presidential election, which he ultimately lost. On the other hand, Timoshenko is regarded as a pro-Western candidate who opposes Russia’s military presence on the Crimean peninsula and was investigated by Russian law enforcement agencies on corruption charges. However, we believe that such a division into pro-Russian and pro-Western candidates is overly simplistic, as both candidates’ political platforms remain pragmatic and could substantially change in the face of economic and political realities.
Given that none of the candidates got close to an outright majority, we think that the results of the second round will mostly depend on the support that the two run-off candidates garner from unsuccessful candidates. A decisive alliance with the new president could influence the distribution of ministerial positions in the new government, as well as the crucial position of prime minister.
We note that the third-place candidate, Sergey Tigipko was the chief of Yanukovich’s presidential campaign team in 2004, although we do not think that his support for Yanukovich is a given.
We expect the Ukrainian presidential election to have a meaningful impact on Russian markets as many traded Russian companies have substantial business interests in the country. In particular, we expect that a win by a relatively pro-Russian candidate would be a positive development for Gazprom, which could benefit from the reduction of the political component in the annual negotiations over pricing of gas supplies and transit tariffs to Europe.
Evraz Group, Lukoil, TNK-BP and CTC Media could benefit from the likely support for their expansion plans in the country. Tatneft might get support in the legal case to regain its share in Ukrtatnafta, which it lost in a hostile takeover. On the other hand, we do not see an impact on VIP and MTS, despite their large exposure to the country, as the Ukrainian telecoms industry is likely to remain unaffected by changes in the political landscape.
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