By Vladimir Osakovsky, Head of Strategy and Research at UniCredit Securities
Ukraine’s former prime minister, Viktor Yanukovich, continues to lead in the second round of presidential elections in Ukraine, receiving close to 48.6% of the vote, with 86.2% of the votes counted. Current Prime Minister Yulia Timoshenko managed to narrow the first round gap of over 10% with Yanukovich to receive 45.8% of the vote, RBC reports.
Our view: According to the election rules, in the second round a candidate needs a simple majority to win the election, which makes Yanukovich the likely winner. However, the narrowing gap between the two candidates is likely to trigger accusations of vote rigging from both sides, which could leave the final outcome uncertain for some time.
However, we would not expect any major civil protests against the results this time, as the political standoff between Yanukovich and Timoshenko is likely to move into the parliament.
Yanukovich is seen as 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. However, we believe that such a narrow labelling of Yanukovich as pro-Russian is simplistic, as his political platform is pragmatic and could change substantially when faced with economic and political realities.
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 positive for Gazprom, which could benefit from a reduction in the political component of annual negotiations over the gas price and transit tariffs to Europe. Evraz Group, Lukoil, TNKBP, and CTC Media could benefit from the likely support for their expansion plans in Ukraine, and Tatneft might receive support for its attempt through the courts to regain its share in Ukrtatnafta, which it lost in a hostile takeover.
We would not expect much impact on Vimpelcom and MTS, despite their large exposure to the country, as the Ukrainian telecoms industry is likely to be less affected by changes in the political landscape
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