Belarus becoming a thorn in Russia’s side

Political instability in Belarus has prompted speculation about how President Putin will respond to calm the situation. Mr. Putin is working to maintain close ties with Belarus, but the more that the political situation deteriorates, the more likely that President Putin would be willing to engineer a power transition and try to gain influence over a new regime. Russia is unlikely to take a heavy-handed approach, but the possible imposition of sanctions complicates the outlook. Russia’s balance sheets are in a stronger position to weather the effects of sanctions than a few years ago, but developments have taken their toll on local markets, with the ruble 5% lower against the dollar over the past month. This is likely to force a more cautious approach from the central bank about further monetary easing Apologies to those who have received this publication twice. 
William Jackson Chief Emerging Markets Economist
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Ukraine's financial markets remained under pressure this week as investors appear to have priced in a more serious outcome regarding Russia-Ukraine tensions. A positive reaction to today's talks between the US and Russia has brought some relief but, even if a renewed conflict doesn't materialise, local markets are set to face a difficult few months. Meanwhile, oil prices closed in on $90pb this week and we've revised up our year-end Brent crude forecast to $70pb (from $60pb). This will help support Russia's budget and current account surpluses, but will add 0.2-0.3%-pts to inflation elsewhere in the region and cause current account balances to worsen.

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