EMEA Daily Update

Russia(=)

- The EconMin released its new forecasts based on oil prices of an avg USD 50pb this year, 60 in 2016 and 65 in 2017. In our view, these are realistic scenarios, reflected in our similar forecast of a 2.8% GDP drop this year - we are more conservative for 2016 at 1.6%. We also see CPI falling to an avg of around 7% next year, which should allow the CBR to cut rates by at least 350bp this year. Bottom line: a constructive mid-term scenario for Russian bonds and FX, assuming the situation in eastern Ukraine doesn't escalate again...

Ukraine(=)

- Gazprom picking up the gas dispute again, saying it will sue Naftogaz, with an apparent USD 29.5bn owed to it for not importing the full amount of gas agreed on in the 10yr contract back in 2009. All these issues could be resolved in our view if the opposing sides would be able to find a general political solution, including a possible rolling over of the USD 3bn Eurobonds held by Russia…

- Yesterday's comments from President Poroshenko spoke against direct dialogue with separatists, while ForMin Lavrov is stating that direct dialogue is the only way forward. Nonetheless, there is full recognition of the issues at hand – we now need someone to find the solution.