Putin calms the markets

• Russia’s president Vladimir Putin spoke on the situation around Crimea. 

• The president signed the treaty of accession of Crimea. 

• Markets welcomed the speech as Putin indicated readiness to end confrontation.

• Downside risks for the rouble remain on possible new sanctions by West. 

Assessment and outlook

Russia’s president Vladimir Putin today addressed Moscow’s Russian parliamentarians and representatives of society on the situation surrounding Crimea and the Ukrainian crisis. Putin stated that as part of Russia, Crimea will adopt three official languages: Russian, Ukrainian and Crimea Tatar. Putin’s message was aimed at broadly calming the markets as he emphasised that ‘Russia must rebuild ties with independent Ukraine’, acknowledging the people who went to peaceful protests in Kiev to oppose corruption within the government. He thanked China for support and India for objectivity, stating also that ‘Russia is honestly seeking partnership with the West’. Another important message was that Russia does not want Ukraine to be split and he pointed out that the results of the referendum had showed people’s willingness to join Russia. 

After the speech, together with Crimean representatives, Putin signed the treaty of accession of Crimea. As Russia’s constitution dictates, the treaty must be next approved by the constitutional court and the parliament, which is scheduled for Friday 21 March 2014. 

Following the president’s message of avoiding escalation, the market responded well, with a positive reaction in FX and Russian stocks. The rouble gained 0.6% against the dual currency basket and Russia’s stock index Micex advanced total 2.5% after the speech had started. At the same time, global markets have been in green territory as S&P 500 futures jumped 0.6% during Putin’s speech. The events signal that markets still remain very sensitive on public announcements from both sides and news headlines. The next events for rouble markets will be announcements by the US and EU on possible new sanctions for Russia. As the Russian economy depends greatly on global energy markets, any sanctions for Russia’s energy exports will worsen investor sentiment on the rouble and Russian stocks.