Impact of the gas-for-navy deal on Gazprom, sovereign bonds and country risk discounts

In our December 2009 note Ukraine: It’s Russia or bust, we predicted that Ukraine under new leadership would successfully seek a major financing from Russia. This outcome materialized this week in a striking and politically far-reaching deal – trading Russian gas price discounts worth up to US$40 billion over the next ten years for a 25-year extension (until 2042, and automatically renewable for a further five years thereafter) of Russia’s lease on the Ukrainian naval base of Sevastopol...