As Ukrainians head to the polls this weekend to cast their vote for Ukraine's future president, investors are just hoping for a leader who is amenable to working with Kiev's erstwhile antagonist to the east, Russia.
Though many Ukrainians see Russia as the villain in the crisis that has unfolded since deposed former President Viktor Yanukovych rejected closer political and economic ties with Europe last November, economists and financial analysts recognize that the only road out of Ukraine's money problems still runs through Moscow.
Investors have grown more confident in Ukraine's situation as fears of civil war or open conflict with Russia have abated. In recent weeks leading into the presidential election, Ukrainian bonds have rebounded, rising 7.4 percent in May, according to Bloomberg, after falling 3.6 percent in the first four months of the year. Buyers are now willing to pay more for Ukrainian bonds because they see the political situation as stabilizing, making it more likely that Ukraine will be able to pay back all its debts on time.
But the first order of business for Ukraine's likely next president, Petro Poroshenko, will still be sitting down for what promise to be tough negotiations with Moscow. That's because Ukraine owes Russia a lot of money, including the first installment of the promised loan to Yanukovych, in the form of $3 billion in government bonds, and a natural gas bill, which Russia's Gazprom recently put at $3.5 billion. How those debts are calculated and how soon Moscow insists they be repaid could make or break Ukraine's attempts to regain solvency. Ukraine's Gazprom bill is an ever-fluctuating number as the company has repeatedly made contradictory claims, not only about how much Kiev owes, but the price that will have to be paid going forward to keep the gas flowing.
So, it's an asset to be seen as the candidate most likely to be able to sit down and cut a deal with Russian President Vladimir Putin. But it wasn't always clear who that would be. Earlier this year, former Prime Minister Yulia Tymoshenko - newly released from prison after Yanukovych's ouster-- was seen as the best person for the job. That reputation was based on the gas deal she struck with Russia in 2009, which ultimately landed her in jail because her political rivals saw it as too favorable to Moscow because it locked in a gas price that was nearly twice Gazprom's original offer. For some analysts, that was an indication of close ties to Putin that could come in handy.
"She was perceived as being able to do a backdoor deal that would, in a miracle, solve the problem with Russia, but these were unrealistic expectations," said Dmitri Petrov, an emerging markets strategist at Nomura Holdings Inc. in London.
That was before Russia annexed Crimea. Tymoshenko's spirited condemnation of Moscow's take over of the peninsula made some possible supporters reconsider. Her fiery rhetoric, aimed at garnering the support of Ukrainians headed to the polls, could make it hard for her to bargain with Putin after the election, which would in turn prolong the uncertainty that has hung over the country.
"Using degrading and immoral means, the Russian government has destroyed the notion of truth with their mad propaganda for the occupation of Ukraine," she said in an op-ed published in the Christian Science Monitor in March.
"It has backfired in how the market perceives her," said Petrov.
But her Kremlin credentials may never be tested because Poroshenko, a billionaire better known as the "Chocolate King," has pulled ahead of her decisively in the polls. Poroshenko's relationship with Moscow has been strained because he took to the streets and spoke out in support of the Maidan protesters who, in February, brought down former President Yanukovich. In March, Moscow retaliated by closing one of his Roshen chocolate factories in Lipetsk, effectively shutting him out of the Russian market.
Because of that dispute and his pro-European stance, investors initially believed that Poroshenko wouldn't be able to sit down with Putin, but he's pushed back against that characterization.
"Of course I know Putin well. I have a lot of experience of talking with him. I can confirm these discussions are always not easy," Poroshenko told the Financial Times this week. Yet he promised a resolution. "Within three months we will settle the issue of stabilising the east," he said.
Whether his Maidan compatriots will be able to stomach negotiating with Russia is another question, but market-watchers see his willingness to talk as a positive.
"It looks likely that the Ukraine government that will be elected on May 25 will pursue a more politically realistic course, one that recognizes the geopolitical realities and Russia's strategic interest," Brown Brothers Harriman analyst Mark Chandler said in a note Thursday.
That may sound comforting to investors holding Ukrainian bonds, but there is still a long way to go. Even if Kiev is able to strike a grand bargain with Moscow over the gas debt, many economists still see the possibility that Ukraine will have to ask bondholders to wait for the country to pay off it's obligations.
"There's already some question marks there about whether all debts would be paid on time," said Robert Kahn, a senior fellow for international economics at the Council on Foreign Relations.
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