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The new U.S. special envoy to Ukraine negotiations announced the Trump administration is actively considering sending arms to Kievs forces so they can defend themselves against pro-Russian separatists.

Defensive weapons, ones that would allow Ukraine to defend itself, and to take out tanks for example, would actually help, Kurt Volker, the U.S. special representative for Ukraine negotiations, told the BBC in an interview Tuesday, noting such a move could change Moscows approach in the region, where the United Nations estimates more than 10,000 people have been killed since April 2014. Im not predicting where we go on this but I think that argument that it would be provocative to Russia or emboldening of Ukraine is just getting it backwards.

The conflict in Ukraine, which began in 2014 following the public ouster of then-Ukrainian President Viktor Yanukovych, flared when Russia moved to annex Ukraines Crimean Peninsula. Moscow has since been accused of backing Russian separatists in the eastern part of the country against government forces, though it has denied direct involvement. Despite reaching a ceasefire in February 2015, the terms of the agreement have been far from fulfilled. Indeed, the U.S. State Department condemned last week what it called the deadliest one-day period in 2017 after eight Ukrainian soldiers were killed in 24 hours.

Russia had long viewed Crimea as part of its territory (the region was gifted in 1954 to Ukraine by former Soviet leader Nikita Khrushchev), and Ukraine as part of its sphere of influence. The pro-Western government in Kiev has angered Moscow, and at least some of its actions in the country can be attributed to Russias regional status.

Though the U.S. has maintained its opposition to Moscows cross-border activity, it has stopped short of providing lethal arms to Ukraine. Steven Pifer, a senior fellow at the Brookings Institution and a former U.S. ambassador to Ukraine during the Clinton administration, told me this policy was due in large part to President Obamas opposition to providing lethal aid in fear of escalating the violence. People were not two years ago going to say We like the idea, because they knew it was a presidential decision and they knew the president was cautious, Pifer said. In this case, I dont think President Trump has taken a position, so they may feel they have a little bit more leeway.

Trump has offered little specificity on his stance over the Ukrainian conflict, but he hasnt formally ruled out providing arms either. Trump called on Moscow to cease its destabilizing activities in Ukraine and elsewhere during his visit to Poland earlier this month, and told Ukrainian President Petro Poroshenko last month during his visit to Washington that the crisis is one weve all been very much involved in. But where Trump hasnt been specific, others in the government have. In an address this month to the Senate Armed Services Committee, Air Force General Paul J. Selva, the vice chairman of the Joint Chiefs of Staff, said lethal defensive aid to Ukraine is more than just a military recommendation, adding: This will be a policy choice on whether or not were going to give the Ukrainian government the tools they need to defend themselves against what we believe to be a Russian-supported insurgency movement in the Donbass, referring to the region in eastern Ukraine.

More than just giving Ukrainian forces a means to defend themselves, Pifer said the arms could serve as a way to compel Moscow toward a political resolution to the conflict. Nobody on the Ukrainian side suggests to us that they were going to use the force to drive the Russians and the separatists out of Donbassthey know they cannot beat the Red Army, he said, referring to the Russian military. The advantage ... is giving them better ability to raise the cost to the Russians and the separatists of further aggression.

The Russians may not see it that way. Though Volker insisted that arming Ukrainian forces would not be seen as a provocation, Moscow is unlikely to look on the move as kindly either. There is a risk the Russians choose to escalate, and I think its a risk we have to acknowledge, Pifer said, noting that as long as the Russians are disinclined to resolve the conflict, it could remain at a standstill.

It hasnt yet reached the point where theyre looking for a way out, he added. Weve got to somehow figure out a way to change the calculation in the Kremlin.

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Will US Arms Resolve the Conflict in Ukraine? - The Atlantic

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How long until Ukraine is hacked again? - BBC News

Enlarge / WASHINGTON, DC - JANUARY 19: Former Texas Governor Rick Perry, President-elect Donald Trump's choice as Secretary of Energy, testifies during his confirmation hearing before the Senate Committee on Energy and Natural Resources on Capitol Hill January 19, 2017 in Washington, DC. (Photo by Aaron P. Bernstein/Getty Images)

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Last week, US Department of Energy Secretary Rick Perry took a phone call from two men he thought were the Ukrainian Prime Minister and his translator. But the 22-minute-long phone call was actually two Russian pranksters, Vladimir Vovan Kuznetsov and Alexei Lexus Stolyarov, otherwise known as the Jerky Boys of Russia, in the style of an American prank call duo from the 1990s, according to Bloomberg.

The Washington Post confirmed the conversation with the Department of Energy. In audio originally posted on a Russian website and reposted elsewhere, the dialogue touched on a Baltic Sea pipeline that would pump Russian gas, as well as an expansion of coal and oil and gas interests in Ukraine. Early in the conversation, Secretary Perry tells the pranksters that the [Trump] administration is broadly supportive of sanctions against Russia at this particular point in time, and later he offers that negotiation is always possible on coal exports to Ukraine.

The Secretary also advised the Prime Minister that, without transparency about regulations and geological data about where wells have been or could be drilled, it would be hard for the US to help oil and gas companies expand exploration in Ukraine.

Perry also told the men that the US was very interested in working with Ukraine on the civil nuclear side and noted that thats what theyd discuss in an upcoming meeting. Between coal, oil and gas, and nuclear, this August meeting can be very productive, Perry said.

Perry also took questions from the men about the Paris Agreement, which the Trump administration intends to withdraw from. I hope that stepping away from the Paris accord will not have any negative impact with our relationship with the Ukraine, Perry said on the phone. We tried to divorce the politics from this and really just let our record stand, one that Im very proud of.

According to the Washington Post, the duo played it straight the whole time, including duringa part of the call when Kuznetsov and Stolyarov told Perry that Ukrainian President Poroshenko had invented a new biofuel out of pig manure and alcohol.

The Russian pranksters have allegedly duped Elton John and John McCain in the past. But how these two men got Perry on the line is unclear. Calls between Cabinet secretaries and foreign officials are typically closely vetted; its not clear how the pranksters connected with Perry, Bloomberg wrote.

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US Energy Secretary takes 22-minute prank call from Ukrainian Prime Minister - Ars Technica

U.S. President Donald Trump has criticized Attorney General Jeff Sessions, calling his former ally "very weak" in investigating intelligence leaks and for failing to probe former Democratic presidential candidate Hillary Clinton.

Meanwhile, the Reuters news agency has reported that Trump has spoken privately to his political allies in recent days about the potential consequences of firing Sessions.

But at a press conference on July 25, when asked about Sessions' future as attorney general, Trump avoided saying whether Sessions would be fired -- saying instead that "time will tell."

Trumps anger over Sessions' decision to recuse himself from the government's investigation of Russias alleged interference in the 2016 presidential election became public on July 24 when Trump referred to the attorney general in a tweet as "beleaguered."

Last week, Trump said he never would have appointed Sessions to be attorney general -- the chief U.S. prosecutor -- if he had known that Sessions would recuse himself.

"Attorney General Jeff Sessions has taken a VERY weak position on Hillary Clinton crimes (where are E-mails &DNC server) & Intel leakers!" Trump tweeted on July 25.

His remarks came after the Washington Post, citing unnamed sources, reported that Trump and his advisers have discussed replacing Sessions.

Trump also called on Sessions to investigate Clinton's use of a private server to send e-mails when she was secretary of state.

Trumps tweets, and mounting pressure on Sessions, have fueled speculation in Washington that the attorney general may resign even if Trump doesnt fire him.

But several people close to Sessions have said he does not plan to quit.

Fiery Response

Meanwhile, Trump's criticism of Sessions has drawn a fiery response from some Republican lawmakers -- suggesting that not all Republicans will support a presidential effort to oust the attorney general.

Senator Lindsey Graham, a Republican from South Carolina, said on July 25 that "Trumps tweet today suggesting Attorney General Sessions pursue prosecution of a former political rival is highly inappropriate."

"Prosecutorial decisions should be based on applying facts to the law without hint of political motivation," Graham said. "To do otherwise is to run away from the long-standing American tradition of separating the law from politics regardless of party."

Trump's tweets on July 25 also accused Ukraine of trying to "sabotage" his campaign, without offering any evidence.

Ukraine's embassy in Washington denied Trump's allegations with a tweet of its own saying, "We stand by our words that the government of Ukraine didn't help any candidate" in the U.S. presidential election.

The Ukrainian embassy also said "Ukraine is proud of bipartisan support" in the United States.

Ukraine's permanent representative to the Council of Europe, Dmytro Kuleba, also responded on Twitter to Trumps allegations.

"Trump writes that we interfered in the elections in the USA, while Putin says that we threaten Russia," Kuleba said. "There was a time when we were peaceful buckwheat sowers who kept themselves to themselves."

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Trump Attacks Sessions, Accuses Ukraine Of 'Sabotage' - RadioFreeEurope/RadioLiberty

This is post 2 of 4 in the series Hungry for Yield? These Emerging Markets Can Satiate Your Appetite

Political quarrels are a dark side of the relationship between Russia and Ukraine. The bright side is the commonality they share pertaining to their fixed income markets: high yields. Just as India and Indonesia lead Asia in terms of attractive yields, Russia and Ukraine do the same for Eastern and Central Europe.

The graph below shows that yields on the 10-year notes of both countries have declined since the beginning of the year. But in the emerging markets universe, these yield levels are still quite elevated comparatively.

This is reflected in the Eurobond issuance conducted by the country in June.

In June 2017, Russia sold 10 and 30-year Eurobonds worth $1 billion and $2 billion respectively. The issuance was oversubscribed over two times with a total order book of over $6.6 billion. The issue was beneficial for the country as well because yields of 4.25% and 5.25% respectively were the lowest in its history.

The bonds popularity can be further gauged from the fact that the sale came on the same day that the US Senate extended sanctions to some Russian individuals and firms in connection with the countrys annexation of Crimea from Ukraine in 2014.

This led to some US investors pulling out of the sale along with some European buyers because VTB Capital the sole arranger of the sale was also subject to sanctions. But even then, the order book remained strong.

The outlook for Russian bonds looks a bit hazy at this juncture. From purely an investment perspective, yields are attractive and have some room to decline further, thus providing a buying opportunity.

In YTD 2017 until July 17, yields have decline by 64 basis points. Bloomberg reported that Viktor Szabo, an asset manager with Aberdeen Asset Management believes that yields on Russias 10-year notes could drop to 7%.

Related Article Spreads Tell A Story: Emerging Markets Bonds Are Running Out Of Breath

However, the possibility that extended sanctions may be passed by the US House of Representatives is a cause for concern. The bill, in its current form, does not place any restrictions on sovereign debt or derivatives from the country, but has asked for a report on the impact any limits can have.

This leaves the possibility open for either limits or a complete ban on Russian sovereign debt. Foreign investors have already become cautious.

Central bank data had shown that foreigners share of Russias ruble securities, known as OFZ bonds, had surged to an all-time high of 30.7% in May. However, on July 13, central bank First Deputy Governor Ksenia Yudayeva said that this share had fallen below 30%.

The other aspect to track is currency. After having strengthened against the US dollar until April, the Russian ruble (RUB) has been weakening. This does not bode well for local currency bonds when converted into US dollars.

Points to ponder: Ukraine

As far as currency is considered, the Ukrainian hryvnia (UAH) has risen against the dollar in YTD 2017, which makes its local currency denominated bonds attractive. However, these bonds are still not eligible for clearing through Euroclear.

Finance Minister Oleksandr Danylyuk has said that the country is serious about making the countrys bonds Euroclear-able soon. This would certainly enhance the appeal of the bonds as trades will be settled easily.

Both countries have further plans for their fixed income markets this year and beyond. Russia plans to swap $4 billion of old foreign bonds for new ones this year. Meanwhile, Ukraine expects to raise Eurobonds worth $2 billion in 2018.

However, geopolitical developments and currency movement will determine their future appeal.

This is post 2 of 4 in the series Hungry for Yield? These Emerging Markets Can Satiate Your Appetite

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Russia And Ukraine: Divided By Politics, United By Attractive Bond Yields? - Frontera News