Lukashenka becomes the darling of the bond market

He’s known as Europe’s last dictator, he mangles financial terminology and his secret service once jailed the chief executive officer of the world’s biggest potash miner. He’s also turning into a darling of the bond market.

Alexander Lukashenko, president of Belarus, is showing a softer side that’s helped cut the premium on the country’s debt to the lowest in almost a year compared with other emerging markets. The bonds have climbed at twice the pace of Russia’s since February. And Ashmore Group Plc, which owned Belarus Eurobonds as of the end of September, says the rally has further to go.

Wedged between Russia and the European Union, the former Soviet republic is in the unfamiliar position of receiving largesse from both sides simultaneously. While Moscow provided a $760 million loan to Belarus this summer, the EU eased sanctions on the country on Thursday as a reward for Lukashenko’s decision to release political prisoners and host talks between Russia and Ukraine that led to a peace deal in February.

“Belarus was wrongly beaten up,” Jan Dehn, Ashmore’s London-based head of research, said by e-mail on Oct. 29. Lukashenko used his “role as mediator to Belarus’ advantage” and “investors are now realizing that Belarus was mispriced,” he said.