Russia’s credit rating has been reduced to trash by S&P Global Ratings, part of a wide-ranging review by all major rating agencies to assess the strength of the gas-exporting giant’s financial health after the invasion of Ukraine by the country.
Moody’s Investors Service, meanwhile, said late Friday that it had placed Russia and Ukraine’s credit ratings on review for possible downgrades, again to speculative or junk ratings for Russia.
S&P joined Fitch Ratings in downgrading Ukraine.
The war, which entered its third day on Saturday as Russian troops reportedly entered the capital Kiev, prompted the United States and its allies to impose sanctions on Russia. President Joe Biden has also sanctioned Vladimir Putin’s own finances and those of several key aides.
This action rocked the equity, debt and energy markets this week. Energy supply from Russia, natural gas NG00,
in particular, are an integral part of the economies of the European Union, but also count as a major source of Russian income. Russia’s export of technology has also been sanctioned.
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S&P downgraded Russia’s broadest credit rating to BB+, below investment grade, from BBB- on Friday night and warned of further cuts.
It also downgraded Russian foreign currency RUBUSD,
rating to BB+ and place this rating on negative watch for possible further reductions.
“Russia’s military intervention in Ukraine has resulted in strong international sanctions, including on large parts of the Russian banking system,” S&P said in its note.
“We believe that the announced sanctions could have significant direct and indirect effects on economic activity and foreign trade, the confidence of national residents and financial stability,” he added. “We also expect geopolitical tensions to weigh on private sector confidence, weighing on growth.”
Moody’s Investors Service said late Friday that it had placed Russia and Ukraine’s credit ratings on review for possible downgrades, which in the case of Russian debt would mean a slide to lower ratings. speculative or undesirable.
Russia currently holds a Baa3 rating, the lowest tier of Moody’s investment grade, while Ukraine holds a B3 rating, the middle tier of non-investment grade.
The Russian invasion of Ukraine represents “a further significant elevation in geopolitical risk…which comes with additional and tougher sanctions against Russia, including potentially those that could impact sovereign debt repayments,” Moody’s said.
He added that a fuller picture of the impact of the sanctions would depend on the scope of the sanctions, the sectors targeted and the degree of coordination among Western countries.
For Ukraine, an “extensive conflict” would pose a liquidity risk because the country has “significant” debt maturing in the coming years and its economy depends on foreign currency financing, Moody’s said.
S&P downgraded Ukraine from B- to B.
Fitch, meanwhile, lowered Ukraine’s level from B to CCC, placing it seven rungs below investment grade or on par with El Salvador and Ethiopia.
Claudia Assis contributed to this report.