“The downgrade of Russia’s ratings follows the introduction of measures that we believe could significantly increase the risk of default,” the report says.
According to the agency’s analysts, the war with Ukraine led to sanctions against Russia by the West, including in relation to the foreign exchange reserves of the Bank of Russia. This makes a significant amount of reserves unavailable, which will adversely affect the CBR’s ability to serve as a lender of last resort, as well as undermining what until recently was the backbone of Russia’s creditworthiness – its net foreign exchange position.
“To contain currency appreciation and financial market volatility, and protect remaining currency buffers, the Russian authorities have, among other steps, introduced capital controls that we understand could limit the timely receipt of interest on Russian government bonds by non-residents. , as well as principal repayments,” S&P notes.
Russia’s ratings remain under review with a negative outlook. “Placing the ratings on review with a negative outlook means that we may worsen them again over the next few weeks,” the report says.
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