Russia’s credit rating slashed to junk, same as Angola and Nicaragua

The invasion of Russia Ukraine has this nation in a risky financial situation, with major credit bureaus now leveling their credit to the rubbish state. Sales are in the middle crippling sanctions “Possibly the hardest and fastest country in modern times,” he said.

Moody’s downgraded Russia’s rating to rubbish on Thursday, echoing a move by Fitch a day earlier. Both claim that Western sanctions imposed by Moscow’s military intrusion on Ukraine would hurt the economy and increase Russia’s potential for non-payment of billions in debt.

Now wreaking havoc on lives or on ordinary Russians, measures imposed on the Russian financial sector by the United States, the European Union and the United Kingdom include blocking access to the global financial system SWIFT. Sanctions restrict Russia’s central bank for the first time, targeting more than $ 600 billion in reserves.

The scope and harshness of the sanctions exceeds “initial expectations and will have significant credit implications,” Moody’s wrote in its downgrade, reducing Russia’s rating by half a dozen degrees, from Baa3 to B3.

Restrictions on Russian banks’ access to SWIFT and sanctions on major state-owned banks and the Central Bank of Russia will effectively prevent them from “participating in the global financial system,” the rating agency said.

According to Trading Economics, the downgrade puts Russia in a similar unwanted solvency situation to countries such as Angola, Bosnia, Kyrgyzstan, Moldova, Mongolia, Nicaragua, Niger and Pakistan.

Fitch downgraded Russia to “B” from “BBB” and put its rating on “negative surveillance.”

The only equivalent of such a massive downgrade of a single sovereign entity was South Korea in 1997 amid the Asian financial crisis of the day, according to Fitch. “The severity of international sanctions in response to the Russian military invasion of Ukraine has increased the risks of macro-financial stability, poses a major shock to Russia’s credit base and could undermine its willingness to pay public debt,” he said. stated Fitch in a report.

U.S. and European Union sanctions that prevent any transaction with Russia’s Central Bank would weigh more heavily on Russia’s “credit fundamentals” than any previous sanctions, Fitch said.

S&P downgraded Russia’s rating to rubbish last week.

MSCI said on Wednesday it would remove its emerging market indices from Russian stocks, describing the Russian stock market as “currently non-reversible”.

Citigroup is among the entities that could suffer a financial blow. The bank had a $ 5.4 billion exposure to Russian assets in late December, according to a regulatory document Monday. The figure represents 0.3% of the bank’s assets last year, the bank said, which estimated its total exposure to third parties in Russia at nearly $ 8.2 billion.

“Citi continues to monitor the current geopolitical situation and economic conditions between Russia and Ukraine and will mitigate its exposures and risks as appropriate,” the document states.