Moodys UnitState Sanctions Russia - Arhive

Moodys UnitState Sanctions Russia

Moodys considers US sanctions a “constant threat” to Russia

Moodys UnitState Sanctions Russia

MOSCOW – New US sanctions will not affect Russia’s public finances in the near future, but in the long run they will put pressure on Russian investment and access to technology, RBC reports citing data from Moody’s rating agency.

Although the new sanctions will not affect the credit worthiness of the Russian government in the short term, their long-term consequences will be more serious, writes the rating agency Moody’s Investors Service in a report to investors. “The ambitions of Russian President Vladimir Putin to increase growth and quality of life will be more difficult to realize with new US sanctions,” says Moody’s. Moodys UnitState Sanctions Russia

New sanctions do not cut Russia off from international capital markets, but limit the ability to attract financing. Domestic investment and foreign investment in Russia is likely to “remain significantly lower than if there were no sanctions.”

Sanctions may also limit Russia’s access to Western expertise and financing, which are necessary to modernize the Russian economy, Moody’s said. In addition, the suddenness of the announcement of new sanctions reflects their “continuous and unpredictable nature.” Moodys UnitState Sanctions Russia

US sanctions have become a constant threat looming over Russia’s credit profile, the agency points out, although Russia currently remains stable against current and future sanctions.

New sanctions prohibit the participation of US banks in the initial offerings of bonds of the Russian government in foreign currency, as well as foreign currency lending by US government banks and the Central Bank. Banks are interpreted broadly and include brokers and securities dealers, commodity futures and options dealers, currency traders, clearing companies, investment companies, corporate social programs (i.e. non-state pension funds), holding companies. Moodys UnitState Sanctions Russia

But the sanctions have not yet affected the secondary market of Russian government securities and the market of ruble OFZs.

The plan to attract external loans from the market for 2019 has already been overfulfilled, and very moderate borrowings in the amount of USD3 billion annually are planned for 2020–2021. Moodys UnitState Sanctions Russia

Moreover, Russia has an abundance of liquid reserves, which in principle make it possible to do without issuing international bonds. Government funds in accounts at the Central Bank reached 10.4 trillion rubles. in mid-2019 – 9.5% of expected GDP for 2019.

The external debt of the government and the Bank of Russia in dollars to non-residents amounted to USD18.7 billion at the end of 2018, which is significantly less than the figure at the end of 2013 (USD30.8 billion), Moody’s notes.

“In this context, US sanctions are likely to entail a further reduction in Russia’s dollar issues,” the agency writes.Moodys UnitState Sanctions Russia

Even if American investors no longer participate in Russian government securities, Moody’s expects that Russia will still be able to attract funding in euros and other reserve currencies from non-US investors.

It was previously reported that the GDP growth of the Russian Federation in June accelerated to 0.7% in annual terms from a revised 0.1% in May (a correction of the estimate from 0.2% occurred after Rosstat revised the operational data for certain sectors). Moodys UnitState Sanctions Russia


Anna Larionova

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