S&P confirms Russia's ratings
Nov 04, 2003
Standard & Poor's Ratings Services has confirmed its 'BB' long-term foreign and 'BB+' long-term local currency sovereign credit ratings on the Russian Federation. The agency has also affirmed its 'B' short-term foreign and national currency ratings of the country. The forecast of the long-term ratings has remained stable, Standard & Poor's Ratings Services said in its official statement.
The confirmation of the ratings reflects the agency's opinion that the current sovereign ratings on Russia envisage risks of such events like the YUKOS case. The arrest of YUKOS CEO and major shareholder Mikhail Khodorkovsky and the freezing of some shares in the company's testify to the current opinion of Standard & Poor's that its sovereign ratings on Russia are still restricted by political uncertainty and the YUKOS affair is not a new rating factor.
Over the past 10 months since the agency last time increased its rating on Russia (on December 5, 2003) Standard & Poor's has several times declared that its ratings on Russia are still constricted by such factors as protracted structural, economic, legal, institutional and administrative problems. Still developing democratic culture, political institutes and an overly centralized process of decision-making might result in some political tension. However, it is unlikely to pose a considerable threat to Russia's social and political stability and programs of reforms in the country, the agency said.
So, the recent uneasy events do not undermine the current sovereign ratings and their stable forecast. Risks are minimized in the near term in Russia, taking into account strong external liquidity of the country and the considerable short-term flexibility of its fiscal and budget system. Nevertheless, existing fiscal and currency reserves might start decreasing if political hindrances continue.
A change in market sentiments might lead Russia into a vicious circle of capital outflows, decline in investments, weakening of the economy and deterioration of the fiscal situation. However, given the amount of Russia's tax and international reserves, it will take time that this scenario of serious outflows of domestic and foreign capitals starts materializing and bringing significant damage to the ratings of Standard & Poor's. The agency considers this scenario as unlikely.
The confirmation of the ratings reflects the agency's opinion that the current sovereign ratings on Russia envisage risks of such events like the YUKOS case. The arrest of YUKOS CEO and major shareholder Mikhail Khodorkovsky and the freezing of some shares in the company's testify to the current opinion of Standard & Poor's that its sovereign ratings on Russia are still restricted by political uncertainty and the YUKOS affair is not a new rating factor.
Over the past 10 months since the agency last time increased its rating on Russia (on December 5, 2003) Standard & Poor's has several times declared that its ratings on Russia are still constricted by such factors as protracted structural, economic, legal, institutional and administrative problems. Still developing democratic culture, political institutes and an overly centralized process of decision-making might result in some political tension. However, it is unlikely to pose a considerable threat to Russia's social and political stability and programs of reforms in the country, the agency said.
So, the recent uneasy events do not undermine the current sovereign ratings and their stable forecast. Risks are minimized in the near term in Russia, taking into account strong external liquidity of the country and the considerable short-term flexibility of its fiscal and budget system. Nevertheless, existing fiscal and currency reserves might start decreasing if political hindrances continue.
A change in market sentiments might lead Russia into a vicious circle of capital outflows, decline in investments, weakening of the economy and deterioration of the fiscal situation. However, given the amount of Russia's tax and international reserves, it will take time that this scenario of serious outflows of domestic and foreign capitals starts materializing and bringing significant damage to the ratings of Standard & Poor's. The agency considers this scenario as unlikely.